Category: Alameda Decision

VCERA staff are implementing the July 2020 California Supreme Court Decision, Alameda County Deputy Sheriffs’ Association v. Alameda County Employees’ Retirement Association (2020) 9 Cal.5th 1032, 1070, commonly referred to as “Alameda.” Alameda affected the pensionability of certain pay items that VCERA had previously included in members’ pensionable earnings, which are used to calculate contributions and retirement benefits. This implementation is being executed in accordance with the latest direction received from the Board of Retirement in its Resolutions passed between October 2020 and April 2023.

TIMELINE

VCERA understands that members have questions related to the timeline of the project and when affected members may expect to receive refunds. The following factors are affecting the timeline of the project:

Initial Delay:

• Though the Alameda Decision occurred in July 2020, VCERA’s Alameda Project did not begin until April 2023, almost three years later, due to pending legislative efforts and the County’s request for additional time to adopt the Legacy HRA benefit to address reduction in expected pension benefits related to flex credits. Litigation concerning elimination of non-cashable flex credit, standby pay and excess annual leave redemptions (“straddling”) contributed to these initial delays.

Complexity:

• VCERA’s project is more complex and impacts a larger volume of members than other affected pension systems, resulting in significantly more historical data to validate and correct.
• Most other affected systems primarily had standby and callback pay exclusions. In addition to those, VCERA corrections include numerous changes to flex credits, situational pay codes, and leave straddling, each requiring separate review.
• In total, over 10,500 members are estimated to be affected by the corrections, spanning multiple employers, bargaining units, and varied pay structures and reporting practices.

Approach & Resources:

• Due to the large volume and the need for standardization and accuracy, VCERA is automating much of its correction work.
• While automation takes longer to build initially, it allows all corrections to be applied consistently and in a single coordinated update rather than through thousands of manual adjustments.
• VCERA is utilizing a variety of staffing resources, including hiring fixed-term staff and external consultants.
• VCERA is engaging the expertise of its pension administration system vendor and partnering with the County, both of which have added dedicated resources for this project.
• Because of the number of corrections and programming changes required, VCERA is testing the results of the efforts above before finalizing corrections to ensure accuracy and enable processing all correction types to each member’s account together with the goal of having to adjust each account only once.

MEMBER IMPACT

Members are affected if they received pay items that Alameda determined should be excluded from pensionable compensation. Here are a few key points to keep in mind if you are an affected member:

• Affected members will receive individual communication (via US mail) prior to their corrections (refunds and/or corrected retirement benefits) being processed.
• Refunds and benefit recalculations will begin after all data corrections have been completed in member accounts.
• Members will receive 7.9% interest on any refunds, and have options to roll their refunds over to Deferred Compensation plans, like 401(k) or 457 plans, or to other qualified plans.
• Overpaid benefits to retirees (net of contributions refunds) will not be recouped by VCERA. Once retirement benefits are recalculated using corrected compensation, VCERA will determine any overpaid benefits and any overpaid member contributions, each with interest. If overpaid contributions exceed overpaid benefits, VCERA will refund the difference with interest. If overpaid benefits exceed overpaid contributions, VCERA will not pursue collection and no refund will be issued.
• If your account includes a division of community property, or a service credit purchase, your refund or corrected retirement benefit may take longer to process than others. These situations require additional review or calculations to ensure the corrections are applied accurately.
• Some affected members may be eligible for the employer-provided Legacy HRA benefit.

STAYING INFORMED

VCERA staff are providing bimonthly Alameda implementation status updates to the Board of Retirement at Board meetings. Highlights from the latest status report and general reminders include:

• We are still working on Phase 1, which includes calculating corrections to pensionable earnings and member contributions. Remaining Phase 1 work includes final testing of system updates and validation of historical data corrections.
• We are in the preparation stages of Phase 2, in which we will process contribution refunds with interest and calculate corrections to retirement benefits. Phase 2 cannot begin until all Phase 1 data corrections are finalized.
• VCERA will be able to provide a more definitive timeline of corrections processing once Phase 2 work has begun.
• View status updates on our Alameda webpage, including Alameda Decision FAQs, Leave Straddling FAQs, and information about flex credit under old and new benefit structures.

While progress is being made, the project has not yet advanced to the stage where refunds and benefit recalculations can begin. We recognize this is taking longer than anticipated and the impact this delay may have. Our team continues to work diligently, and we will provide an update as soon as we are able to share a more defined timeline. In the meantime, despite the delay in processing refunds, correction amounts payable to members will continue to accrue interest at the Board-approved rate of 7.9%. We will post additional updates to the website about its Alameda Implementation as the multi-year project progresses. To receive email alerts when updates are posted to our website, please sign up here: https://vcera.gov/vcera-website-notifications.

VCERA staff are implementing the July 2020 California Supreme Court Decision, Alameda County Deputy Sheriffs’ Association v. Alameda County Employees’ Retirement Association (2020) 9 Cal.5th 1032, 1070, commonly referred to as “Alameda.” This implementation is being executed in accordance with the latest direction received from the Board of Retirement in Resolutions passed by the VCERA Board between October 2020 and April 2023.

VCERA staff are providing bimonthly Alameda implementation status updates to the Board of Retirement at Board meetings. Highlights from the latest status report include:

• We are nearing the end of Phase 1, which includes calculating corrections to pensionable earnings and member contributions.
• Testing of system enhancements and correction calculations is still underway and has taken longer than anticipated due to complexities with the system and data.
• We are in the preparation stages of Phase 2, in which we will process contribution refunds with interest and calculate corrections to retirement benefits.
• VCERA will be able to provide a more definitive timeline for the project after Phase 2 work has begun.
• Affected members will receive individual communication (via US mail) prior to their corrections (refunds or corrected retirement benefits) being processed.
• If your account includes a division of community property, your refund or corrected retirement benefit may take longer to process than others.

VCERA will post additional updates to the website about its Alameda Implementation as the multi-year project progresses. To receive email alerts when updates are posted to our website, please enter your information here: https://www.vcera.org/vcera-website-notifications.

*Note: This news post reflects information available at the time of publication. Please check our newer articles for the most current updates or revised timelines.

VCERA staff are implementing the July 2020 California Supreme Court Decision, Alameda County Deputy Sheriffs’ Association v. Alameda County Employees’ Retirement Association (2020) 9 Cal.5th 1032, 1070, commonly referred to as “Alameda.” This implementation is being executed in accordance with the latest direction received from the Board of Retirement in Resolutions passed by the VCERA Board between October 2020 and April 2023.

VCERA staff are providing bimonthly Alameda implementation status updates to the Board of Retirement at Board meetings. Highlights from the latest status report include:

• April of 2025 marked two years since the project kick-off, after the Board passed the Alameda Resolutions regarding Flex Credit and PEPRA Exclusions in April 2023.
• The VCERA Project for Alameda Corrections team includes several staff, plus coordination with the County of Ventura and many other consultants and system support services.
• The project consists of two phases:
  • Phase 1 – Calculate corrections to pensionable earnings & member contributions
  • Phase 2 – Calculate corrections to retirement benefits & process refunds with interest
• VCERA is nearing the end of Phase 1 and has begun the setup and initial tasks of Phase 2.
• A recent upgrade to the County’s payroll system has initiated a second testing round of County historical correction files. VCERA and County staff are closely collaborating on data cleanup and continued testing.
• VCERA staff and project partners are now conducting final testing of the flex credit corrections for the period prior to 2004.
• VCERA staff and project partners continue to develop and test modifications to the Pension Administration System, which are required for corrections file processing.
• Next steps include the development and testing of a tool to apply interest to monthly benefit corrections and determine final amounts eligible for refund.
• The refunds and benefit recalculations will begin after completion of Phase 1, and are projected to take a year or more to complete. An updated timeline estimate is expected to be available in summer 2025.
• Affected members will receive individual communication prior to their corrections being processed.

VCERA will post additional updates about its Alameda Implementation as the multi-year project progresses. To receive email alerts when updates are posted to our website, please enter your information here: https://www.vcera.org/vcera-website-notifications.

*Note: This news post reflects information available at the time of publication. Please check our newer articles for the most current updates or revised timelines.

VCERA Staff are implementing the July 2020 California Supreme Court Decision, Alameda County Deputy Sheriffs’ Association v. Alameda County Employees’ Retirement Association (2020) 9 Cal.5th 1032, 1070, commonly referred to as “Alameda.” This implementation is being executed in accordance with the latest direction received from the Board of Retirement in Resolutions passed by the VCERA Board between October 2020 and April 2023.

VCERA staff has provided the Board of Retirement with Alameda implementation status updates at the monthly Board meetings. Highlights from the latest status reports include:

• The VCERA Project for Alameda Corrections team includes several staff, plus coordination with the County of Ventura and many other consultants and system support services.
• The project consists of two phases:
  • Phase 1 – Calculate corrections to pensionable earnings & member contributions
  • Phase 2 – Calculate corrections to retirement benefits & process refunds with interest
• VCERA is nearing the end of Phase 1, with work in Phase 2 projected to begin in 2025.
• Currently, VCERA staff are working to clean up historical data, and test system enhancements for accuracy of the corrections.
• The County has recently completed programming for certain calculations and the next step is for the project team to perform full testing of those changes.
• Refunds and benefit recalculations are projected to begin in the second half of 2025. That process is projected to take a year or more to complete.
• Affected members will receive individual communication prior to their corrections being processed.

VCERA will post additional updates about its Alameda Implementation as the multi-year project progresses. To receive email alerts when updates are posted to our website, please enter your information here: https://www.vcera.org/vcera-website-notifications.

The Alameda Decision of 2020 concluded that all amendments to the definition of compensation earnable, enacted because of the Public Employees’ Pension Reform Act of 2013 (PEPRA), were constitutional. The Court also ruled that boards may not include the value of benefits paid “in-kind,” such as the portion of flex credit applied to healthcare benefits. To comply with the decision, the Board of Retirement adopted the Flexible Benefits Correction Resolution on April 17, 2023, excluding a portion of the Flexible Credit Allowance from the compensation earnable calculation for legacy retirement plan members. This resulted in reduced pension benefits for those retiring on or after July 30, 2020. Eligible members will receive a refund of member contributions on non-cashable flex credit, plus interest (net of overpaid benefits plus interest for retirees.) The corresponding employer contributions remain with the VCERA fund as a credit toward future employer contributions. With this savings, on June 27, 2023, the Ventura County Board of Supervisors approved the creation of the Legacy Retiree Healthcare Premium Subsidy and Reimbursement Plan (“HRA plan”) to mitigate some of the loss in retirement benefits to members.

Additionally, on June 27, 2023, the Board of Supervisors approved an Amendment to the Memorandum of Agreement between the Ventura County Fire Protection District and the Ventura County Professional Firefighters’ Association (VCPFA). This amendment enables the monthly funding of a Legacy Retiree Healthcare Contribution on behalf of eligible retirees, directed into the VCPFA-administered medical trust to cover health-related expenses for qualified retirees.

The County HRA Plan will provide eligible retirees a healthcare reimbursement account, funded by employer contributions in amounts based on individual bargaining agreements, with potential annual increases of up to 3%. The HRA can be used for eligible out-of-pocket medical, dental, and vision expenses for eligible retirees and their dependents.

While VCERA does not administer retiree health benefits or the HRA plan, and thus cannot answer questions about such plans, you can learn more by calling the Ventura County HRA Administrator at (805) 654-5033, or by visiting the HRA Benefit web page.

For information about eligibility for the County’s medical, dental, and vision care plans, contact the Ventura County Human Resources Department at (805) 662-6791, or visit the Ventura County Retiree Health Benefits web page. 

On May 20, 2024, the Board of Retirement voted to adopt a 7.9% interest rate on underpaid benefits stemming from Alameda-related corrections. Members who retired on or after July 30, 2020 who had certain estimated exclusions applied at the time of their initial retirement calculation may be affected.

After the Alameda court decision in July 2020, VCERA staff used the information available to recalculate benefits and began excluding certain items from Final Average Compensation (FAC) calculations to comply with the decision. These exclusions that occurred early in the process after July 2020 were best estimates at that time. Since then, more precise numbers have been calculated by the employers and by VCERA, and some of these exclusions have now been reversed. Such exclusions included 1) the removal of all flex credits for VRSD members, which was later determined to be improper because VRSD had reported only the cashable amount of flex credits, and 2) the removal of situational pay codes in full where it was later determined that only a portion of hours reported with the pay code should be removed. As a result of reversing these exclusions, VCERA has, in some cases, identified a new higher FAC period and has recalculated benefits. The recalculations resulted in underpaid benefits owed to the affected retired members. These missed benefit payments will be treated as back-pay.

Following the board’s May 2024 approval, an interest rate of 7.9% will be applied to these back-payments. This is consistent with a March 2023 board decision to apply the same interest rate to other Alameda corrections. The 7.9% interest rate was selected based on average long-term earnings, and also mirrored the quarterly performance report as of December 31, 2022.

To learn more, visit our Alameda-related updates page or view our Alameda Decision FAQs & Glossary. You may also find additional information in this VCERA staff letter requesting the interest rate adoption.

In the Alameda Decision, issued on 7/30/2020, the California Supreme Court ruled that retirement boards, such as VCERA’s, could not include in Legacy members’ compensation earnable any pay items that were excluded by law, including “in-kind” benefits. “Flex credit” allowances provided to employees each pay period and applied to healthcare benefits are “in-kind” benefits that must be excluded. Rather than implement that exclusion immediately, the VCERA Board agreed to delay a decision on flex credit until April 2023 at the request of the County and labor organizations, allowing time to negotiate alternative benefits.

In May 2023, after the Board adopted a Resolution to implement the Alameda Decision’s ruling as to flex credit, VCERA began limiting flex credit in Legacy members’ retirement earnings to the “maximum cashable amount,” which was the flat or employee-only rate minus the lesser of the opt-out fee or lowest-cost employer-sponsored healthcare plan. This was the formula under the County’s benefit structure in place at that time, referred to as the “old benefit structure.” After the County changed the program’s structure in June 2023, referred to as the “new benefit structure,” the “maximum cashable amount” for most bargaining units was equal to the opt-out allowance.

The following two sample paychecks illustrate the new benefit structure with regard to opt-out allowances and flex credit allowances for Legacy members.

Example #1: New Benefit Structure with Opt-Out Allowance

• “Opt Out Allowance” is the flat amount ($147.00) payable to this employee for not electing a County-provided health plan. [Under the new benefit structure, this employee no longer receives the old “Flex Credit FT $497” amount and no longer pays the “Opt Out” fee.]
• “Retirement Earnings Final” is the total pensionable retirement earnings in this pay period. For Legacy members, “Retirement Earnings Final” is what is included as “compensation earnable.” For this Legacy member, it is the sum of all pay items listed under “Earnings.”
• “Retirement Cnty Reg Fund” is the amount the County reported paying toward this employee’s future retirement benefit (“normal cost”). The County also includes in this amount a portion of the amortized unfunded liability (UAAL).
• “Retirement Cnty COL Fund” is the amount the County reported paying toward this employee’s future cost-of-living adjustments (COLA) (“normal cost”). The County also includes in this amount a portion of the UAAL.

Note: Under the new benefit structure, employees receive either the “Flex Credit” allowance or the “Opt Out Allowance.” There is no longer an opt-out fee. The maximum cashable amount is equal to the opt-out allowance and is the same for all members of the same bargaining unit. (Click here to see charts of maximum cashable amounts by union.)

Note: Effective 6/25/2023, the County began reporting the new benefit structure’s maximum cashable amount in “Retirement Earnings Final” for Legacy members. The pensionable amount varies by bargaining unit. For example, the maximum cashable amount is $229.94 per pay period for VCDSA-represented employees; it is $279.94 per pay period for CNA-represented employees.

Example #2: New Benefit Structure with Flex Credit Allowance

• “Flex Credit” is the flex credit allowance ($147.00) for this employee in this bargaining unit.
• “Retirement Earnings Final” is the total pensionable retirement earnings in this pay period. For this Legacy member, it is the sum of all pay items listed under “Earnings,” except the “Flex Credit Additional” amount.

Note: The sum of “Flex Credit” and “Flex Credit Additional” amounts equals the flex credit amount negotiated by each bargaining unit. Under the new benefit structure, the “Flex Credit” amount is pensionable, but the “Flex Credit Additional” amount is not pensionable.

Other Information

PEPRA members do not have flex credit included in their retirement earnings because PEPRA excludes from “pensionable compensation” any employer-provided allowance. Also, the “Retirement Earnings Final” amounts on Legacy members’ paychecks prior to 6/25/2023 were overstated due to the inclusion of the full flex credit.

VCERA has created the Alameda Administrative Appeal Request Form to provide members who are affected by the Alameda Decision with the opportunity to appeal VCERA’s corrections to their retirement accounts. Corrective actions could include removing certain pay items from a member’s final average compensation (FAC), refunding retirement contributions overpaid to VCERA, and reducing monthly retirement benefits.

Members are permitted to file an administrative appeal with VCERA only if:

• A member’s excluded pay items were “compensation earnable” under the law and therefore includable in FAC.
• VCERA’s calculations or other numerical data provided in the “VCERA Account Correction Notice” were incorrect.
• A member retired before the effective date of the law that VCERA applied to him/her.

All members affected by the Alameda Decision will receive written notices before any account correction occurs, along with information on how to file an appeal. Appeals must be filed within 30 days of the postmark date of the notice. For members who file an appeal, VCERA will provide a written determination concerning the appeal within 60 days of receipt.

To learn more about the Alameda Decision and the appeals process, go to our Alameda Decision Information page.

The Alameda Decision excluded from Legacy members’ pensionable earnings payments for annual leave redemptions (i.e., vacation buydowns) that exceed what “may be earned and payable in each 12-month period” during their final average compensation (FAC) period. When multiple leave redemptions from two calendar years are paid in a 12-month period, the total redeemed hours in that period may exceed their redeemable calendar-year hour limit. To comply with Alameda, VCERA must remove these “excess” hours from members’ pensionable earnings used to calculate their FAC, which could affect their retirement benefits.

VCERA has produced frequently asked questions (FAQs) to help educate members on this complex subject. Please click on the links below to learn more. You can also click here to view the Alameda Decision FAQs and Glossary.

*Note: This news post reflects information available at the time of publication. Please check our newer articles for the most current updates or revised timelines.

VCERA staff has provided the Board of Retirement with three Alameda Implementation status updates since October 2023. Highlights from those status reports include:

• The total number of Alameda Implementation corrections exceeds 13,000. (This total refers to the different corrections by type, not the number of members affected.) When categorized by pay exclusions, there are 6,100+ corrections involving PEPRA Exclusions (i.e., “excluded” and “situational” pay codes and leave straddling) and 7,800+ corrections involving Alameda Exclusions (i.e., flex credit and leave donations). Many member accounts will require multiple corrections in the above categories, and each correction may affect multiple pay periods. The total number of impacted members is not yet known, as additional account review is needed.
• Phase 1 of the Alameda Implementation involves calculating pensionable earnings and member contributions. This phase is projected to last from May 2023 to approximately September 2024. Phase 2 involves staff calculating retirement benefits and processing refunds with interest. This phase will last from approximately September 2024 to at least September 2025. The overall project timeline may require changes due to VCERA staffing needs and revised timelines from third-party resources.
• To complete Phase 1, VCERA partnered with several third parties, including the County of Ventura, Vitech, MBS and Simpler Systems, to perform historical data corrections and to enhance technologies prior to Phase 2 calculations. Each third party fulfills a different role in developing, testing, calculating and delivering various data points to VCERA.
• VCERA recruited four fixed-term employees to assist with the Alameda Implementation directly or indirectly. The employees will begin their training in January 2024.
• Staff will begin manual Alameda calculations for VRSD member accounts in January 2024. Affected members will be notified in writing before any account adjustments are made.

VCERA will post additional updates about its Alameda Implementation as the multi-year project progresses.