By: Vance Piggott, Senior Counsel, Kronick Moskovitz Tiedemann & Girard
In recent years, provisions of the Public Employees' Retirement Law ("PERL") which governs CalPERS, have been updated. This year, the California State Legislature has adopted a number of revisions to the County Employees Retirement Law governing 1937 Act county retirement systems, which are similar to the recent changes to PERL. Although the changes discussed below relate only to county retirement systems, they also serve as a good reminder for agencies with California Public Employees’ Retirement System (CalPERS) benefits as some of these laws may have similar or analogous CalPERS / PERL equivalents.
AB 2284 amends California Government Code section 31461. This section of law defines "compensation earnable" and sets out certain requirements that must be met in order for compensation to be pensionable. AB 2284 allows a county retirement system, to the extent it has not already defined “grade,” to adopt a definition for the term "grade," as it relates to pensionable compensation, to mean a number of employees considered together because they share similarities in job duties, schedules, unit recruitment requirements, work location, collective bargaining unit, or other logical work-related group or class. A single employee shall not constitute a group or class.
This authority for a county retirement system is not operative in any county until the board of supervisors of that county, by resolution adopted by majority vote, makes that subparagraph applicable in the county. Adopting the definition may, in some circumstances, allow for additional forms of compensation to be considered pensionable for special districts participating in county retirement systems.
AB 2474 contains two primary distinct parts.
First, AB 2474 amends portions of the California Government Code which dictate where a retirement system sends a retiree’s or beneficiary’s monthly retirement benefits. Under the prior language, the retiree or beneficiary could only designate an account they personally hold. Under the new language, retirees or beneficiaries can designate an account held by a trust, as specified, which is controlled by the retiree or beneficiary to receive their monthly benefits from their retirement system.
Second, AB 2474 prohibits a retiree from a county retirement system from being employed by a county or district of the same retirement system, unless the person first reinstates from retirement or is authorized under County Employees Retirement Law or Public Employees' Pension Reform Act. AB 2474 also provides that retirees who are unlawfully working after retirement will be required to repay the retirement system for any allowance they received during the period of their unlawful employment. It also provides that such a retiree's employer must pay the retirement system contributions that otherwise would have been paid and must reimburse the system for administrative expenses.
AB 2474 also contains funds transfer provisions applicable only to the Los Angeles County Employees Retirement Association, and by extension, to special districts that participate in that county retirement system.
AB 2474 serves as a good reminder for public employers to ensure that they are not unlawfully employing retirees and are complying with all working after retirement rules.
AB 3025 adds section 31541.2 to the California Government Code to cover situations in which a retirement system disallows compensation. Disallowed compensation is compensation which is not pensionable but was reported to the system as pensionable.
Under the new statute, a county retirement system must require an employer to cease reporting disallowed compensation. In the case of an active member, the bill requires the retirement system 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, or on behalf of, that member, to the member directly or indirectly through the employer that reported the disallowed compensation, except as provided.
In addition, this provision will require that the employer reimburse the retirement system for any retiree benefits paid based on the disallowed compensation, as specified, and pay an amount to the retiree, survivor or beneficiary, equal to 20 percent of the amount calculated by the system representing the actuarial equivalent present value of the difference between the monthly allowance that was predicated on the disallowed compensation and the adjusted monthly allowance calculated as specified, for the duration the system projects to pay that allowance to the retired member, survivor, or beneficiary. The bill contains exceptions for systems that have initiated a process prior to January 1, 2024, to recalculate or adjust compensation or benefits, as specified.
AB 3025 provides that an employer or authorized employee representative may submit to the retirement system for review an additional compensation item that a party to a proposed agreement requests be included, contained, adopted, or entered into that agreement, on and after January 1, 2025, that is intended to form the basis of a pension benefit calculation, in order for the system to review consistency. The bill requires the retirement system to provide guidance regarding the submission within 90 days of the receipt of all information required to make a review.
AB 3025 serves as a good reminder for public employers to review the components of compensation being reported to their retirement systems to ensure that they are, in fact, pensionable.
Communication is provided for general information only and is not offered or intended as legal advice. Readers should seek the advice of an attorney when confronted with legal issues and attorneys should perform an independent evaluation of the issues raised in these communications.
Take a look back at previous parts of the 2025 New Laws Series in CSDA eNews for more in-depth overviews of new laws affecting special districts:
Missed Part 7? Read it now: Three Bills Revise California’s Paid Leave Laws: What Employers Should Know
Missed Part 6? Read it now: Increasing Bid Thresholds Through CUPCCAA (AB 2192)
Missed Part 5? Read it now: Development Related Fees: Changes to Preliminary Estimate and Collection Provisions
Missed Part 4? Read it now: New Laws Impacting Proposition 218
Missed Part 3? Read it now: The Brown Act: Clarification of the Standards for Remote Meetings and an Expanded Ground for Closed Session; New Attorney General Guidances
Missed Part 2? Read it now: Assembly Bill 2561 (McKinnor): All Local Agencies Must Present Status of Job Vacancies at a Public Hearing
Missed Part 1? Read it now: Public Officials May Not Block Commenters from Official Social Media Accounts and Posts
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