Jerry Heath, a commander with the City of Long Beach, California Police Department, retired on industrial disability in September 1987. At the time of his retirement, in addition to his salary, Heath was receiving a regular automobile allowance of $300 per month. This compensation was not included in Heath’s retirement pay, although it was noted as “income” on his W-2 form every year.
Ten years later, in 1997, the California Supreme Court held that premium items not payable to all employees, such as uniform allowances, motorcycle bonuses, and bilingual premium pay, had to be included in compensation for the purposes of computing retirement. Heath then wrote to the California Public Employees’ Retirement System (CalPERS) and requested that his benefits be retroactively adjusted to comport with the finding of the California Supreme Court. When CalPERS rejected his claim, Heath appealed. The California Court of Appeals sided with Heath.
The Court found that there was a presumption that all compensation should be included in determining retirement benefits. To be excluded, “special compensation” must have been paid for “additional services outside regular duty.”
The controlling statute listed as one example of “special compensation” which could be excluded from retirement calculations “an allowance for automobile.” The Court was not persuaded, though, that the “allowance for automobile” exception applied to Heath.
The Court held “the examples cannot be read without reference to the defining principle to exclude special payment for services outside the normal job function. Thus, this language indicates that Heath’s automobile allowance would be included within its scope, and excluded from retirement benefits, if the allowance was ‘special compensation’ for ‘additional services outside regular duty.’
“The undisputed facts indicate that Heath’s automobile allowance was ‘special compensation,’ but not ‘for additional services outside regular duty.’ On the contrary, it appears to be for services Heath regularly performed as a commander. Therefore, based upon the language of the statute, Heath’s automobile allowance would not be excluded and could be considered compensation for purposes of retirement benefits. We cannot read the statute to simply exclude ‘automobile allowance,’ because to do so would ignore the preparatory phrase, ‘special compensation for additional services outside regular duty.’”
Heath v. Board of Administration, California Public Employees’ Retirement System, 2004 WL 2086434 (Cal.App. 2004).