On August 19, 2011, CalPERS adopted a new regulation and amended an existing regulation to further define those items of compensation which will be included in a member’s “compensation earnable” for purposes of determining the member’s retirement allowance.

Compensation earnable is made up of payrate and special compensation.  These regulations affect both.  Title 2 of the California Code of Regulations, section 570.5 was added providing that for purposes of determining “compensation earnable,” a member’s payrate will be limited to the amount listed on a pay schedule that meets all of the following requirements:

  1. Has been duly approved and adopted by the employer’s governing body pursuant to public meeting laws;
  2. Identifies the position title for every employee position;
  3. Shows the payrate for each identified position, which may be stated as a single amount or as multiple amounts within a range;
  4. Indicates the time base, including, but not limited to, whether the time base is hourly, daily, bi-weekly, monthly, by-monthly, or annually;
  5. Is posted at the office of the employer or immediately accessible and available for public review from the employer during normal business hours or posted on the employer’s internet website;
  6. Indicates an effective date and date of any revisions;
  7. Is retained by the employer and available for public inspection for not less than five years; and
  8. Does not reference another document in lieu of disclosing the payrate.   

This new regulation clarifies existing law which limited payrate to amounts set forth on a publicly availably pay schedule, but provided little guidance as to what the schedule was to include.

If an employer fails to meet these requirements with regard to “payrate,” CalPERS may, in its sole discretion, determine an amount that will be considered the member’s payrate, taking into consideration all information it deems relevant including, but not limited to: documents that were approved by an employer’s governing board in conformance to public meeting laws, as well as the last payrate of the member listed on a pay schedule that conforms to the requirements above for the current employer, current position, or former CalPERS employer, or the last payrate for the position with the current employer.

Title 2 of the California Code of Regulations section 571(b) was amended to provide clarification of the existing requirement that special compensation must be “contained in a written labor policy agreement.”  It states that CalPERS will recognize, as “special compensation”, those items listed in section 571(a) where they are contained in a written labor policy or agreement as defined in Government Code section 20049, provided that the document: (a) has been duly approved and adopted by the employer’s governing body in accordance with requirements of applicable public meeting laws; (b) indicates the conditions for payment of the item of special compensation, including, but not limited to, eligibility for, and amount of, the special compensation; (c) is posted at the office of the employer or immediately accessible and available for public review from the employer during normal business hours or posted on the employer’s internet website; (d) indicates an effective date and date of revisions; (e) is retained by the employer and available for public inspection for not less than five years; and (f) does not reference another document in lieu of disclosing the item of special compensation. 

The remainder of section 571 is unchanged.

Employers are advised to audit all pay schedules currently maintained by the agency to ensure that all employees of the agency are in a position or classification whose payrate is identified in publicly available pay schedules in the manner prescribed by CalPERS.  Employers should also ensure that collective bargaining agreements set forth the conditions for special compensation as indicated by CalPERS regulations.

Liebert Cassidy Whitmore offers Retirement Liability Audit services which include, among other things, review of pay schedules and special compensation to ensure conformance with CalPERS statutes and regulations, review of retirees working after retirement, analysis of membership liability for contractors and employees not currently enrolled in CalPERS, and a review of elected official benefits.  For more information on these services contact: Steve M. Berliner at 310.981.2002.