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CalPERS Pension and Benefits Committee Approves Regulations Concerning “Pensionable Compensation”

Includes Various Items of “Ad Hoc” Pay in Possible Violation of PEPRA

August 19, 2014
Following a brief public hearing today, the CalPERS Pension and Benefits Committee on a 6-2 vote accepted its staff recommendation to adopt new regulations for determining which forms of compensation are “pensionable” for employees hired under the Public Employees’ Pension Reform Act of 2012 (PEPRA), as further amended in 2013.
The proposed regulations contain approximately 100 categories of “special pay” that would, in addition to base or normal pay, be defined as pensionable compensation. The list is virtually identical to the categories of special pay used for pre-PEPRA (or “classic” CalPERS employees) despite the clear direction of PEPRA that “ad hoc” categories of pay should not be pensionable.
Websters dictionary defines ad hoc as: “formed or used for a special purpose,” suggesting many of these special pay items are ad hoc and should not be included. In response to questioning from Chief Deputy State Treasurer Steve Cooney, CalPERS staff acknowledged that the list had not been substantively reviewed and updated since approximately 1993. It includes special pay items like “Audio Visual Premium” for operating audio visual equipment, “Confidential Premium” for employees who are assigned to sensitive positions requiring trust” and many other examples of work that most people would consider part of base pay.
League Executive Director Chris McKenzie testified on behalf of League members warning that any broadening of how CalPERS calculates “pensionable compensation” beyond “base pay” could add financial stress to city budgets on top of that resulting from the recent increase in rates approved by the Board over the last year. California cities, McKenzie stressed, continue to recover from the Great Recession and the 450 California cities in the PERS system face rate increases over the next six years.
McKenzie’s testimony today reiterated the League’s written comments submitted to CalPERS on June 27 that raised issue with the continued treatment of categories of “ad hoc” pay, including “temporary upgrade pay” as pensionable.
“We strongly urge the Board not to approve this proposal and instead send it back to CalPERS staff with clear direction to identify any category that no longer shows a valid public purpose and is ad hoc,” said McKenzie. There is a lot at stake in this decision that will set the stage for how public employees and PEPRA are treated well into the future. We want to make sure we get it right.”

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