Hudson

Appellants are the former fire chief, division fire chief, police chief, and substation superintendent of the electric utility division of the City of Colton (City). The City permitted appellants to convert employer-paid benefits, such as health and life insurance, to salary increases if they agreed to retire within 12 months. The purpose of the conversions was to increase appellants’ final year compensation so they would receive greater retirement benefits under the Public Employees’ Retirement System (PERS).

PERS, however, refused to include the salary increases in calculating appellants’ pensions, taking the position the benefit conversions were not “compensation” under the Public Employees’ Retirement Law (PERL). In the published part of this opinion we conclude the lower court correctly determined the benefit conversions were excluded from compensation under the then applicable provisions of PERL.

I

Factual and Procedural Background

PERL (Gov. Code, § 20000 et seq.) establishes PERS, a retirement system for employees of the state and participating local public agencies. PERS determines employees’ retirement benefits based on their years of service, final…