PURPOSE

The purpose of this policy is to establish standards and procedures for an assessment of the final compensation of a retiring member that will be used to calculate that member’s retirement allowance.

POLICY

At retirement, members are entitled to a calculation of their final compensation as part of determining their monthly retirement allowance. In making this calculation, SCERS staff is authorized to review the member’s payroll activity and associated pay elements during their employment and make a determination regarding retirement-eligible compensation in a manner consistent with applicable law.

STANDARDS AND PROCEDURES

1. Retirement-Eligible Compensation
   A summary of compensation or pay elements that are included in and excluded from final compensation is provided in the Appendix to this policy. For consideration under this policy, compensation and pay elements must be included in an employer’s publicly available pay schedules, labor agreements, or governing body resolutions.
2. Review of Proposed Additional or New Compensation or Pay Elements
   Employers or authorized employee representatives are encouraged to submit to SCERS’ Chief Executive Officer (CEO) for review any proposed additional or new compensation or pay elements intended to form the basis for retirement-eligible compensation determinations at least thirty (30) days prior to implementation. Upon receipt of all necessary supporting documentation to complete SCERS’ review, in accordance with applicable law, the CEO will issue an Administrative Decision pursuant to SCERS’ Administrative Appeals Policy.
3. Staff Review, Assessment and Determination of Retirement-Eligible Compensation
   
   a. Upon receipt of a member’s application for retirement, SCERS staff will review payroll activity and associated pay elements to identify any items that may have been paid or manipulated to enhance a member’s retirement benefit utilizing the following non-exclusive criteria:
   
   i. whether there was a substantial increase in final average compensation compared to prior years;
   ii. whether there was an increase due to payments unavailable or not provided to similarly situated employees of the member’s employer;
   iii. whether there was an increase due to a conversion to a case payment of a benefit previously provided in-kind to the member or paid to a third party on the member’s behalf;
   iv. whether there was an inconsistent use of special pay items at or near the end of the member’s career;
   v. whether there was use of a special pay item for a job classification or grade that includes only one employee (“class-of-one” pay items);
   vi. whether there was an increase due to any significant change in the member’s elements of compensation; or
   vii. any other factor that may be relevant to staff’s determination.
   
   SCERS may request additional information from the member, the employer, or both in order to assist its review, assessment and determination.

   b. If SCERS initially determines there is evidence that compensation or pay elements may have been 
   paid or manipulated to enhance a member’s retirement benefit, the member and the employer will be notified and given the opportunity to submit additional information to rebut the assessment within fifteen (15) days of the notice. SCERS staff will re-assess the determination within fifteen (15) days of receipt of any such additional information from the member or employer. The CEO may extend these timeframes upon request.

   c. Following any review, assessment or re-assessment, and final SCERS staff determination regarding 
   payroll activity and associated pay elements to identify any items that may have been paid or 
   manipulated to enhance a member’s retirement benefit:
   
   i. if staff concludes that compensation or pay elements were paid or manipulated to enhance a member’s retirement benefit, notice will be provided to the member and the employer, and the member may appeal the determination to SCERS’ Chief Benefits Officer as an Administrative Decision pursuant to SCERS’ Administrative Appeals Policy; or
   
   ii. if staff concludes that compensation or pay elements were not paid or manipulated to enhance a member’s retirement benefit, notice will be provided to the member and the employer, and the compensation or pay elements will be included in the member’s benefit calculation.
   
   d. To avoid delay in the payment of the member’s retirement benefit, in all cases where review, assessment and determination of retirement-eligible compensation is undertaken pursuant to this policy, SCERS staff will calculate the retirement benefit without the compensation or pay element under scrutiny and place the member on retiree payroll as soon and so long as all other necessary documents are received by SCERS. Upon final resolution of the review, assessment and determination procedure (including any administrative appeals and/or court actions), if benefit payments are adjusted to include compensation or pay elements that were initially excluded from the member’s benefit calculation, the member will be made whole retroactively for any unpaid retirement benefits. 
   
   e. Members retiring from a reciprocal retirement system shall also be subject to this review process.    Staff shall review for and exclude impermissible pay elements even if paid by an employer of a reciprocal retirement system and accepted by such reciprocal system.

APPENDIX

Categories and descriptions of included and excluded compensation and pay elements.

AUTHORITY

California Government Code Sections 7522.32, 7522.34
California Government Code Sections 31541.2, 31542, 31461, 31462, 31462.1

RESPONSIBILITIES

Executive Owner: Chief Benefits Officer

POLICY HISTORY

SCERS Policy No. 024

Final Compensation Policy: Appendix

Categories and descriptions of included and excluded compensation and pay elements

SCERS Policy No. 024 Appendix