At least nine Merced County employees retired this week in an apparent effort to cash out on vacation hours they could potentially lose in a looming legal battle at the state level over employee retirement benefits.
The state appealed a judge’s ruling in May that allowed some county employees to continue receiving 160 hours of “terminal vacation pay” – a one-time payout counted toward employee pensions.
In an email obtained by the Sun-Star, Merced County’s retirement board advised dozens of county employees they must retire by Friday to keep the benefit.
“As a result of the appeal, effective July 11, 2014, any MCERA (Merced County Employees’ Retirement Association) members who retire after July 11, 2014, will not at least during the pendency of the appeal, be able to have any cashed out vacation hours counted as pensionable compensation for retirement purposes,” the email said.
“Should you decide to take advantage of the vacation cash out to be included in your pension,” the email continued, “your last working day must be no later than July 10, 2014.”
Steven Bland, the plan administrator for MCERA, did not return calls for comment Friday.
Employees hired before Dec. 31, 2012, were eligible for the 160-hour payout, according to county officials. Those hired after that date can “cash out” and count vacation hours earned in their last year of employment as pensionable compensation.
The 160-hour benefit stems from a 1997 California Supreme Court decision in Ventura County that addressed whether terminal cash-outs could be counted toward employee pensions. Some counties went to trial; others reached their own settlements. Merced County’s settlement granted the 160-hour payout in 2000.
The 160 hours represents the maximum vacation time an employee can earn or accumulate in one year.
The benefit was challenged after Assembly Bill 197, which took effect January 2013, changed the way pension benefits are calculated. Specifically, the new law excluded any terminal cash-outs – paid when employees are terminated, quit or retire – from being counted toward employee pensions.
Judge David B. Flinn in May ruled the sell-back of the 160 hours that had been previously allowed and counted as pensionable compensation could continue – until the state appealed the decision this week.
Assistant County Counsel Richard Flores said Merced County employee unions could request a stay in the case, which would suspend the proceedings.
The county’s two major unions – American Federation of State, County and Municipal Employees, Local 2703, and Teamsters, Local 856 – had not filed anything as of Friday.
“They have indicated that they may, but we haven’t seen one yet,” Flores said. “I don’t anticipate them doing it, but you never know.”
Merced County will have to wait for the case to be decided by the Court of Appeals – that could be six months to a year from now.
“Now we’re in a situation that we’re in a limbo because if the Court of Appeals reverses the judgment’s decision, no one gets the 160 hours,” Flores explained. “If the Court of Appeals affirms the decision, then people are back to getting the 160 hours.”
If that happens, Flores added, the county would have to go back from now until the time of the decision and retroactively give employees the payout.
Merced County District 4 Supervisor Deidre Kelsey, who also sits on the retirement board, said the numerous retirements this week came as no surprise.
“I knew once the ambiguity of the ruling became clear that other employees would reconsider their personal situations,” Kelsey said. “I’m fairly certain that this group of employees was aware of the possible outcomes. Most likely they wanted to continue in their jobs until it became unfeasible for them to do so in the long run.”