Kenneth (Ken) Noss, staff services manager in CalPERS’ Audit Compliance and Resolution Section, presented a detailed walkthrough of the government codes and California Code of Regulations that define special compensation for classic members and pensionable compensation for PEPRA members.

Why it matters: whether an extra pay item counts toward pension calculations depends on statute and regulatory definitions and on how the pay item is documented; improper documentation can create compliance findings and financial liabilities.

Noss summarized that compensation outside the pay rate for classic members is governed by Government Code sections such as 20636 and 20636.1 and by CCR section 571, which lists 104 special-compensation items; for PEPRA members pensionable compensation is addressed in Gov. Code 7522.34 and CCR 571.1, which lists 98 items and excludes roughly six items for PEPRA members (for example, uniform allowances and employer-paid member contributions for certain members). He stressed that many requirements overlap for both membership classes: compensation must be available to a defined group or class (not a single individual), be part of normally required duties, be paid periodically as earned, be historically consistent and not be final settlement pay.

Noss advised employers to put compensation items outside the pay rate in a written labor policy — typically a memorandum of understanding or collective bargaining agreement — that is duly approved in a public meeting, is immediately accessible to the public, and contains effective and revision dates, the conditions of payment (eligibility, amount, frequency) and a clear definition of the covered group or class. “I strongly encourage employers that have classic and pepra members… to have your special and pensionable compensation items outside of pay rate listed in the same written labor policy,” he said, noting that referencing another document instead of fully disclosing compensation items can render those items not reportable for pension-calculation purposes.

CalPERS staff said compliance checklists and a reportability table are available on the CalPERS website and that the agency plans to add item-level sample language and checklists to help employers standardize documentation.