Oakland Unified School District (PERB 0818E)

STATE 	OF 	CALIFORNIA
DECISION OF 	THE
PUBLIC 	EMPLOYMENT 	RELATIONS 	BOARD
OAKLAND 	SCHOOL 	EMPLOYEES
ASSOCIATION,
Charging 	Party,
v.
OAKLAND UNIFIED SCHOOL DISTRICT,
Respondent.
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) 	Case No. 	SF-CE-12 75
PERB Decision No. 	818
June 	21 	1990
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Appearances: 	Andrew Thomas Sinclair, 	Attorney, 	for Oakland
School Employees Association; 	Peter N. 	Hagberg, Attorney, 	for
Oakland 	Unified 	School 	District.
Before Hesse, 	Chairperson; 	Craib and Camilli, 	Members.
DECISION
CRAIB, 	Member: 	This case is before the Public Employment
Relations 	Board 	(PERB or Board) 	on exceptions 	filed by 	the
Oakland 	Unified School 	District 	(District) 	to a proposed decision
of a PERB administrative 	law judge 	(ALJ), 	in which it was 	found
that 	the 	District 	unilaterally 	changed 	its 	contribution to 	a
supplemental 	annuity plan 	(Plan), 	in violation of Educational
Employment Relations Act 	(EERA or Act) 	section 	3543.5,
subdivision 	(c) 	and, 	derivatively, 	subdivision 	(b).2 The
1The ALJ 	referred to 	the 	Plan as 	the 	trust 	supplemental
annuity plan and 	the 	complaint 	calls 	it 	the 	Tax 	Sheltered Annuity
Plan. 	The Oakland 	School 	Employees Association 	(OSEA or
Association) 	alleged at the hearing that the terms were
synonymous. 	The District argues otherwise. 	For ease of
reference, 	it will be called the Plan.
2EERA 	is 	codified at Government Code 	section 	3540 	et 	seq.
Unless 	otherwise 	indicated, 	all 	statutory references 	herein are
to the Government Code. 	Section 3543.5, 	subdivisions 	(b) 	and 	(c)
provide:

District has 	filed numerous 	exceptions which assert, 	generally,
that 	it had no duty to negotiate 	its 	decision to use nonvested 	,
forfeitures 	to reduce its 	future 	contributions.
It 	shall be unlawful 	for a public 	school
employer to:
(b) 	Deny to employee organizations 	rights
guaranteed 	to 	them by 	this 	chapter.
(c) 	Refuse or fail to meet and negotiate 	in
good 	faith with an 	exclusive 	representative.
FACTUAL AND 	PROCEDURAL 	BACKGROUND
In 	1971, 	prior to the enactment of EERA, 	the District
adopted 	its 	first Plan. 	At that time, 	the Plan provided that the
District would 	contribute 	1-1/2 	percent 	of 	each 	employee's 	salary
to the 	tax-deferred Plan. 	The Plan was 	set up to qualify as 	a
defined 	contribution plan under the 	Internal Revenue Code. 	A
board of trustees 	(Trustees) 	was 	selected to administer the Plan.
In 	1977, 	the 	District and the Association3 negotiated an 	initial
collective bargaining agreement 	(CBA or contract), 	on behalf of
the 	"white 	collar" 	unit, 	which incorporated the Plan by
reference. 	That 	contract provided 	for an 	8-percent 	contribution
by the 	District, 	and 	contained a provision which 	stated 	that 	the
Association would 	support 	a 	change 	in the 	Plan that would 	require
a 	3-year vesting period 	for 	eligibility 	to 	receive 	funds 	from the
3The Association represents 	two units 	of 	employees with 	the
District, 	a 	"white collar" 	unit and a 	"paraprofessional" 	unit.
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Plan.4 The 	1979-81 	"white 	collar" 	agreement contained the 	3-year
vesting requirement. 	In 	1979, 	the parties 	negotiated a CBA on
behalf 	of 	the paraprofessional 	unit which 	also 	incorporated 	the
Plan, 	provided 	for 	an 8-percent 	contribution,5 and 	contained 	a
similar 	vesting 	requirement.
As 	a result of the vesting requirement, 	contributions 	made
on behalf 	of 	employees who 	left 	employment 	before 	they 	vested 	in
the Plan were 	forfeited. 	The 	nonvested 	forfeitures 	accumulated
in the Plan's account. 	In 	1984, 	pursuant to the parties'
agreements, 	participation in the Plan was 	abolished 	for new
hires; 	however, 	contributions 	continued to be made for employees
already participating 	in the 	Plan. 	Nonvested 	forfeitures,
therefore, 	have not 	continued to accumulate.6 The District 	and
the Association are now parties 	to two 	separate CBAs,7 each of
which incorporates 	the Plan by reference, 	contains 	a vesting
4The original 	Plan did not provide 	for a vesting period.
The 	District 	delayed payment 	of 	2 	percent,of 	the 	8-percent
contribution pursuant to 	its budget proposal. 	The Association
challenged 	that 	delay. 	The 	issue was 	ultimately decided by 	the
Board 	in Oakland Unified 	School 	District 	(1982) 	PERB 	Decision
No. 	236. 	Decision No. 	236 will be discussed, 	infra.
6The ALJ 	found that 	the 	District was 	not 	obligated 	to
contribute 	on behalf 	of 	paraprofessional 	unit 	members 	hired 	after
June 	6, 	1985. 	There were no exceptions 	filed to this 	factual
determination. 	The parties 	apparently agreed that no 	further
nonvested 	forfeitures 	are 	accumulating.
7Both agreements are effective July 	1, 	1987 	through June 	30,
1990.
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requirement,8 and mandates 	that the District contribute 	8 percent
of 	each 	employee's 	salary to 	the 	Plan.
Even though 	nonvested 	forfeitures 	do 	not 	continue 	to
accumulate, 	at the time of the hearing, 	the account contained in
9
excess 	of 	$600,000 	and 	interest 	continues 	to 	accumulate on this
amount. 	It 	is 	the disposition of this money that is 	the basis
for the Association's unfair practice charge. 	Neither the
parties' 	CBAs 	nor the Plan contain an explicit directive 	for the
disposition of 	nonvested 	forfeitures.10 In an effort 	to remedy
that deficiency, 	the District passed Resolution 	32435 	on
88Although Article 	7 	of 	the 	"white collar" 	contract 	continues
to 	contain a vesting requirement, 	it 	expressly limits
participation 	in the 	Plan to 	employees who were hired prior to
February 22, 	1984. 	The 	"paraprofessional" 	contract contains a
similar vesting requirement 	in Article 8; 	however, 	that article
does 	not 	contain a 	similar limitation on new hires.
9As of May 	18, 	1988, 	the nonvested forfeitures totaled
$607,023.58.
1010 Section 	11.11 	of 	the Plan provides 	for the disposition of
forfeitures 	which 	result 	from the 	inability of 	the 	Plan Trustees
to 	find participants. 	That 	section provides:
If 	any benefits 	payable 	to 	Participant 	or
Beneficiary under 	this 	Plan cannot be paid 	by
reason that 	such person 	cannot be 	located 	for
three years 	after reasonable 	efforts 	have
been made to locate him, 	the Trustees may
declare 	such benefits 	forfeited 	and 	in 	such
event 	all 	liability 	for 	the payment 	thereof
shall 	terminate. 	Any amounts 	forfeited 	in
accordance with this 	Section 	shall be used 	to
reduce 	the 	current 	or 	next 	succeeding
contribution of 	the Employer.
44

August 	24, 	1988.11 Resolution 	32435 	amended Section 	11.11 	of 	the
Plan to provide, 	in pertinent part:
The Trustees 	[of the Plan], 	their agents,
those 	they 	contract with and 	the 	District
shall 	credit and allocate 	as 	Employer
contributions 	to 	the 	current next 	succeeding
required contribution(s) 	of the Employer
amounts 	equal 	to the 	amount of 	the unvested
forfeitures 	including 	interest 	thereon.
If 	the 	total 	amount of unvested 	forfeitures
exceeds 	the amount 	of 	the 	next 	required
Employer contribution, 	the amount of the
unvested 	forfeitures 	shall 	be 	credited and
allocated as 	Employer 	contributions 	as
follows:
(1) 	An amount equal to 	95% of the next
required 	contribution 	shall 	be 	credited 	to
the Employer as 	95% 	of 	its 	next required
contribution;
(2) 	Any additional 	amount of 	extant unvested
forfeitures 	shall 	be 	credited 	as 	an Employer
contribution 	toward 	the 	next 	succeeding
required Employer contribution up to 	95% 	of
the 	full 	amount 	of 	said required
contribution;
(3) 	Should the amount of unvested
forfeitures 	exceed 	the 	next 	succeeding
required contribution, 	the remainder 	shall be
credited to 	the 	next 	succeeding 	required
contribution 	in the manner described above.
Upon 	crediting 	the 	Employer with 	the
contributions, 	the Trustees, 	their agents,
and those 	they 	contract with and the 	District
shall allocate the amounts 	credited, 	along
with 	any 	additional 	Employer 	contribution
made 	to 	satisfy 	the 	required 	Employer
contribution, 	to the individual accounts of
the 	individual participants 	as 	the current
required 	Employer 	contribution 	to 	their
annuity.
11The District has 	passed 	12 	prior resolutions 	relating 	to
the Plan.
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The 	term 	"unvested 	forfeitures" 	means 	the
amount of contributions, 	interest and any-
other 	benefits 	contributed 	for 	and/or
allocated to 	the accounts 	of 	employees 	and
individual 	participants 	who 	terminate
employment prior to 	the vesting 	of the
account, 	benefits and contributions,
including 	interest.
Pursuant to this 	resolution, 	the District would have reduced 	its
direct 	out-of-pocket 	contributions 	by 	95 	percent 	and 	replaced
that percentage 	of 	the 	contribution with the nonvested
forfeitures. 	Thus, 	the employees would continue to receive the
same 	8 percent of their salaries as 	contributions 	to their Plan
accounts.
The 	resolution 	itself 	indicates 	that 	the 	amendment was
necessary to 	conform to 	Internal 	Revenue Code 	section 	401,
subdivision (a)(8). 	The resolution states, however, 	that, 	"at
all 	times," 	the Plan 	"has provided that 	forfeitures 	be 	allocated
to 	future 	Employer contributions." 	The resolution also provides
that 	it would become 	effective 	immediately to prevent 	any
allocation or use 	of 	the nonvested 	forfeiture 	funds 	in violation
of the amendment. 	However, 	it additionally provides 	for a 	60-day
waiting period prior to 	the 	first 	crediting of 	nonvested
forfeitures 	to 	the District's 	contributions 	for
an opportunity 	for 	any necessary 	or desirable
discussion of 	the 	implementation of 	the
crediting 	and 	allocation procedure with 	the
Classified Annuity 	Board 	of 	Trustees,
participants 	and/or 	exclusive
representatives.
6

This 	resolution was 	presented to 	the 	District 	board 	of
trustees 	at its August 24, 	1988 meeting. 	It appeared as 	an item
on the 	agenda 	received by 	the Association Executive 	Director
William Freeman on August 	23. 	The agenda described the matter as
"Resolution 	32435 	- 	Amending 	the Classified 	Supplemental Annuity
Plan. 	For 	consideration—action on 	9/14." 	Freeman made 	several
attempts 	on August 	23 	and 	24 	to obtain a copy of the resolution,
but by the 	time of 	the board meeting on the 	evening of August 	24
he had not 	succeeded in securing a copy. 	At the meeting, 	the
District 	board 	of 	trustees 	voted 	to 	suspend 	its 	usual practice
and vote on the 	resolution 	immediately.12 Freeman requested, 	and
was granted, 	an opportunity to speak, 	and, 	at that time, 	he
received a 	copy of 	the 	resolution. 	Freeman told the 	District
board 	of 	trustees 	that 	the 	issue was 	bargainable 	and 	requested
that 	the District 	not pass 	the 	resolution until 	the parties 	had
bargained. 	The board of 	trustees 	passed the resolution over 	this
objection.
The Association then 	filed 	its 	charge which 	alleged 	that 	the
District's 	contribution to the Plan is 	a part of 	the wage package
and, 	therefore, 	within the scope of representation. 	Furthermore,
the Association alleged that 	the 	District 	agreed 	that 	the
unvested 	forfeitures would remain in the Plan account. 	The
Association relied 	on a 	1982 	PERB 	decision which 	requires 	the
District 	to make 	"its 	TSA 	contributions 	at 	eight percent 	in
12	12 The 	normal procedure 	for the 	District board of 	trustees
was 	to 	review a matter at 	one meeting and vote on 	it 	at 	the 	next
board of trustees' 	meeting two weeks 	later.
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accordance with past practice 	. 	. 	. 	with OSEA." 	(Oakland Unified
School District, 	supra. 	PERB Decision No. 	236, 	p. 	20.) 	The
thrust 	of 	its 	argument 	is 	that 	the District violated 	its 	duty 	to
bargain by unilaterally 	implementing 	an 	amendment 	to 	the 	Plan 	"so
as 	to diminish Employer 	contributions." 	The Association also
alleged 	that 	the 	District 	violated 	its 	duty 	to bargain 	in good
faith by 	failing to provide 	Freeman a 	copy of 	the 	resolution
prior to the August 	24 	meeting.
The 	District 	denied 	the 	charges 	generally 	and 	raised 	the
following affirmative defenses: 	(1) 	the passage of the
resolution was 	not 	a 	change 	in wages 	or working 	conditions 	within
the meaning of the Act; 	(2) 	the matter was a contract dispute and
subject to contract enforcement procedures, 	and was, 	therefore,
deferrable pursuant to Lake Elsinore 	School District 	(1986) 	PERB
Decision No. 	603; 	(3) 	it did negotiate the passage of the
resolution; 	(4) 	its 	actions were proper under the Plan and
applicable law; 	and 	(5) 	any failure to provide the Association
with the 	timely copy of 	the resolution was 	de minimus.
A formal hearing was held on February 21, 	22, 	and 23, 	1989.
In addition to 	testimony of 	the principal 	negotiators 	from 	the
District 	and the Association, 	witnesses 	included two 	tax 	and
benefit plan experts, 	the Plan administrator, 	and a consultant
who prepared a bid proposal 	to 	send to potential 	carriers.
THE ALJ'S 	PROPOSED DECISION
On the preliminary 	jurisdictional matter, 	the ALJ 	found 	that
both 	contracts 	had 	grievance procedures 	which 	culminated 	in
8

binding 	arbitration and 	that 	the 	unilateral 	modification 	of 	the
Plan was 	arguably 	a 	contract 	violation because 	the 	Plan was
incorporated in the contracts. 	However, 	the contracts 	expressly
limit the right to file grievances to employees and, 	thus, 	the
ALJ 	found 	that 	the Association had waived 	its 	right 	to 	grieve.
Therefore, 	the ALJ held that the matter was 	not deferrable to
arbitration under 	EERA 	section 	3541.513 and 	Lake 	Elsinore 	School
----·District. 	supra---. 	PERB Decision No. 	603, 	because the Association
- -
13EERA section 3541.5 provides, 	in pertinent part:
(a) 	Any employee, 	employee organization, 	or
employer 	shall have 	the right 	to 	file 	an
unfair practice charge, 	except that the board
shall not do either of the following: 	. 	. 	.
(2) 	issue a complaint against conduct also
prohibited by 	the provisions 	of 	the 	agreement
between the parties 	until 	the 	grievance
machinery of the agreement, 	if 	it exists and
covers the matter at issue, 	has been
exhausted, 	either by 	settlement or binding
arbitration. 	However, 	when the charging
party demonstrates 	that 	resort 	to 	contract
grievance procedure would be 	futile,
exhaustion 	shall 	not be necessary. 	The board
shall 	have 	discretionary 	jurisdiction to
review 	such 	settlement 	or 	arbitration 	award
reached pursuant 	to 	the 	grievance 	machinery
solely 	for 	the purpose 	of 	determining whether
it 	is 	repugnant to the purposes 	of this
chapter. 	If the board finds that 	such
settlement 	or 	arbitration award 	is 	repugnant
to the purposes 	of this 	chapter, 	it 	shall
issue a complaint on the basis 	of 	a timely
filed charge, 	and hear and decide the 	case on
the merits; 	otherwise, 	it shall dismiss the
charge. 	The board shall, 	in determining
whether the charge was 	timely filed, 	consider
the 	six-month 	limitation 	set 	forth 	in this
subdivision to have 	been tolled during the
time 	it took the 	charging party to 	exhaust
the 	grievance 	machinery.
99

could not 	have 	filed 	a 	grievance 	nor pursued binding 	arbitration.
He 	relied on the 	Board's 	decision in Temple 	City 	Unified 	School
District 	(1989) 	PERB Order No. 	Ad-190, 	in which the Board held
that 	a matter 	is 	not deferrable where the Association has 	no
right to pursue binding arbitration. 	This 	issue 	is 	not on
appeal.
The ALJ 	next 	addressed whether 	the 	adoption of 	the
resolution was 	an unlawful 	unilateral 	action. 	He 	first 	looked 	at
the Board's prior decision involving the 	District's 	Plan, 	Oakland
Unified School District, 	supra, 	PERB Decision No. 	236. 	In
Oakland, 	the 	Board held that 	the 	District's 	obligation to make
payments 	to 	the Plan was within the 	scope 	of 	representation and,
hence, 	a mandatory 	subject of bargaining. 	The ALJ relied on the
following 	language 	of that decision:
The District's payment 	into the 	employees'
TSA 	fund 	represents 	a 	fixed 	8 	percent 	of 	the
employees' 	salary and, 	as such, 	is part and
parcel of the employees' 	wages. 	This TSA
contribution is 	of 	equal 	concern to both
management 	and 	employees 	whose 	interests 	are
appropriately 	represented 	at 	the 	negotiating
table. 	Furthermore, 	there is nothing in the
record to 	support a 	finding that 	the
District's 	freedom to 	exercise 	those
managerial 	prerogatives 	(including matters 	of
fundamental policy) 	essential to the
achievement of 	its 	mission would be
significantly 	abridged by 	a 	requirement 	that
it negotiate a 	change 	in its practice and
policy with respect 	to 	the 	TSA.
(Id. 	at pp. 	8-9, 	relying on Anaheim Union
High School District 	(1981) 	PERB Decision No.
177. )
Relying on other PERB precedent, 	the ALJ 	concluded that
contributions 	to 	the Plan were 	a 	significant 	form of 	supplemental
10

compensation. 	The ALJ then discussed what possible uses 	could
have been made 	of 	the nonvested 	forfeitures. 	He 	found that 	the
funds 	could 	have been used 	to 	reduce 	the 	significant
administrative costs of the Plan which, 	by its terms, 	were first
charged 	against 	the 	employer contribution. 	He 	reasoned 	that 	no
evidence was 	submitted which would 	indicate 	that 	such use 	of 	the
nonvested 	forfeitures 	would 	contravene 	the 	Internal 	Revenue 	Code
or 	Internal 	Revenue 	Service regulations. 	He 	concluded that 	"such
an amendment to the Plan would alter it and the 	. 	. 	. 	[contracts]
as 	to a 	subject matter within 	scope 	so as 	to achieve a result not
reached by the parties 	at the bargaining table."
The ALJ 	also 	rejected 	the 	District's 	argument 	that 	the
Association waived 	its 	right 	to 	negotiate 	the 	amendment 	by virtue
of 	the management rights 	clause 	in the Plan document.
Section 	9.01 	of 	the 	Plan provides:
The 	Employer reserves 	the 	right by
appropriate 	action of 	its 	governing board 	to
modify or amend this 	Plan 	in whole or 	in part
at any time and from time to time, 	and 	such
amendment 	may be 	made 	retroactively by
delivery to the Trustees 	and 	Insurer of 	a
written 	copy of 	such modification 	or
amendment signed by the Employer; 	. 	. 	.
He 	reasoned 	that 	the 	clause 	does 	not 	clearly waive 	the
Association's 	right 	to 	negotiate 	the use 	or application of
nonvested 	forfeitures, 	because the 	clause pertains 	only to 	the
District's 	reserved rights 	as 	trustor prior to 	the 	inclusion of
the Plan in the parties' 	contracts.
He 	further 	found that 	since 	the parties 	knew how to phrase
explicit 	language relating to 	forfeitures, 	e.g., 	in section
11

11.11,14 he would not 	infer that 	the Association meant 	to waive
any right to bargain on this 	issue.
The ALJ 	also 	found that 	the 	District breached 	its 	duty 	to
bargain by 	failing 	to timely provide 	a 	copy of 	the 	resolution to
the Association prior to the District board of trustees' 	meeting.
He 	found 	that 	the 	information was 	necessary and 	relevant 	to 	the
Association's 	duty to represent 	its 	members, 	and that the
Association made 	a 	clear and unconditional demand 	on the
District. 	He 	reasoned that the delay 	in providing the
information would only have been 	"inappropriate or di 	minimus" 	if
the District board of trustees' 	action on the matter had not been
taken that night. 	However, 	since the District board of 	trustees
took action on the 	resolution the 	same 	night, 	and 	the Association
had 	received the resolution only minutes 	before, 	the delay 	in
providing the 	resolution amounted 	to 	a 	refusal 	to provide
information.
THE 	DISTRICT'S 	EXCEPTIONS
The 	District 	excepted 	to 	numerous 	factual 	and 	legal
determinations 	made 	by the ALJ which 	supported his 	ultimate
conclusion that 	the 	District violated the Act by: 	(1)
unilaterally 	determining 	how to 	spend 	the 	nonvested 	forfeitures;
and 	(2) 	failing to timely provide 	a 	copy of 	the resolution to the
Association. 	The District argues, 	generally, 	that the matter was
not within the 	scope 	of 	representation because 	the amount 	of 	the
contribution to 	the 	Plan on behalf of 	the 	employees 	did not
14For text of Section 	11.11 	of the Plan, 	see 	footnote 	10.
12

change, 	and it was 	obligated to adhere to the 	Internal 	Revenue
Service 	(IRS) 	rules 	and regulations 	governing the Plan.
DISCUSSION
The ALJ, 	relying primarily on the Board's 	decision 	in
Oakland Unified School District, 	supra. 	PERB Decision No. 	236,
found that 	modifications 	to 	the Plan were matters within the
scope of representation and, 	thus, 	negotiable. 	Oakland. 	however,
is not dispositive.
In Oakland, 	the 	District unilaterally decided to defer
2 	percent of 	its 	8-percent 	contribution, 	with payment of 	the
deferred 	amount 	to 	be paid 	out 	of 	the 	anticipated reserves 	of 	the
subsequent fiscal year. 	(Id. 	at pp. 	1-2.) 	The effect of this
deferral was 	to reduce the District's 	contribution to 	6 percent,
from September 	1979 until July 	1980. 	(Id. 	at p. 	7.) 	The
exclusive 	representatives 	requested 	negotiations 	which 	the
District 	refused because 	it 	contended 	that 	the 	decision was 	not
negotiable. 	(Id. 	at p. 	5.)
The 	Board rejected 	the 	District's 	argument 	that 	the 	deferral
was 	consistent with 	its 	past practice 	of 	not negotiating the
timing of 	its payments. 	The Board reasoned that, 	even though the
District may 	have 	deferred 	the payment 	of 	its 	8-percent
contribution during the 	same 	fiscal year, 	the District was
obligated by 	the 	terms 	of 	the 	contract 	to make 	the 	full 	8-percent
contribution. 	(Id. 	at p. 	11.) 	The Board ordered the District to
"henceforth make 	its 	contractually mandated payments 	at 	8 	percent
in accordance with its past practice." 	(Id. 	at p. 	19.)
13

Despite 	the Association's 	characterization that 	the 	District
was 	reducing its 	contribution by 	95 percent, 	this 	case does 	not
involve a reduction in contribution levels. 	Under the District's
resolution, 	the contribution level would remain at 	8 percent.
Rather, 	we must address 	the negotiability of the disposition of
the accumulated nonvested 	forfeitures. 	That 	issue 	cannot be
determined 	solely 	on the basis 	of 	the 	Board's 	prior decision 	in
Oakland Unified School District, 	supra, 	PERB Decision No. 	236.
The 	District 	and the trustees 	for the 	Plan are mandated by
the Plan itself 	to 	abide by the 	Internal Revenue Code. 	Section
1.01 	of the Plan states, 	in pertinent part:
The Plan 	is 	intended to 	comply with 	all
requirements 	for 	qualification under 	Sections
401-404 	of 	the 	Internal 	Revenue Code of
1954 	. . . .
Section 401, 	subdivision 	(a)(8) 	of the Internal Revenue Code
outlines 	the 	requirements 	for qualification. 	That 	section
provides:
A trust 	forming part 	of 	a pension plan 	shall
not 	constitute 	a 	qualified 	trust 	under 	this
section unless 	the plan provides 	that
forfeitures 	must not be 	applied to 	increase
the benefits 	any 	employee would 	otherwise
receive under the plan.
(26 U.S.C, 	sec. 	401, 	subd. 	(a)(8).15)
The parties 	agree that 	the 	Plan is 	a defined 	contribution
plan. 	As 	the experts 	testified, 	there are two general types 	of
defined 	contribution plans, 	money-purchase plans 	and profit-
15Section 401, 	subdivision 	(a)(8) 	was amended in 	1986 	to
substitute 	"defined benefit plan" 	for 	"pension plan." 	This
amendment does 	not affect the 	law governing the Plan at 	its
inception, 	nor when the vesting requirement was 	adopted 	in 	1977.
14

sharing plans. 	Myron Sugarman, 	expert witness 	for the District,
explained the differences:
[A] 	money purchase pension plan was 	required
to 	state 	an annual 	contribution that would be
made 	for the 	employees. 	And it 	could not be
varied on a year to year basis. 	For example,
it might 	state 	that 	the 	employer would
contribute 	five percent 	of 	each 	employee's
contribution 	[salary] 	on an annual
basis. 	. 	. 	. 	That is to be contrasted with a
profitsharing 	[sic] 	plan, 	where the employer
might determine on an annual basis what 	if
any contribution would be made 	to the plan.
And . 	. 	. 	[the] contribution, if made, could
only be made 	out 	of 	current or accumulated
profits. 	. 	. 	. 	There was a second basic
difference between those two types 	of plans.
And it has 	to do with the 	subject of
forfeitures. 	. . . 	A forfeiture 	is 	a portion
of 	a 	contribution which an employee 	loses
because he or 	she 	terminates
employment. 	. 	. 	. 	With a money purchase
pension plan, 	forfeitures which occur as 	a
result 	of 	employees 	terminating 	employment
must be used to reduce 	subsequent
contributions 	of the 	employer to the plan.
That 	is 	to be 	contrasted with a profitsharing
[sic] 	plan. 	In a profitsharing 	[sic] 	plan,
the plan can provide 	a 	number of 	alternatives
with respect to forfeitures. 	One is 	they can
be used to 	reduce 	subsequent 	contributions.
Second, 	and probably more 	common in a
profitsharing 	[sic] 	plan, 	is that
forfeitures, 	when they occur, 	are allocated
to the accounts of the remaining employees.
Both experts 	agreed that, 	when established in 	1971, 	the Plan was
intended 	to be a money-purchase plan.
The Association relies 	heavily 	on the 	testimony 	of 	its
expert, 	Luke Bailey, 	that he could convince the IRS that, 	with
the vesting requirement, 	the Plan changed 	from a money-purchase
plan to a profit-sharing plan and, 	thus, 	the nonvested
'
forfeitures 	could be 	used to 	increase 	the 	contributions 	to 	the
15

remaining participants. 	This argument, 	however, 	must fail.
First, 	as the charging party and proponent of this 	theory, 	the
Association failed to meet 	its burden of proof. 	(See PERB Reg.
32178 	which provides 	that 	the 	charging party must prove 	the
complaint by a preponderance of 	the evidence.) 	The 	statement of
one 	tax 	expert 	that he believed he 	could 	convince 	the 	IRS 	that
the 	Plan had changed 	from a money-purchase plan to 	a profit-
sharing plan is 	speculative and, 	therefore, 	insufficient to prove
the Plan is 	a profit-sharing plan. 	Secondly, 	the Association's
argument 	is 	in direct conflict with 	its 	position 	in Oakland
Unified School District, 	supra, 	PERB Decision No. 	236, 	where it
successfully 	argued 	that 	the 	District 	could 	not 	choose 	to 	reduce
its 	contribution, 	but rather was 	obligated to 	contribute 	8
percent of the employees' 	salaries to the Plan. 	Therefore, 	the
Board 	finds 	that the Plan is 	indeed a money-purchase plan.
The 	regulations 	adopted to 	interpret 	section 	401,
subdivision 	(a)(8) 	of the 	Internal Revenue Code provide:
In the 	case of a trust 	forming a part of 	a
qualified pension plan, 	the plan must
expressly provide 	that 	forfeitures 	arising
from 	severance of 	employment, 	death or 	for
any other reason, [16] 	must not be applied to
increase 	the benefits 	any 	employee would
otherwise 	receive under the plan at any time
prior to 	the termination of 	the plan or the
complete 	discontinuance 	of 	employer
contributions 	thereunder. 	The amounts 	so
forfeited must be used as 	soon as 	possible 	to
reduce 	the 	employer's 	contributions 	under 	the
16As 	indicated 	infra. 	the Plan provided that 	forfeitures
resulting 	from an 	inability 	to 	locate 	recipients 	were 	to be 	used
to 	reduce 	future employer contributions. 	(See 	section 	11.11,
quoted at fn. 	10)
16

plan. 	However, 	a qualified pension plan may-
anticipate the 	effect 	of 	forfeitures 	in
determining the 	costs 	under the plan.
Furthermore, 	a qualified plan will not be
disqualified merely because 	a 	determination
of 	the amount 	of 	forfeitures 	under the plan
is 	made only once during 	each taxable year of
the employer.
(26 	CFR 	1.401-l(b)(1)(i).)
Pursuant to the provisions 	of 	section 401, 	subdivision 	(b)(8)
and the regulations, 	in order to maintain its 	status 	as 	a
qualified pension plan, 	the Plan must provide 	that nonvested
forfeitures will 	be used 	to 	reduce 	future 	employer
contributions.17 However, 	the 	IRS has determined that a money-
purchase pension plan which provides 	that 	forfeitures 	will 	be
used to reduce reasonable administrative expenses, 	with any
excess 	to 	be 	used 	to 	reduce 	further 	employer 	contributions 	was
not 	inconsistent with 	Internal 	Revenue 	Regulation 	1.401-7(a) 	that
requires 	forfeitures 	be used as 	soon as 	possible 	to reduce
employer contributions. 	(IRS Rev. 	Rul. 	84-156.)
The Association argued, 	and the ALJ found, 	that the
nonvested 	forfeitures 	could 	be 	used 	to pay 	for 	administrative
costs without 	jeopardizing the Plan's 	qualified 	status. 	However,
the 	Plan document 	specifically provides 	for the 	source 	of 	payment
of 	administrative costs. 	Section 6.01 provides:
All 	contributions 	shall 	first 	apply to 	the
administrative 	costs of the Plan, 	with the
17The 	IRS has ruled that 	it is unnecessary for a plan, 	in
order to 	qualify, 	"to 	contain a 	specific 	statement 	regarding 	the
application of 	forfeitures" 	as 	long as 	the plan makes 	it
otherwise 	clear that 	forfeitures 	must not be applied to 	increase
the 	benefits 	any 	employee would otherwise 	receive under 	the 	Plan.
(IRS Rev. 	Rul. 	67-68.)
17

balance applied to 	the purchase 	of
Accumulation units.
As 	the 	Plan has 	always 	generated 	forfeitures 	(see 	section 	11.11,
quoted at fn. 	10), 	the parties 	could have provided that the
forfeitures 	be used 	for reasonable 	administrative 	costs. 	The
Plan 	could have been 	set up to 	anticipate 	the 	effect 	of
forfeitures 	on administrative 	costs. 	Instead, 	the parties
established 	a 	mechanism 	for payment 	of 	administrative 	costs,
i.e., 	they are to be paid from the District's 	contributions.
As mentioned, 	the Plan is 	incorporated by reference 	in the
parties' 	contracts. 	The issue of administrative costs, 	or any
•
other 	item in the Plan, 	has been open for negotiation at the
parties' 	bargaining sessions. 	Furthermore, 	since the Plan
specifically provides 	that 	it 	is 	intended to 	comply with all
requirements 	for qualification under 	section 	401-404 	of 	the
Internal 	Revenue Code, 	we must assume that the parties 	knew of
the section 401, 	subdivision 	(a)(8) 	requirements 	for
qualification when 	they 	determined 	the payment 	of 	administrative
costs.
Although the Association argues 	that 	the District 	agreed to
keep 	the nonvested 	forfeitures 	in the Plan account, 	it 	failed to
meet 	its 	burden of proof on this 	issue. 	The Association
presented the 	testimony of Ann Sprague, 	Plan administrator and
former OSEA president, 	who participated 	in the 	1976-77
negotiations which resulted 	in the vesting requirement. 	Sprague
testified that the District represented at the table, 	in a
response to an October 	13, 	1977 OSEA inquiry, 	that the
18

forfeitures would remain 	in the Plan account with 	no 	savings 	to
the District.18 The District, 	however, 	subsequently indicated,
in its November 6, 	1977 bargaining proposal, 	that the 	forfeitures
would revert to the District.19 Additionally, 	in a 	1982 	bid
specification, 	prepared by the 	Trustees 	to 	solicit 	contractors
for the 	annuity 	fund, 	the 	consultant 	represented that
"forfeitures 	are used to 	reduce 	future 	District 	contributions."
In a 	1984 	certified public 	accountant report on the 	District
annuity plans, 	prepared for the Trustees, 	the consultants 	stated
that 	they 	started with the 	following 	assumption:
District 	contributed 	funds 	for 	employees 	who
leave 	the 	District prior 	to 	being vested 	and
related earned 	interest 	revert 	to 	the
District. 	Such amounts 	should be 	recovered
monthly by 	the 	District by 	reducing 	the 	next
month's 	contribution.
Moreover, 	even the Association's attorney, 	in a document prepared
in 	1984 	describing the Plan agreement 	for Connie Sloan, 	the then-
president of OSEA, 	quoted the applicable regulations 	as 	follows:
18The 	District's written response 	to 	that 	inquiry 	stated:
Funds 	freed by 	the 	early departure of 	an
employee 	remain 	in the 	fund and 	these 	assets
as well 	as 	the 	interest 	generated become
assets 	of the fund. 	No cost 	savings to the
district.
19That proposal 	stated:
Contributions 	for 	employees 	who 	terminate
with less 	than three years' 	service return to
District. 	Potential 	savings 	attained from
reduction 	in administrative 	costs 	remain with
program.
19

The 	amounts 	so 	forfeited must be used as 	soon
as possible to reduce 	the 	employer's
contributions 	under the plan.
Given the 	above 	evidence 	and the tax 	rules 	and regulations,
we 	find 	that 	the 	District had 	no duty 	to bargain 	over 	the
disposition of 	the 	nonvested 	forfeitures.20 Section 	401,
subdivision 	(a)(8) 	makes 	clear that 	nonvested 	forfeitures 	must 	be
used to 	reduce 	future employer 	contributions. 	The 	fact 	that 	the
District had not, 	in the past, 	complied with this 	requirement
does 	not 	justify continued noncompliance. 	The 	District 	and 	the
Trustees 	have 	an obligation to maintain the 	Plan's 	qualified
status. 	Although, 	under the applicable 	Internal Revenue Code
sections 	and regulations, 	the parties 	could have agreed that
administrative 	costs 	be paid out of 	nonvested 	forfeitures, 	the
parties 	instead 	agreed 	that 	administrative 	costs 	be paid 	out 	of
the District's 	contributions. 	Therefore, 	the District had no
duty 	to 	negotiate 	over 	its 	decision to 	use 	nonvested 	forfeitures
to reduce 	its 	future contributions.
20
Assuming a 	copy of 	the resolution was 	relevant 	and
necessary to 	the Association's 	duty 	to monitor 	compliance with
the CBA, 	we nevertheless 	reverse the ALJ's 	finding of 	a violation
based upon a 	failure to provide 	information. 	In light of 	our
holding 	that 	the disposition of 	nonvested 	forfeitures 	was
nonnegotiable, 	coupled with the 	fact that 	the resolution provided
for 	a 	60-day delay 	in 	implementation to 	allow 	for discussions
with 	exclusive 	representatives, 	we 	find that the 	short delay 	in
providing 	a 	copy 	of 	the 	resolution was 	insufficient 	to 	constitute
a 	violation.
20

ORDER
The Board, 	therefore, 	REVERSES the ALJ and finds 	that the
District did not breach 	its 	obligation to 	negotiate 	in good
faith. 	The unfair practice charge 	in Case No. 	SF-CE-1275 	is
hereby 	DISMISSED.
Chairperson Hesse 	and Member Camilli 	joined 	in this 	Decision.
21