Kirpalani

I. BACKGROUND

At the end of her 27-year career with the district in school year 2005–2006, Kirpalani was employed as the “Chief Business Official.” Under her written employment contract with the district for that year (contract), Kirpalani was paid a total of $165,396, consisting of a salary of $148,069, an “annuity” of $7,403, and $9,924 paid “in lieu of any fringe benefits.” The contract required Kirpalani to retire before the beginning of the subsequent school year and, as an incentive for her “early retirement,” granted her two years of “additional service credit.” The PERS retirement contributions made by and on behalf of Kirpalani were based on the total amount of cash compensation stated in the contract. In September 2006, PERS notified the district that it did not consider the entirety of Kirpalani’s pay to qualify as “compensation earnable” under Government Code1 section 20636, the amount of compensation on which retirement benefits are calculated. As PERS explained its reasoning in a letter, the district’s published salary schedule set the compensation of the Chief Business Official at $140,000, rather than the $148,069 granted by Kirpalani’s contract. Under section…