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CalPERS audit team urges clearer labor‑policy language for educational pay to avoid pension calculation errors
Summary
CalPERS audit staff advised school employers to use precise, publicly available labor‑policy language and follow CCR 571/571.1 when reporting educational pay; common errors include misclassifying required degrees as incentives, reporting lump sums and excluding conditions of payment from the policy.
Ken NS, manager of Audit, Compliance and Resolution at CalPERS, explained that California Code of Regulations sections 571 (classic members) and 571.1 (PEPRA members) define multiple categories of special and pensionable compensation and that employers commonly misreport educational pay.
Ken said two frequently confused categories are undergraduate/graduate/doctoral credit — compensation required as a condition of employment — and educational incentive pay, which is additional pay for voluntarily completing programs that enhance job performance. “A lot of employers default to educational incentive pay,” he said, and that practice can “create compliance issues” when required degrees are reported in the wrong bucket.
To avoid misreporting, Ken recommended written labor policies or publicly available pay schedules that explicitly state conditions of payment, identify the covered group or class, confirm governing‑body approval (Brown Act compliance) and are retained for public inspection. He read sample compliant language for each category (e.g., “Employees in the job classifications of [X] are required to hold a bachelor’s degree … will receive additional compensation equal to 5% of base pay,” reported as earned).
Ken also described common reporting mistakes — lump‑sum reporting, extra eligibility hurdles, referencing non‑public documents — and highlighted CalPERS resources: circular letter 20004625 on educational incentive pay, the Audit Compliance and Resolution Unit, and an in‑system request process for compensation reviews.
What employers should do: review and update pay policies to match CCR definitions, make conditions of payment publicly available and report educational pays separately in the pay period they are earned. CalPERS warned that failure to provide supporting documentation could result in excluding the compensation from final compensation calculations at retirement.
