FACT SHEET FOR CDF FIREFIGHTERS’ CASH OUT LAWSUIT SETTLEMENT

*Please read carefully. There are issues related to the settlement that have tax implications for those contemplating retirement. If you have any further questions, please contact Ken Hale (khale@cdf-firefighters.org), Ray Snodgrass (rsnodgras@msn.com ) or Kevin O’Meara (cell phone 209 419-1402)*

CDF Firefighters and its attorneys from Carroll, Burdick & McDonough LLP are working toward a settlement of the so-called “Cash Out” lawsuit. In that case, we argued that, under Government Code section 19839, the State Employer must include EDWC when cashing out accrued credits for vacation, annual leave, and compensatory time off (“CTO”) upon separation from service (i.e. retirement or seasonal layoffs). In other words, the State Employer must pay you the same dollar amount for vacation, annual leave, and CTO credits as you would have been paid if you had used those credits during employment. The State Employer has tentatively agreed to settle this case, and this fact sheet details the terms of the proposed settlement. However, please note that the settlement will not be final until the Governor’s Office, the Department of Finance, and the Court approve it.

PROPOSED SETTLEMENT TERMS

FOR ALL CLASS MEMBERS CONTEMPLATING SEPARATION ON OR AFTER DECEMBER 30, 2011 - Beginning on December 30, 2011, the State will automatically include EDWC in the lump sum paid upon separation for vacation, annual leave, and CTO credits.

o If you wish to get the benefit of a lump sum that includes EDWC at the time you separate AND the ability to split your deferred contributions on this amount between 2011 and 2012, YOU MUST SEPARATE FROM SERVICE ON DECEMBER 30. This means that December 30 MUST be your last day of work. Separating on this day also gives you the benefit of having 2011 count as your first year of the two-year waiting period to qualify for a Cost of Living Adjustment from CalPERS because you will be retired for one day in 2011 (December 31).
o If you separate from service on or before December 29, 2011, you will be able to split your deferred compensation contributions between the 2011 and 2012 tax years, but your lump sum payment will not include EDWC at the time you separate. Instead, you will fall into category number 3 below and will have to wait until approximately mid-2012 to receive the EDWC portion of your cash out.
o If you separate from service on or after January 1, 2012, you will get the benefit of a lump sum that includes EDWC at the time you separate, but will not be able to split your deferred compensation contribution between tax years.

FOR ALL CLASS MEMBERS WHO SEPARATED ON AUGUST 20, 2006 THROUGH JUNE 30, 2011
o Utilizing an agreed upon formula, the State Employer will pay approximately 95% of the amount you would have been paid had EDWC been included in the lump sum paid upon separation for vacation, annual leave, and CTO credits
o The State Employer will also pay 3% in interest compounded annually on the total amount owed.
o For all classifications other than Firefighter 1’s, the formula will be calculated using top-step salaries.
o For Firefighter 1’s, the formula will use an average of salary step rates including the step increases recently awarded in arbitration.
o Because of the way the State Employer records leave credit data, the formula also subtracts the average number of PLP credits and adds the average number of CTO credits. These averages were calculated using a random sampling of 200 Unit 8 members.
o The State will make all necessary payroll tax payments to Medicare to adjust for these previously unpaid amounts, and it will withhold all income taxes on these amounts at the standard rates.

FOR ALL CLASS MEMBERS WHO SEPARATED ON OR AFTER JULY 1, 2011 THROUGH DECEMBER 29, 2011
o Utilizing an agreed upon formula, the State Employer will pay 100% of the amount you would have been paid had EDWC been included in the lump sum paid upon separation for vacation, annual leave, and CTO credits.
o Because the separation date is so recent, no interest will be paid to class members who fall within this group.
o The State will make all necessary payroll tax payments to Medicare to adjust for these previously unpaid amounts, and it will withhold all income taxes on these amounts at the standard rates.

NEXT STEPS

Once all parties reach a final agreement, including CDF Firefighters, the Department of Personnel Administration, the Department of Finance, and the Governor’s Office, it will be submitted to the Court for approval. Because this is a class action, the Court must approve any settlement before it can become final. Once the Court approves it, we will mail the Class Action Settlement Notice to all class members. After the Court approves the settlement and enters judgment, interest will begin to compound at a rate of 7% per year on all amounts owed to class members until all payments are made. Therefore, we expect the State will distribute all monies owed by mid-2012.