Alameda Update: Recovery of Pension Overpayments
At the February 15th Board of Retirement meeting, SCERS will consider changing its approach regarding the recovery of overpaid pension benefits subject to reductions under the Alameda decision, and not collect overpaid pension benefits directly from retirees.
The agenda item can be found here. The meeting begins at 10 a.m. and will take place in person at the SCERS’ office, 980 9th Street. Due to technical issues, the meeting will not be streamed online. Public comments can also be submitted to firstname.lastname@example.org.
Approximately 1,500 SCERS retirees are facing pension reductions since the California Supreme Court’s July 2020 Alameda decision, which triggered a correction process for SCERS and other county retirement systems to exclude pay items that were not supposed to be included in pension calculations going back to 2013.
Under the correction plan adopted by the SCERS Board, SCERS is to recalculate and adjust pensions, and recover overpaid benefits made since September 2020. This was the same approach adopted by other county retirement systems. However, SCERS is unique due to its larger volume of Alameda corrections – affecting nearly 20% of the SCERS membership – as well as various administrative and technical challenges.
Some 2-½ years after the Alameda decision, the correction process is ongoing and will take several more months to complete. SCERS recognizes that the potential overpayment a retiree owes to SCERS grows each month, placing financial uncertainty on the retiree due to a complex administrative correction process for which they have no control.
SCERS will continue to make the pension reductions, as instructed by the Court. However, staff is recommending that the overpaid benefit amounts will be accounted for and reconciled actuarially through the employer pension liability as permitted by the Internal Revenue Service.
SCERS expects this approach to have an insignificant impact on the $12 billion pension fund. The median pension reduction calculated to date is about $1.57/month, with a median overpayment due to SCERS of about $49.30, representing about 30 months of overpaid benefits.