County Chief Executive Officer Rick Robinson disallowed the holiday cash-outs earlier this year in one of the first steps toward reining in the county's pension costs. County supervisors decided in closed session Tuesday, however, to allow the retirement credits for 10 or 12 managers who cashed holiday time in the past two years.
The CEO's decision came after a review of the county's pension policies late last year. He set down the new policy in a Jan. 14 letter to Auditor-Controller Larry Haugh and Retirement Administrator Tom Watson.
For more than 12 years, the county allowed holiday cash-outs to contribute to managers' pensions based on a liberal interpretation of a 1997 California Supreme Court ruling on pensions, Robinson said.
That ruling required county pension funds to include compensation in addition to salary in calculating pensions. Since the ruling, county pension systems have permitted retiring employees to claim unused vacation cash-outs, car allowances, bilingual pay, uniform allowances and other pay in their final year, which spikes pensions and drives up the taxpayer cost of funding retirements.
Compensation, years of service and retirement age are the key factors in calculating pensions for public service retirees.
Stanislaus County pays managers for unused vacation time, but only one year's worth of vacation (or 232 hours) can be applied to retirement benefits. On top of that, managers have received retirement credits for working holidays such as Thanksgiving, Christmas, Fourth of July or Labor Day.
Robinson said there was no reason to credit the 84 hours of holiday time toward retirement. County officials either mistakenly allowed it for 12 years or misinterpreted the court ruling, he said.
"Managers are exempt from overtime laws and they don't have holiday time that can be converted to vacation," Robinson explained. "I felt strongly the practice was based on a liberal interpretation of the court decision."
Increasing salary by 4 percent
By claiming holiday cash-outs, managers were able to increase final-year salary by 4 percent. No figures were available on the total costs to the county or the Stanislaus County Employees' Retirement Association.
County officials won't try to adjust pensions retroactively for retired managers who claimed the cash-outs.
Because it was a common practice, the county could be challenged in court if it tried to reduce their pensions, Robinson said. He scheduled a closed session for Tuesday's board meeting to discuss recent holiday cash-outs for managers before the new policy was set.
Supervisors voted 5-0 to let them apply the cash-outs to retirement if they retire this year. The cash-outs won't be allowed going forward from Jan. 14 of this year.
"We have been spending a fortune on attorneys, so we figured we would pick a start date for the policy," Supervisor Jim DeMartini said. "The CEO never made us aware of this until January when he discovered it." DeMartini questioned whether managers outside the Sheriff's Department were working very many holidays.
With pension costs straining the county budget, county officials intend to establish less generous benefits for new hires through negotiations with labor groups. Holiday cash-outs won't be an issue in those talks because those employees can claim less compensation toward retirement.
Bee staff writer Ken Carlson can be reached at 578-2321 or kcarlson@modbee.com.
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