1. (a) Compensation that has been treated inconsistently pursuant to this section and Section 27600 shall be deemed to have been paid to enhance a member's benefit pursuant to paragraph (8) of subdivision (c) of Education Code section 22119.3 and shall not be included as creditable compensation to the system.

2. (b) Upon determination that compensation was treated inconsistently, except in cases where an adjustment to the crediting of contributions would not result in a change to a member's final compensation, the creditable compensation shall be limited during the period of time specified in subdivision (c).

   1. (1) If the inconsistent treatment of compensation is the result of a restructure of compensation, creditable compensation shall not include the amount that was restructured.

   2. (2) If the inconsistent treatment of compensation is not attributable to a restructure, creditable compensation shall not include the portion of compensation in excess of the following thresholds:

      1. (A) For inconsistent compensation increases concurrent with a change in position, the threshold for the fiscal year in which the inconsistent compensation increase occurred is the immediate predecessor's salary increased by the percentage calculated pursuant to paragraph (3). The resulting amount is the baseline on which the percentage increase calculated pursuant to paragraph (4) shall be applied to determine the threshold for each subsequent fiscal year.
      2. (B) For inconsistent compensation increases not concurrent with a change in position, the threshold for the fiscal year in which the inconsistent compensation increase occurred is the member's compensation earnable for the year prior to the year in which the inconsistent increase occurred increased by the percentage calculated pursuant to paragraph (3). The resulting amount is the baseline on which the percentage increase calculated pursuant to paragraph (4) shall be applied to determine the threshold for each subsequent fiscal year.

   3. (3) For the purposes of subparagraphs (A) and (B) of paragraph (2), the percentage increase to establish the baseline amount shall be the greater of either (A) or (B), whichever is applicable, or (C), as follows:

      1. (A) 150 percent of the median percentage increase of the compensation earnable of the members at the member's employer between that fiscal year and the previous fiscal year, if that employer has at least 30 members.
      2. (B) 150 percent of the median percentage increase of the compensation earnable of the members within the member's county between that fiscal year and the previous fiscal year, if the member's employer has less than 30 members.
      3. (C) 150 percent of the median percentage increase of the compensation earnable of active members statewide, or zero, whichever is greater.

   4. (4) For the purposes of subparagraphs (A) and (B) of paragraph (2), the percentage increase applied during each subsequent fiscal year shall be calculated as follows:

      1. (A) For each subsequent inconsistent increase that is not concurrent with a change in position, the percentage calculated pursuant to paragraph (3) is applied to the prior year's threshold amount.
      2. (B) For each subsequent inconsistent increase that is concurrent with a change in position, the percentage calculated pursuant to paragraph (3) is applied to the immediate predecessor's salary.
      3. (C) For each subsequent consistent increase that is not concurrent with a change in position, the same percentage increase that the member earned is applied to the prior year's threshold amount.

      4. (D) For each subsequent consistent increase that is concurrent with a change in position, the threshold amount is the actual compensation earnable for that new position.

         (c)(1) For a member whose initial final compensation after their most recent retirement is calculated using a period of 36 or 12 consecutive months pursuant to Section 22134, 22134.5 or 22135 of the Education Code, the period of time shall not exceed the seven years preceding and including the last day used to calculate the member's final compensation.

   5. (2) For a member whose initial final compensation after their most recent retirement is calculated using nonconsecutive periods of time due to a reduction in school funds as permitted by Education Code section 22134, the period of time shall not exceed the number of years that begins four years prior to the first day used to calculate final compensation and ends on the last day used to calculate final compensation.
3. (d) This section shall become operative on July 1, 2027.

Note: Authority cited: Sections 22119.3, 22207, 22213, 22215, 22250, 22305, 22324.5 and 22458, Education Code. Reference: Sections 22115, 22119.3 and 22458, Education Code.

History

1. New section filed 11-18-2014; operative 1-1-2015 (Register 2014, No. 47).

2. Amendment of subsections (b)(1)-(2) and amendment of Note filed 8-22-2017; operative 10-1-2017 (Register 2017, No. 34).

3. Change without regulatory effect amending subsections (b)(1)-(2) filed 6-20-2024 pursuant to section 100, title 1, California Code of Regulations (Register 2024, No. 25).

4. New subsection (c) filed 4-20-2026; operative 7-1-2026 (Register 2026, No. 17).

5. Repealer and new section filed 4-20-2026; operative 7-1-2027 (Register 2026, No. 17).