In October of 2019, CalPERS issued a Circular Letter to all covered employers, including the Agency, explaining that the monetary value of the purchase, rental and/or maintenance of employer-provided required clothing (i.e., uniform) is considered compensation for pension calculation purposes. A uniform serves as a ready substitute for the personal attire the employee would otherwise need to acquire and maintain. Pursuant to Section 571, subsection (a)(5) in Title 2 of the California Code of Regulations, the value of employer-provided uniforms is defined as special compensation (i.e., wages earned) for CalPERS Classic Members and is required to be reported as such to CalPERS.
CalPERS Classic Members are defined as employees who were hired prior to January 1, 2013, or employees hired on or after that date with prior CalPERS membership. The Agency has a total of 62 employees who meet these criteria and who are required to wear a uniform while on duty. Of this total, 51 employees are in the Water Systems Bargaining Unit and 11 employees are in the Power System Bargaining Unit. Special compensation in the form of a Uniform Allowance was eliminated on January 1, 2013, by the California Public Employees’ Pension Reform Act. Consequently, employees hired on or after January 1, 2013, with no prior CalPERS service-credit are not eligible for this special compensation.
In addition to reporting the monetary value of the Uniform Allowance to CalPERS on a prospective basis, CalPERS also requires that this special compensation be reported retroactively for the period of time equivalent to the employer’s Records Retention Schedule for uniform invoices. This is a seven-year period for the Agency. There are 101 CalPERS Classic Members for whom retroactive special compensation must be reported. This total includes 62 current employees and 39 former employees who have left the Agency over the past seven years.
Working closely with the Financial Services Department, Administrative Services has determined the monetary value of the purchase, rental and/or maintenance of uniforms provided to employees in the various job classification across the Agency. Additionally, Administrative Services has completed the required meet-and-confer process with the International Union of Operating Engineers, Stationary Engineers, Local 39, and has reached agreement on the amount of special compensation to be reported to CalPERS, both retroactively and prospectively. These amounts have been memorialized in a Side Letter to the Water Systems Bargaining Unit MOU and in a Side Letter to the Power System Bargaining Unit MOU.
CalPERS requires that the monetary value of a Uniform Allowance reported as special compensation for Classic Members be included in a labor agreement (i.e., MOU or a Side Letter to an MOU) and approved via resolution in a public meeting by the Agency’s governing body. Consequently, the attached resolution is hereby presented for consideration and approval by the Board.