The Ventura County Employees’ Retirement Association (VCERA) administers a county pension system under the County Employees Retirement Law of 1937 (CERL; Gov. Code, § 31450 et seq.). For “legacy” members hired before the California Public Employees’ Pension Reform Act of 2013 (PEPRA; Gov. Code, § 7522 et seq.) took effect, a retiring employee’s pension is based on “final compensation” calculated over a one- or three-year period the employee selects. Before PEPRA, cashed-out unused leave time counted toward that calculation without a clear statutory cap, which the Legislature came to view as enabling “pension spiking” — employees timing leave cashouts to inflate their final-compensation figure. PEPRA responded by adding Government Code section 31461, subdivision (b)(2), which excludes from “compensation earnable” any leave-cashout payments “in an amount that exceeds that which may be earned and payable in each 12-month period during the final average salary period.”

In its 2020 decision in Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement Assn. (2020) 9 Cal.5th 1032, the Supreme Court upheld PEPRA’s constitutionality and, in the course of that ruling, described section 31461(b)(2) as preventing employees from doubling their cashed-out leave time by designating a final-compensation period that straddles two calendar years.

Relying on that description, VCERA’s board adopted a 2020 resolution excluding from pension calculations any leave cashouts exceeding an employee’s applicable annual (typically calendar-year) allowance, even when the employee’s chosen final-compensation period spans two calendar years. VCERA then sued for a declaratory judgment confirming the resolution’s legality. Retired county counsel Leroy Smith cross-complained for the opposite declaration: Smith, whose employment allowed him to cash out 200 hours of leave per calendar year, designated a final-compensation period running October 2019 to October 2020, and cashed out 40 hours in December 2019 and 200 hours in February 2020 — 240 hours total. He argued all 240 hours had to count toward his pension because all of it was earned and payable during his single, employee-selected 12-month final-compensation period.

The Santa Barbara County Superior Court granted summary adjudication for VCERA. Relying heavily on the Supreme Court’s discussion in Alameda County, the trial court found the statutory text ambiguous but concluded VCERA’s interpretation better served the Legislature’s purpose of curbing pension spiking. Two defendant employee associations, the Criminal Justice Attorneys Association of Ventura County and the Ventura County Professional Peace Officers’ Association, appealed. The Court of Appeal affirmed in a published decision, likewise finding the statute ambiguous and resolving that ambiguity in VCERA’s favor based on the statute’s anti-spiking purpose. (Ventura County Employees’ Retirement Assn. v. Criminal Justice Attorneys Assn. of Ventura County (2024) 98 Cal.App.5th 1119.)

In the case of Ventura County Employees’ Retirement Association v. Criminal Justice Attorneys Association of Ventura County, No. S283978 (Cal. Sup. Ct., July 2026) — the California Supreme Court affirmed the judgment of the Court of Appeal.

Writing for the majority, Justice Kruger first addressed whether Alameda County had already definitively resolved the question. The Court held it had not: Alameda County’s primary holding concerned PEPRA’s constitutionality, and its description of section 31461(b)(2) as preventing straddled-year doubling, while consistent with today’s holding, was not itself the product of statutory textual analysis and was not essential to that decision’s outcome. The Court therefore undertook that analysis for the first time, reviewing the question of statutory interpretation de novo.

On the text itself, the Court found the statute genuinely ambiguous. The employee associations argued that “each 12-month period during the final average salary period” unambiguously means the very 12-month (or 36-month) period the employee designates, so that anything paid within that period counts in full. The Court acknowledged this reading was linguistically possible but not compelled: the statute’s use of “payable,” rather than “paid,” suggested a focus on what an employee’s employment terms allow to be paid in a given period, not merely what happened to be paid, and reading the provision the associations’ way would render the “12-month period” language meaningless for the many legacy members with one-year final-compensation periods. Because the text supported more than one reasonable reading, the Court turned to statutory purpose.

Purpose resolved the ambiguity decisively in VCERA’s favor. Reading section 31461(b)(2) to permit inclusion of any cashout paid during an employee’s chosen period, regardless of ordinary annual limits, would let legacy employees who straddle a final-compensation period across two calendar years count potentially double their normal annual cashout allowance — the exact manipulation PEPRA was enacted to eliminate, and one that would treat legacy employees more favorably than employees hired after PEPRA, who cannot count any leave cashouts toward their pensions at all under Government Code section 7522.34.

The Court also found administrability concerns favored VCERA’s reading, since it lets county retirement systems predict funding obligations more reliably than a rule permitting cashouts of “somewhere between 100 and 200 percent” of the annual allowance depending on an employee’s chosen dates. The Court rejected the employee associations’ argument that ambiguous pension statutes must be construed in members’ favor, explaining that rule applies only when consistent with the statute’s clear purpose, which here cut against the associations’ reading. On this basis, the Court held section 31461(b)(2) excludes from compensation earnable any cashed-out leave exceeding the annual allowance set by an employee’s terms of employment, regardless of whether the employee’s chosen final-compensation period straddles calendar years.

California Supreme Court Limits Public Employee Pension Spiking