CalPERS CLARIFIES REQUIREMENTS FOR REPORTING COMPENSATION EARNABLE

September 2011
Number 48

CalPERS has clarified the definitions of “payrate” and “special compensation,” which are both included in “compensation earnable” for purposes of determining the retirement payments of members. Payrate is clarified in a newly adopted regulation, Title 2 of the California Code of Regulations (CCR), section 570.5. (Click here for the full text of section 570.5.) Special compensation has been further defined in Title 2, CCR section 571(b), as amended. (Click here for the full text of section 571.)

To determine a member’s payrate, prior regulations had restricted payrate to amounts provided on a publicly available pay schedule, but did not specify what the schedule was required to include. The newly enacted section 570.5 requires that each pay schedule include a number of elements, the most significant of which include position title for every employee position, payrate for each position, and time base for each payrate. (See full text of section 570.5 for complete requirements.)

In the event that an employer fails to meet these requirements, CalPERS may, in its sole discretion, determine the member’s payrate. CalPERS may take into account any information that it deems relevant in order to set the payrate.

Section 571(b), as amended, clarifies what items CalPERS will recognize as “special compensation.” CalPERS will recognize special compensation in a labor policy or agreement if the written document meets a number of requirements. Most significantly, the document must include the conditions for payment of the item of special compensation and the eligibility requirements and amount for each special compensation item. (See full text of section 571(b) for complete requirements.) 

Failure to comply with these new requirements could result in CalPERS determining a lower “compensation earnable” for employees. If the lower compensation earnable is used to determine final compensation, employee benefits could be reduced at retirement.

If you have any questions about the new regulatory requirements, or would like assistance with reviewing your existing pay schedules or labor agreements for compliance, please contact one of our eight offices located statewide or consult our website.

Written by:

Thomas Manniello
Shareholder
MontereyOffice
tmanniello@lozanosmith.com

Jonathan Dale
Associate
MontereyOffice
jdale@lozanosmith.com

© 2011 Lozano Smith

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