Category: Alameda Decision

The Alameda Decision of 2020 concluded that all amendments to the definition of compensation earnable, enacted because of the Public Employees’ Pension Reform Act of 2013 (PEPRA), were constitutional. The Court also ruled that boards may not include the value of benefits paid “in-kind,” such as the portion of flex credit applied to healthcare benefits. To comply with the decision, the Board of Retirement adopted the Flexible Benefits Correction Resolution on April 17, 2023, excluding a portion of the Flexible Credit Allowance from the compensation earnable calculation for legacy retirement plan members. This resulted in reduced pension benefits for those retiring on or after July 30, 2020. Eligible members will receive a refund of member contributions on non-cashable flex credit, plus interest (net of overpaid benefits plus interest for retirees.) The corresponding employer contributions remain with the VCERA fund as a credit toward future employer contributions. With this savings, on June 27, 2023, the Ventura County Board of Supervisors approved the creation of the Legacy Retiree Healthcare Premium Subsidy and Reimbursement Plan (“HRA plan”) to mitigate some of the loss in retirement benefits to members.

Additionally, on June 27, 2023, the Board of Supervisors approved an Amendment to the Memorandum of Agreement between the Ventura County Fire Protection District and the Ventura County Professional Firefighters’ Association (VCPFA). This amendment enables the monthly funding of a Legacy Retiree Healthcare Contribution on behalf of eligible retirees, directed into the VCPFA-administered medical trust to cover health-related expenses for qualified retirees.

The County HRA Plan will provide eligible retirees a healthcare reimbursement account, funded by employer contributions in amounts based on individual bargaining agreements, with potential annual increases of up to 3%. The HRA can be used for eligible out-of-pocket medical, dental, and vision expenses for eligible retirees and their dependents.

While VCERA does not administer retiree health benefits or the HRA plan, and thus cannot answer questions about such plans, you can learn more by calling the Ventura County HRA Administrator at (805) 654-5033, or by visiting the HRA Benefit web page.

For information about eligibility for the County’s medical, dental, and vision care plans, contact the Ventura County Human Resources Department at (805) 662-6791, or visit the Ventura County Retiree Health Benefits web page. 

On May 20, 2024, the Board of Retirement voted to adopt a 7.9% interest rate on underpaid benefits stemming from Alameda-related corrections. Members who retired on or after July 30, 2020 who had certain estimated exclusions applied at the time of their initial retirement calculation may be affected.

After the Alameda court decision in July 2020, VCERA staff used the information available to recalculate benefits and began excluding certain items from Final Average Compensation (FAC) calculations to comply with the decision. These exclusions that occurred early in the process after July 2020 were best estimates at that time. Since then, more precise numbers have been calculated by the employers and by VCERA, and some of these exclusions have now been reversed. Such exclusions included 1) the removal of all flex credits for VRSD members, which was later determined to be improper because VRSD had reported only the cashable amount of flex credits, and 2) the removal of situational pay codes in full where it was later determined that only a portion of hours reported with the pay code should be removed. As a result of reversing these exclusions, VCERA has, in some cases, identified a new higher FAC period and has recalculated benefits. The recalculations resulted in underpaid benefits owed to the affected retired members. These missed benefit payments will be treated as back-pay.

Following the board’s May 2024 approval, an interest rate of 7.9% will be applied to these back-payments. This is consistent with a March 2023 board decision to apply the same interest rate to other Alameda corrections. The 7.9% interest rate was selected based on average long-term earnings, and also mirrored the quarterly performance report as of December 31, 2022.

To learn more, visit our Alameda-related updates page or view our Alameda Decision FAQs & Glossary. You may also find additional information in this VCERA staff letter requesting the interest rate adoption.

In the Alameda Decision, issued on 7/30/2020, the California Supreme Court ruled that retirement boards, such as VCERA’s, could not include in Legacy members’ compensation earnable any pay items that were excluded by law, including “in-kind” benefits. “Flex credit” allowances provided to employees each pay period and applied to healthcare benefits are “in-kind” benefits that must be excluded. Rather than implement that exclusion immediately, the VCERA Board agreed to delay a decision on flex credit until April 2023 at the request of the County and labor organizations, allowing time to negotiate alternative benefits.

In May 2023, after the Board adopted a Resolution to implement the Alameda Decision’s ruling as to flex credit, VCERA began limiting flex credit in Legacy members’ retirement earnings to the “maximum cashable amount,” which was the flat or employee-only rate minus the lesser of the opt-out fee or lowest-cost employer-sponsored healthcare plan. This was the formula under the County’s benefit structure in place at that time, referred to as the “old benefit structure.” After the County changed the program’s structure in June 2023, referred to as the “new benefit structure,” the “maximum cashable amount” for most bargaining units was equal to the opt-out allowance.

The following two sample paychecks illustrate the new benefit structure with regard to opt-out allowances and flex credit allowances for Legacy members.

Example #1: New Benefit Structure with Opt-Out Allowance

• “Opt Out Allowance” is the flat amount ($147.00) payable to this employee for not electing a County-provided health plan. [Under the new benefit structure, this employee no longer receives the old “Flex Credit FT $497” amount and no longer pays the “Opt Out” fee.]
• “Retirement Earnings Final” is the total pensionable retirement earnings in this pay period. For Legacy members, “Retirement Earnings Final” is what is included as “compensation earnable.” For this Legacy member, it is the sum of all pay items listed under “Earnings.”
• “Retirement Cnty Reg Fund” is the amount the County reported paying toward this employee’s future retirement benefit (“normal cost”). The County also includes in this amount a portion of the amortized unfunded liability (UAAL).
• “Retirement Cnty COL Fund” is the amount the County reported paying toward this employee’s future cost-of-living adjustments (COLA) (“normal cost”). The County also includes in this amount a portion of the UAAL.

Note: Under the new benefit structure, employees receive either the “Flex Credit” allowance or the “Opt Out Allowance.” There is no longer an opt-out fee. The maximum cashable amount is equal to the opt-out allowance and is the same for all members of the same bargaining unit. (Click here to see charts of maximum cashable amounts by union.)

Note: Effective 6/25/2023, the County began reporting the new benefit structure’s maximum cashable amount in “Retirement Earnings Final” for Legacy members. The pensionable amount varies by bargaining unit. For example, the maximum cashable amount is $229.94 per pay period for VCDSA-represented employees; it is $279.94 per pay period for CNA-represented employees.

Example #2: New Benefit Structure with Flex Credit Allowance

• “Flex Credit” is the flex credit allowance ($147.00) for this employee in this bargaining unit.
• “Retirement Earnings Final” is the total pensionable retirement earnings in this pay period. For this Legacy member, it is the sum of all pay items listed under “Earnings,” except the “Flex Credit Additional” amount.

Note: The sum of “Flex Credit” and “Flex Credit Additional” amounts equals the flex credit amount negotiated by each bargaining unit. Under the new benefit structure, the “Flex Credit” amount is pensionable, but the “Flex Credit Additional” amount is not pensionable.

Other Information

PEPRA members do not have flex credit included in their retirement earnings because PEPRA excludes from “pensionable compensation” any employer-provided allowance. Also, the “Retirement Earnings Final” amounts on Legacy members’ paychecks prior to 6/25/2023 were overstated due to the inclusion of the full flex credit.

VCERA has created the Alameda Administrative Appeal Request Form to provide members who are affected by the Alameda Decision with the opportunity to appeal VCERA’s corrections to their retirement accounts. Corrective actions could include removing certain pay items from a member’s final average compensation (FAC), refunding retirement contributions overpaid to VCERA, and reducing monthly retirement benefits.

Members are permitted to file an administrative appeal with VCERA only if:

• A member’s excluded pay items were “compensation earnable” under the law and therefore includable in FAC.
• VCERA’s calculations or other numerical data provided in the “VCERA Account Correction Notice” were incorrect.
• A member retired before the effective date of the law that VCERA applied to him/her.

All members affected by the Alameda Decision will receive written notices before any account correction occurs, along with information on how to file an appeal. Appeals must be filed within 30 days of the postmark date of the notice. For members who file an appeal, VCERA will provide a written determination concerning the appeal within 60 days of receipt.

To learn more about the Alameda Decision and the appeals process, go to our Alameda Decision Information page.

VCERA staff has provided the Board of Retirement with three Alameda Implementation status updates since October 2023. Highlights from those status reports include:

• The total number of Alameda Implementation corrections exceeds 13,000. (This total refers to the different corrections by type, not the number of members affected.) When categorized by pay exclusions, there are 6,100+ corrections involving PEPRA Exclusions (i.e., “excluded” and “situational” pay codes and leave straddling) and 7,800+ corrections involving Alameda Exclusions (i.e., flex credit and leave donations). Many member accounts will require multiple corrections in the above categories, and each correction may affect multiple pay periods. The total number of impacted members is not yet known, as additional account review is needed.
• Phase 1 of the Alameda Implementation involves calculating pensionable earnings and member contributions. This phase is projected to last from May 2023 to approximately September 2024. Phase 2 involves staff calculating retirement benefits and processing refunds with interest. This phase will last from approximately September 2024 to at least September 2025. The overall project timeline may require changes due to VCERA staffing needs and revised timelines from third-party resources.
• To complete Phase 1, VCERA partnered with several third parties, including the County of Ventura, Vitech, MBS and Simpler Systems, to perform historical data corrections and to enhance technologies prior to Phase 2 calculations. Each third party fulfills a different role in developing, testing, calculating and delivering various data points to VCERA.
• VCERA recruited four fixed-term employees to assist with the Alameda Implementation directly or indirectly. The employees will begin their training in January 2024.
• Staff will begin manual Alameda calculations for VRSD member accounts in January 2024. Affected members will be notified in writing before any account adjustments are made.

VCERA will post additional updates about its Alameda Implementation as the multi-year project progresses.

Dear County Employees & VCERA Members,

On October 12, 2020, the VCERA Board of Retirement will be considering a matter of general interest and importance to VCERA members regarding the impact of the California Supreme Court Alameda decision on VCERA. You may have received an email containing two letters from the County on this topic.

On September 28th, the VCERA Board Chair appointed an ad hoc committee to address potential litigation over VCERA’s implementation of Alameda. That committee, as well as VCERA staff and fiduciary counsel will be meeting with the County and the unions and their respective counsels on Thursday, October 8th.

VCERA’s fiduciary counsel sent a letter to the counsels participating in the October 8th meeting, which addresses the various issues and objections raised by both the County and employee groups and their counsels in regard to VCERA’s proposed implementation of the Alameda ruling. We provide this letter to  help answer questions you may have.

We recognize the impact this ruling and its implementation has on the VCERA membership, and we look forward to discussing these important issues with representatives of the County and employee groups. We welcome your virtual attendance at the scheduled public meeting of the Board of Retirement on October 12th, the agenda for which will be posted on the VCERA website at www.vcera.org.

On September 29, 2022, Governor Newsom vetoed Assembly Bill 826, a bill sponsored by SEIU and the County of Ventura. Had it passed, AB 826 would have allowed, under specific conditions, Legacy members’ compensation for calculating their retirement benefits (“compensation earnable) to include a larger portion of their flexible benefit credit (the amount the employer credits toward medical and other tax qualified benefits for its employees each pay period.) This benefit has been referred to as “cafeteria plan allowance” or other similar terms, but in Ventura County, it is most frequently called “flex credit”.

Because AB 826 did not become law, the portion of flex credit that cannot be received in cash may not be included in Legacy members’ compensation for retirement purposes. NOTE: For PEPRA members (those who established membership after January 1, 2013), no portion of flex credit may be pensionable so the bill would have had no effect on PEPRA members.

AB 826 was originally introduced in the 2021 legislative session, and was amended to apply only to Ventura County, but went “inactive” for the remainder of that session.  The bill was amended in the 2022 session to allow the non-cashable portion of flex credit to be pensionable for Legacy members who retired prior to 2026.

Background: The Alameda Decision
The veto of AB 826 was the latest in a series of events following the 2020 landmark California Supreme Court Decision, commonly referred to as the Alameda Decision. While generally Alameda clarified the pensionability of pay items such as standby pay,  termination pay and certain annual leave redemptions, it also addressed in-kind benefits not payable in cash directly to the member. The Supreme Court in Alameda ruled that retirement boards do not have, and never had, the discretion to include “in-kind benefits” (i.e., cannot be received in cash directly by a member) because they do not meet the definition of “compensation.”

So while the Alameda applied to public pension systems across the state, in Ventura County, the exclusion of in-kind benefits not receivable in cash had a larger impact because Ventura County’s full flexible benefit allowance had been treated as pensionable.

Flex credit is the annual dollar amount contributed by the County to the cafeteria/flexible benefits plan, and credited toward the medical premium deductions that correspond with the employee’s medical and qualified benefit choices. For most employees, this credit does not cover the cost of their premiums, though for some it may. If the flex credit amount exceeds the amount of deducted premium or qualified benefit cost, the employee receives the balance in cash. For employees who opt out of medical insurance altogether, such as when they are already covered on a spouse’s policy, they still cannot receive the entire flex credit amount in cash; the County mandates that an “opt out” fee be deducted from the employee’s flex credit so only the remaining balance is received in cash. The maximum any member could receive in cash is the “employee-only” flex credit minus the lessor of the opt out fee or the lowest priced healthcare plan.

To illustrate, below shows the maximum amount of flex credit that members covered under the County’s Management Resolution were/are provided, and what portion may be received in cash. (Amounts may vary based on bargaining unit.)

Put simply, had AB 826 passed, it would have allowed VCERA Legacy members who retired on or before December 31, 2025, to include the entire flex credit allowance amount in their compensation used to calculate retirement benefits. So for 2022, in addition to the already-includable $162.25 portion, they would also have included the $334.75 portion. But given the veto of AB 826, only the cashable portion of flex credit is includable for Legacy members.

Next Steps
Though the Alameda was issued in July 2020, the VCERA Board of Retirement has delayed excluding the non-cashable portion of flex credit for Legacy members, awaiting the outcome of AB 826. Now that the veto has occurred, the Board of Retirement will turn its attention back to implementation of that exclusion.

At its October 24, 2022, business meeting, the VCERA Board of Retirement voted 4-3 to delay the exclusion of the non-cashable portion of flex credit from compensation earnable for Legacy members, and to revisit the item at its first Business meeting in April of 2023.