This bill requires a retirement system established under CERL, upon determining that the compensation reported for a member is disallowed compensation, to require the employer, as defined, to discontinue reporting the disallowed compensation.  The bill added section 31541.2 to the Government Code, providing that:

• For 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 in certain circumstances in which a system has already initiated a process, as defined, to recalculate compensation.
• “Initiated a process” means a system has formally adopted a resolution or made an administrative determination for a correction process on identified disallowed compensation that has required or will require collecting any portion of an overpayment from, or refunding member contributions to, any affected active member, retired member, survivor, or beneficiary, or adjusting the retirement allowance of any affected retired member, survivor, or beneficiary due to the determination of disallowed compensation by the system, including a determination by the system that is consistent with PEPRA, the holding in Alameda, and other provisions of this part.
• For a retired member, survivor, or beneficiary whose final compensation was predicated upon the disallowed compensation, the bill requires the retirement system to credit the employer contributions made on the disallowed compensation against future contributions, to the benefit of the employer that reported the disallowed compensation, to return any member contributions paid by, or on behalf of, that member, to the member directly, and to permanently adjust the benefit of the affected retired member, survivor, or beneficiary to reflect the exclusion of the disallowed compensation. The bill established other conditions required to be satisfied with respect to a retired member, survivor, or beneficiary when final compensation was predicated upon disallowed compensation, including, among others, requiring a specified payment to be made by the employer that reported contributions on the disallowed compensation to the retired member, survivor, or beneficiary, as appropriate.  
• Specifically, the bill requires the employer to pay to the affected retired member, survivor or beneficiary, an amount that is 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 for the duration the system projects to pay that allowance to the retired member, survivor, or beneficiary.  The bill requires that the employer begin payment within six months of notice from the system, and that the employer may have up to four years to complete the payment.  The system may charge the employer the actual costs of actuarial services provided under this paragraph.
• The bill authorizes a retirement system that has initiated a process or made a determination prior to January 1, 2024 regarding benefits or contributions related to the exclusion of the disallowed compensation to use that process or give effect to that determination in lieu of the specified provisions of this bill.
• The bill also requires certain information regarding the relevant retired member, survivor, or beneficiary needed for purposes of these provisions to be kept confidential by the recipient.
• This bill additionally authorizes an employer to submit to a retirement system for review a compensation item proposed to be included in an agreement, as specified, on and after January 1, 2025, that is intended to form the basis of a pension benefit calculation and would require the system to provide guidance on the matter.  
• The bill specifies that it does not affect or otherwise alter a party’s right to appeal any determination regarding disallowed compensation made by the system after July 30, 2020.

Status: Enacted. Effective 1/1/2025.