AB 197 Frequently Asked Questions
In July of 2020, the California Supreme Court issued a unanimous
decision upholding the constitutionality of the legislative
changes contained in AB 197 to the definition of “compensation
earnable.” More information about the legislative changes
can be found in the Frequently Asked Questions.
Based on the California Supreme Court decision the CCCERA
Retirement Board took action to correct retirement contributions
for members that paid contributions in the following situations:
- Contributions provided to CCCERA from July 12, 2014 to June
30, 2015 on excluded terminal pay items.
- Contributions provided to CCCERA from July 12, 2014 to
present on on-call pay items.
Members eligible for a contribution correction were
mailed a letter in February 2022 and provided the option
of receiving their contribution correction payment as a direct
deposit. CCCERA has been processing payments according to the
forms received. A check will be mailed to members that do not
send a form authorizing the direct deposit. Checks will be mailed
by summer 2022.
What are terminal pay items?
Terminal pay items are payments an employer provides to an
employee at the time of the employee’s termination from
employment and previously may be included in the retirement
calculation. Once AB 197 was enacted it excluded the inclusion of
some of these pay items going forward in “compensation earnable”,
except those payments that do not exceed what is earned and
payable in each 12-month period during the final average salary
period. Since an employee’s contribution rates are determined
based on the projections of future pay items they may receive,
some employees may have paid a higher retirement contribution
rate due to the projected future terminal pay items. Terminal pay
items identified in AB 197 were no longer included in the
projection of contribution rates effective July 1, 2015.
How is the terminal pay contribution correction
calculated?
To calculate the terminal pay contribution correction amount the
total pensionable compensation from July 12, 2014 to June 30,
2015 is determined and multiplied by the terminal pay percentage
calculated by the CCCERA actuaries by each Cost Group and
outlined in this letter - Segal Letter
What are on-call pay items?
On-call pay items are compensation provided to an employee for
being available to be called into work outside of their normal
working hours. Compensation of this type may also be called
standby.
How are the on-call pay contribution corrections
calculated?
To calculate the on-call pay items contribution correction the
compensation amount paid to the member is multiplied by the
contribution rate in effect during the time period. Contribution
rates can be found in the contribution rate packets. Any
subvention by the member or employer of contributions is factored
into the calculation.
AB 197 Overview
On September 12, 2012, the Governor signed into law Assembly Bill
197, with an effective date of January 1, 2013. The measure
changed how county retirement boards were permitted to calculate
their current members’ retirement allowances.
