Alameda Decision Implementation & Refunds Timeline Update

VCERA staff are implementing the July 2020 California Supreme Court Decision, Alameda County Deputy Sheriffs’ Association v. Alameda County Employees’ Retirement Association (2020) 9 Cal.5th 1032, 1070, commonly referred to as “Alameda.” Alameda affected the pensionability of certain pay items that VCERA had previously included in members’ pensionable earnings, which are used to calculate contributions and retirement benefits. This implementation is being executed in accordance with the latest direction received from the Board of Retirement in its Resolutions passed between October 2020 and April 2023.

TIMELINE

VCERA understands that members have questions related to the timeline of the project and when affected members may expect to receive refunds. The following factors are affecting the timeline of the project:

Initial Delay:

  • Though the Alameda Decision occurred in July 2020, VCERA’s Alameda Project did not begin until April 2023, almost three years later, due to pending legislative efforts and the County’s request for additional time to adopt the Legacy HRA benefit to address reduction in expected pension benefits related to flex credits. Litigation concerning elimination of non-cashable flex credit, standby pay and excess annual leave redemptions (“straddling”) contributed to these initial delays.

Complexity:

  • VCERA’s project is more complex and impacts a larger volume of members than other affected pension systems, resulting in significantly more historical data to validate and correct.
  • Most other affected systems primarily had standby and callback pay exclusions. In addition to those, VCERA corrections include numerous changes to flex credits, situational pay codes, and leave straddling, each requiring separate review.
  • In total, over 10,500 members are estimated to be affected by the corrections, spanning multiple employers, bargaining units, and varied pay structures and reporting practices.

Approach & Resources:

  • Due to the large volume and the need for standardization and accuracy, VCERA is automating much of its correction work.
  • While automation takes longer to build initially, it allows all corrections to be applied consistently and in a single coordinated update rather than through thousands of manual adjustments.
  • VCERA is utilizing a variety of staffing resources, including hiring fixed-term staff and external consultants.
  • VCERA is engaging the expertise of its pension administration system vendor and partnering with the County, both of which have added dedicated resources for this project.
  • Because of the number of corrections and programming changes required, VCERA is testing the results of the efforts above before finalizing corrections to ensure accuracy and enable processing all correction types to each member’s account together with the goal of having to adjust each account only once.

MEMBER IMPACT

Members are affected if they received pay items that Alameda determined should be excluded from pensionable compensation. Here are a few key points to keep in mind if you are an affected member:

  • Affected members will receive individual communication (via US mail) prior to their corrections (refunds and/or corrected retirement benefits) being processed.
  • Refunds and benefit recalculations will begin after all data corrections have been completed in member accounts.
  • Members will receive 7.9% interest on any refunds, and have options to roll their refunds over to Deferred Compensation plans, like 401(k) or 457 plans, or to other qualified plans.
  • Overpaid benefits to retirees (net of contributions refunds) will not be recouped by VCERA. Once retirement benefits are recalculated using corrected compensation, VCERA will determine any overpaid benefits and any overpaid member contributions, each with interest. If overpaid contributions exceed overpaid benefits, VCERA will refund the difference with interest. If overpaid benefits exceed overpaid contributions, VCERA will not pursue collection and no refund will be issued.
  • If your account includes a division of community property, or a service credit purchase, your refund or corrected retirement benefit may take longer to process than others. These situations require additional review or calculations to ensure the corrections are applied accurately.
  • Some affected members may be eligible for the employer-provided Legacy HRA benefit.

STAYING INFORMED

VCERA staff are providing bimonthly Alameda implementation status updates to the Board of Retirement at Board meetings. Highlights from the latest status report and general reminders include:

  • We are still working on Phase 1, which includes calculating corrections to pensionable earnings and member contributions. Remaining Phase 1 work includes final testing of system updates and validation of historical data corrections.
  • We are in the preparation stages of Phase 2, in which we will process contribution refunds with interest and calculate corrections to retirement benefits. Phase 2 cannot begin until all Phase 1 data corrections are finalized.
  • VCERA will be able to provide a more definitive timeline of corrections processing once Phase 2 work has begun.
  • View status updates on our Alameda webpage, including Alameda Decision FAQs, Leave Straddling FAQs, and information about flex credit under old and new benefit structures.

While progress is being made, the project has not yet advanced to the stage where refunds and benefit recalculations can begin. We recognize this is taking longer than anticipated and the impact this delay may have. Our team continues to work diligently, and we will provide an update as soon as we are able to share a more defined timeline. In the meantime, despite the delay in processing refunds, correction amounts payable to members will continue to accrue interest at the Board-approved rate of 7.9%. We will post additional updates to the website about its Alameda Implementation as the multi-year project progresses. To receive email alerts when updates are posted to our website, please sign up here: https://vcera.gov/vcera-website-notifications.