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Final Average Salary
Your retirement allowance under the County Employees Retirement Law (CERL), is calculated based upon your age, service, and final average salary (FAS). FAS is not the same as your employee W-2 wages; it is the average compensation you earned during the period determined to be your final compensation period. ACERA utilizes a two-tier system: Tier 1 and Tier 2. The former represents a one-year period and the latter represents a three-year period.
Tier 1 Member
You entered into ACERA membership on or before June 30, 1983, and have been a continuous member or re-deposited under Aquilino (this allows Tier 2 members who redeposit withdrawn Tier 1 contributions to apply to have their Tier 1 benefits restored). Final average salary is based upon your highest 26 consecutive pay periods, the equivalent of one year.
Tier 2 Member
You entered into ACERA membership on or after July 1, 1983. FAS is based upon your highest 78 consecutive pay periods (three years).
Employees who have worked for another public retirement system with an agreement to coordinate benefits with ACERA are reciprocal members. ACERA uses the highest salary of the linked systems.
Final Average Salary Calculation
Final average salary may include pay differentials, in addition to base salary, such as on-call pay and shift differentials. For information on pay types included in final average salary, contact ACERA. Employee contributions for certain cash benefits are deducted consistent with the biweekly payroll schedule and are a factor in determining the retirement allowance.
The Ventura Decision and ACERA
The Ventura decision permits ACERA to include earnable vacation accruals, such as sell backs within the final compensation period or cash outs at retirement, in the FAS calculation. How you go about maximizing your Ventura benefit is very much dependent on whether you are a Tier 1 or a Tier 2 member.
A Tier 1 member who, for example, accrues vacation at a rate of five (5) weeks per year and has eight (8) weeks of unused time at the time of retirement will receive cash for all eight (8) weeks of unused vacation. Under Alameda County rules, however, ACERA will only include five (5) of the eight (8) weeks of vacation time into the FAS. (In this example, the Tier 1 members accrued vacation rate of five (5) weeks per year sets the upper limit on what will be averaged into the Tier 1 FAS.)
A Tier 2 member who accrues vacation at the rate of five (5) weeks per year can sell/cash out up to fifteen (15) weeks of vacation during the consecutive thirty-six month period leading up to, and including retirement, and have these monies included in the FAS. (In this example, the Tier 2 members accrued vacation rate of five (5) weeks per year for three years sets the upper limit on what will be averaged into the Tier 2 FAS.)
There is, however, a complication in any Tier 2 scenario usually not found under Tier 1. While it would be advantageous to sell all fifteen (15) weeks of accrued vacation at retirement itself, when compensation is most likely its highest, the County only permits an employee to carry two years worth of vacation on the books. In our example, the member who accrues vacation at a rate of five (5) weeks per year can carry no more than ten (10) weeks of vacation.
A Tier 2 member who wishes to take full advantage of the Ventura decision will need to sell their additional five weeks accrued vacation at some point in the thirty-six months prior to retirement. This might be accomplished as follows: two years prior to retirement, the member sells two weeks vacation; one year prior to retirement, the members sells three weeks vacation; and at retirement, the member sells ten weeks vacation.
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