The California Public Employees’ Pension Reform Act of 2013 (PEPRA) and the County Employees Retirement Law of 1937 (CERL) authorizes a board of retirement to correct errors in the calculation of a retired member’s monthly allowances or other benefits, including when the member caused their final compensation to be improperly increased or otherwise overstated at the time of retirement, and the system applied that overstated amount as the basis for calculating the member’s monthly retirement allowance or benefits under CERL, subject to certain limitations. Further established law, the Public Employees’ Retirement Law (PERL) also authorizes its board of administration to adjust retirement payments due to errors or omissions, including for cases in which the retirement systems that the benefits of a member or annuitant are, or would be, based on disallowed compensation that conflicts with PEPRA and other specified laws and is thus impermissible.
Assembly Bill 3025 (AB 3025) requires a retirement system established under CERL to mandate that an employer discontinue reporting disallowed compensation upon determining that the compensation reported for a member is disallowed. For an active member, the retirement system needs to credit all employer contributions made on the disallowed compensation against future contributions to the benefit of the employer that reported the disallowed compensation, and return any member contribution paid by that member, to the member directly or indirectly. For a retired member, survivor, or beneficiary whose final compensation was predicated upon the disallowed compensation, the system needs to credit the employer contributions made on the disallowed compensation against future contributions to the benefit of the employer that reported the disallowed compensation, and to return any member contributions paid by that member to the member directly, and to permanently adjust the benefit of the affected retired member, survivor, or beneficiary to reflect the exclusion of the disallowed compensation.
AB 3025 permits a retirement system that already has initiated a process prior to January 1, 2024 to permanently adjust the benefit of the affected retired member, survivor, or beneficiary to reflect the exclusion of the disallowed compensation to use that system in lieu of the specified provisions of AB 3025. AB 3025 also requires certain information regarding the relevant retired member, survivor, or beneficiary needed for purposes to be kept confidential by the recipient.
Finally, AB 3025 authorizes an employer to submit a proposed compensation item that would form the basis of a pension benefit calculation to a retirement system for review and would require the system to provide guidance on the matter. AB 3025 prescribes a process in this regard. AB 3025 also specifies that it does not affect or otherwise alter a party’s right to appeal any determination regarding disallowed compensation made by the system after July 30, 2020.
(AB 3025 adds section 31541.2 to the Government Code.)