Impact of Alameda Decision on Flex Credit and Retirement Benefits
When the California Supreme Court issued the Alameda Decision on July 30, 2020, it ruled that retirement boards do not have the discretion to include in Legacy members’ compensation earnable “in-kind” benefits. As determined in prior case law, “flex credit” payments that are applied to healthcare-related benefits are considered to be in-kind payments. Accordingly, flex credit amounts that cannot be received by employees in unrestricted cash must be excluded from compensation earnable. These in-kind payments are examples of an “Alameda Exclusion.”
Flexible Benefits Program – Old and New Structures
For decades, the County of Ventura offered its employees in-kind benefits under its Flexible Benefits Program. In 2023, the County modified the program to ensure it complied with regulatory requirements. The “maximum cashable amounts” under both program structures differ, as explained below. The maximum cashable amounts are considered pensionable for Legacy members; no portion of flex credit is pensionable for PEPRA members.
Under the old Flexible Benefits Program structure, all employees were paid a flex credit allowance to help subsidize their health insurance premiums. Those who opted out were charged an opt-out fee. The maximum cashable amount of the flex credit allowance was equal to the “employee-only” or “flat” flex credit allowance minus the lesser of the opt-out fee or lowest-priced medical plan.
Under the new Flexible Benefits Program structure, employees receive either a flex credit allowance or an opt-out allowance. There is no longer an opt-out fee. The maximum cashable amount for all members within the same bargaining unit (i.e., union) is equal to the opt-out allowance.
Legislative and Board Actions on Flex Credit
In 2021-2022, legislative efforts to include the full flex credit allowance in Legacy members’ retirement earnings failed. As a result, VCERA must implement the Alameda Decision by excluding from final average compensation (FAC) the non-cashable portion of flex credit that had formerly been included in FAC. On April 17, 2023, the Board of Retirement passed a resolution permitting the inclusion of the maximum cashable amounts of flex credit under the old and new program structures in members’ FACs.
For Legacy members who retired on or after July 30, 2020, VCERA must recalculate their FACs and monthly retirement benefits to exclude any portion of flex credit payments deemed non-pensionable. The charts linked below will enable affected members to estimate the impact of these flex credit changes on their future retirement benefits.
Using “Estimated Impact Charts”
The “Estimated Impact Presentation and Examples” PDF describes the past and present methods for determining the pensionability of flex credit. It also provides SEIU and VCDSA member scenarios under the old and new Flexible Benefits Program structures.
The “Estimated Impact Charts” PDF lists calculation factors used to estimate the reduction in a member’s retirement earnings and future monthly benefit. On page 3 of the PDF, Legacy members first need to identify their benefit tier and bargaining unit. The applicable row will show the estimated reduction in their retirement earnings and the estimated monthly benefit decrease per year of service. For example, a General Tier 2 Management employee who retires at age 50 with 20 years of service should multiply $11.39 by 20, resulting in an estimated monthly benefit reduction of $227.80.
Note: The Estimated Impact PDF below was updated as of 7/1/2023. As of that date, all County unions (but not the Courts) had adopted the County’s new Flexible Benefits Program structure. Members approaching retirement should contact VCERA to request a retirement benefit estimate rather than relying on information in these charts.
Estimating Your Retirement Benefit Online
Legacy members can run their own benefit estimate using the Legacy Pension Calculator at www.vcera.org/pension-calculators. To input an accurate Final Average Monthly Compensation amount in the “Compensation” field, members should find their Current Retirement Earnings Final amount on their paystubs, multiply it by 26 (to get an annual total), and then divide the total by 12 (to get a monthly average). The retirement earnings amount is expected to be accurate as of the 7/14/2023 paycheck.