Education Matters: March 2026

Education Matters

Amy Conway (Brandt) Partner | San Francisco

Jordan Carman Associate | San Francisco

Andrew Dorado Senior Counsel | Los Angeles

Stephanie J. Lowe Senior Counsel | San Diego

Religious Rights

U.S. Supreme Court Holds That California Parental Notification Policies Likely Violate Parents’ Religious Rights.

In 2023, two California public school teachers, Elizabeth Mirabelli and Nicholas Williams, sued their school district in federal district court to seek exemptions from district policies governing students’ gender identity. The teachers alleged that the policies required them to use students’ preferred names and pronouns and to withhold information from parents about a student’s gender transition at school, which they argued conflicted with their religious beliefs.

During the litigation, the school district asserted that California law required schools to follow these practices. The teachers then added state officials as defendants, and several parents of California public school students joined the lawsuit as plaintiffs.

The parent plaintiffs included John and Jane Poe and John and Jane Doe, who alleged that the policies prevented them from learning about their children’s gender transition at school. The Poes alleged that their daughter began presenting as a boy and using a male name and pronouns at school during seventh grade. The Poes only discovered this after their child was hospitalized for a suicide attempt and a doctor informed them that the child had gender dysphoria and had been presenting as a boy at school. At a new school during ninth grade, the Poes’ child again began identifying as a boy. Contrary to the parents’ instructions, teachers and school officials continued to use a male name and pronouns for their child, citing obligations under California state law.

The Does object to gender transitioning. However, since the fifth grade, their daughter has sometimes identified as a boy. When the child was in seventh grade, the Does confronted the school principal because they believed the school was using a male name and pronouns for their child without informing them. The principal explained that state law prohibited the school from sharing information about a student’s gender identity or transitioning with parents without the student’s consent. The Does believed that the risk

of leaving their child at that school was too great, but sending her to a private school was financially and logistically infeasible. They transferred their child to another public school and placed them in therapy.

After discovery, the district court granted summary judgment in favor of the plaintiffs and entered a permanent injunction. The injunction prevents schools from “misleading” parents about their children’s gender presentation at school and their social transitioning efforts. It also requires schools to follow parents’ directions regarding their children’s names and pronouns.

Defendants appealed, and the Ninth Circuit stayed the injunction pending appeal. The Ninth Circuit concluded that the district court may not have conducted the rigorous analysis required for class certification under Federal Rule of Civil Procedure 23 and suggested that the injunction appeared overly broad. The Ninth Circuit also expressed doubts about the district court’s decision on the merits of the plaintiffs’ constitutional claims. The parents and teachers then applied to the United States Supreme Court to vacate the Ninth Circuit’s stay.

The Supreme Court concluded that the parent plaintiffs who sought religious exemptions were likely to succeed on the merits of their Free Exercise Clause claim. The Supreme Court explained that California’s policies substantially interfered with the right of parents to guide the religious development of their children, a principle recognized in Wisconsin v. Yoder, (1972) 406 U.S. 205. The Supreme Court also relied on its recent decision in Mahmoud v. Taylor, (2025) 606 U.S. 522, which held that failing to provide parents with an opportunity to opt out of having their children exposed to LGBTQ+ inclusive books placed a burden on parents’ religious rights. According to the Supreme Court, California’s nondisclosure policies imposed an even greater burden because they permitted schools to facilitate aspects of a child’s gender transition without parental knowledge or consent.

The Supreme Court stated that California’s policies would not survive the strict scrutiny that Mahmoud demands, because the policies were not narrowly tailored. The Supreme Court opined that California’s interest in safety could be served by a policy that allows

religious exemptions while precluding gender-identity disclosure to parents who would engage in abuse.

The Supreme Court also determined that the parents were likely to succeed on their due process claim. The Court explained that longstanding precedent recognizes parents’ fundamental rights to direct the upbringing and education of their children. The Court stated that this right includes parents’ right not to be shut out of participation in decisions regarding their children’s mental health, and that gender dysphoria is a condition that has an important bearing on a child’s mental health. Therefore, the Court argued that California’s policies likely violate parents’ rights to direct the upbringing and education of their children.

The Supreme Court further held that the denial of constitutional rights during the appellate process

constitutes irreparable harm. The Court stated that the balance of equities favored the parents, because the injunction ensured parental participation in significant decisions affecting children while still allowing the State to protect children through existing child-abuse laws.

The Court also rejected the Ninth Circuit’s procedural concerns, concluding that the parent plaintiffs likely had standing and that the district court sufficiently addressed the requirements for class certification.

The Supreme Court vacated the Ninth Circuit’s stay with respect to the parent plaintiffs but left it in place with respect to the teacher plaintiffs.

Mirabelli v. Bonta (2026) ___U.S.___ [___L.Ed.2d___].

Administrative Law

Ninth Circuit Finds U.S. Education Department Unlikely To Succeed In Appeal Of Mental Health Grant Terminations.

On February 5, 2025, the U.S. Department of Education issued an internal directive requiring a comprehensive review of previously awarded mental health-related grants issued to schools and state education entities. Acting under that directive, the Department reviewed both new grant awards and previously issued grants according to revised policy objectives. The Department then sent identical discontinuation notices to 138 grantees located in sixteen states, informing them that the agency would discontinue their multi-year grants. The notices listed four potential grounds for discontinuation but did not identify which ground applied to any specific grant or explain the particular deficiencies in the affected projects. Instead, the Department relied on generally applicable policy criteria contained in the internal directive to justify the mass discontinuations.

Sixteen states, including Washington, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Mexico, New York, Nevada, Oregon, Rhode Island, and Wisconsin, filed suit against the U.S. Department of Education and the Secretary of Education, seeking declaratory and injunctive relief. The states alleged that the Department

unlawfully discontinued the grants and violated federal law governing agency decision-making. On December 19, 2025, the U.S. District Court for the Western District of Washington granted summary judgment in favor of the states and entered a permanent injunction. The court held that the Department’s discontinuation of the grants violated the Administrative Procedure Act (APA) because the agency acted arbitrarily and capriciously and contrary to law. The Department appealed to the Ninth Circuit and filed an emergency motion for a stay pending appeal. The Department asked the Ninth Circuit to suspend the district court’s injunction while the appeal proceeds.

The Ninth Circuit evaluated whether the Department demonstrated a strong likelihood of success on the merits and whether it would suffer irreparable harm without a stay. The panel concluded that the Department failed to show a likelihood of success under both the General Education Provisions Act (GEPA) and the Administrative Procedure Act (APA).

The Ninth Circuit explained that the Department discontinued the grants based on generally applicable policy criteria derived from an internal directive. Because those criteria effectively established binding rules governing federal financial assistance, the panel concluded that the Department likely had to comply with GEPA’s rulemaking requirements. GEPA requires the Department of Education to conduct noticeand-comment rulemaking before imposing generally

applicable requirements affecting federal education funding. The Department did not engage in rulemaking before implementing those criteria, which supported the states’ claim that the agency acted contrary to law.

The Ninth Circuit also concluded that the Department likely violated the APA’s requirement of reasoned decision-making. The Department issued boilerplate discontinuation notices that listed several possible grounds for terminating the grants but did not identify which ground applied to each grantee or explain the factual basis for the decision. By failing to connect specific facts to the termination of each grant, the Department failed to provide the reasoned explanation required for agency action.

The Ninth Circuit also rejected the Department’s argument that it would suffer irreparable harm absent a stay. The Ninth Circuit explained that the district

court’s injunction did not require the immediate disbursement of funds. Instead, the injunction required the Department to make new continuation or discontinuation determinations consistent with existing statutory and regulatory requirements. The panel concluded that requiring the Department to comply with its legal obligations does not constitute irreparable harm.

The Ninth Circuit therefore denied the Department’s emergency motion for a stay pending appeal. The Ninth Circuit remanded the matter to the district court to set deadlines for the Department to make new continuation decisions and issue any resulting awards, while retaining jurisdiction over the appeal.

Washington v. United States Dep’t of Educ. (9th Cir. Feb. 24, 2026, No. 26-510) 2026 LX 86895.

Special Education

Ninth Circuit Holds Request For IEP Meeting Triggers District’s Duty To Offer FAPE.

L.B., a middle school student in the San Diego Unified School District, had a history of significant mental health challenges, including suicidal ideation and repeated hospitalizations. In December 2019, after meeting with L.B.’s parents, the District developed an Individualized Education Program (IEP) that offered specialized academic instruction, mental health services, and placement at Riley Alternative School, a public program designed for students with severe emotional or behavioral difficulties.

L.B.’s parents initially accepted the IEP but soon concluded that it did not adequately address his needs during the 2020–21 school year, when the District provided only virtual instruction because of the COVID-19 pandemic. L.B. struggled with online learning and experienced escalating behavioral and emotional difficulties at home.

In September 2020, L.B.’s parents unilaterally placed him in an out-of-state residential wilderness therapy program that provided in-person education and treatment. After several months, they enrolled him in a second residential

treatment center in South Carolina. During this period, the parents continued to participate in multiple meetings with the District’s IEP team and repeatedly requested that the District fund L.B.’s residential placement.

In August 2022, L.B. filed a due process complaint with the California Office of Administrative Hearings seeking reimbursement from the District for the costs of his residential placements. After a multi-day hearing, an administrative law judge (ALJ) denied relief, concluding that the District had no duty to offer L.B. a free appropriate public education (FAPE) while he attended the private programs because his parents had not expressly requested an IEP.

A district court affirmed the ALJ’s ruling, reasoning that although the parents had requested several IEP meetings, they had not requested an IEP “document,” and therefore the District had no obligation to prepare or offer an IEP during the period of private placement. L.B. appealed to the Ninth Circuit.

The Ninth Circuit held that the district court and ALJ applied an incorrect legal standard. The Ninth Circuit explained that under the Individuals with Disabilities Education Act (IDEA), states receiving federal education funding must provide children with disabilities a FAPE through an individualized education program developed

by an IEP team that includes both school officials and parents. The court emphasized that the IEP process operates as a cooperative framework in which parents participate directly in developing and revising the educational plan for the child. When parents believe a district has failed to provide a FAPE, they may place their child in a private school and later seek reimbursement if the public program proves inadequate.

Applying this framework, the Ninth Circuit rejected the district court’s conclusion that the District had no duty to offer L.B. a FAPE because his parents did not specifically request an “IEP document.” The Ninth Circuit explained that both federal and California law establish that the purpose of an IEP meeting is to develop, review, or revise the student’s IEP to ensure that the child receives a FAPE. Because L.B.’s parents repeatedly participated in IEP meetings and discussed his educational needs during the period at issue, the District maintained a continuing obligation to offer a FAPE. The Ninth Circuit further noted that the District itself recognized that obligation and continued to offer L.B. placement at Riley as its proposed educational program. The Ninth Circuit concluded that the district court erred by focusing on the terminology used by the parents rather than on whether the District fulfilled its statutory duty to offer an appropriate program.

The Ninth Circuit also concluded that the district court misapplied the Ninth Circuit’s earlier decision in

LCW Welcomes Andrew Dorado, Expanding Benefits and Compliance Services

LCW is pleased to welcome Andrew Dorado as Senior Counsel. Andrew’s addition expands the firm’s ability to advise clients on complex benefits, tax, and retirement plan issues across all sectors we serve.

Andrew counsels employers on a wide range of retirement plans, including defined contribution and defined benefit plans, deferred compensation arrangements, and 403(b) and 457 plans, as well as ERISA and fiduciary compliance. He also advises on IRS and Department of Labor reporting obligations, correction of operational errors, and payroll-related issues that may impact plan compliance or tax status.

Capistrano Unified School District v. S.W. In Capistrano, the parents withdrew their child from the public school system and failed to respond to the district’s request to convene an IEP meeting, leaving the district with no opportunity to develop a plan. By contrast, L.B.’s parents actively participated in multiple IEP meetings and communicated with the District about his educational needs during his private placement. The Ninth Circuit therefore determined that the circumstances in this case differed fundamentally from those in Capistrano.

Because the district court concluded that the District had no duty to offer L.B. a FAPE, it did not determine whether the IEP that the District offered satisfied the IDEA. The Ninth Circuit explained that this inquiry forms the first step of the reimbursement analysis. If the District failed to provide a FAPE, the court must then determine whether the parents’ private placement was appropriate and whether equitable considerations support reimbursement.

The Ninth Circuit reversed the district court’s judgment and remanded the case for further proceedings to determine whether the District’s proposed IEP provided L.B. a FAPE and, if not, whether the private placements were appropriate and reimbursement or other equitable relief may be warranted.

L.B. v. S.D. Unified Sch. Dist. (9th Cir. Feb. 27, 2026, No. 245543) 2026 LX 40823.

His practice is particularly valuable in helping organizations navigate compliance challenges such as late or incorrect contributions, plan administration errors, and reporting requirements, as well as in guiding clients through correction programs, audits, and plan changes.

With Andrew’s arrival, LCW further strengthens its ability to provide comprehensive, practical guidance on employee benefits and payroll compliance issues that increasingly intersect with dayto-day operations.

We are excited to have Andrew join the firm and look forward to the value he will bring to our clients.

Restraining Orders

Restraining Order Granted Against Father Whose Son Had Made Credible Threats Of Violence.

The Anaheim Police Department (APD) sought the Gun Violence Restraining Order under Penal Code section 18175 (GVRO) after John Adams Crockett Jr.’s adult son, Tyler Crockett, who lived with him, made credible threats of a mass shooting at Savanna High School in Anaheim. Tyler had a documented history of multiple mental health holds and was subject to a lifetime prohibition on possessing firearms. After sending text messages threatening to “shoot up” the school and referencing his access to large quantities of ammunition, the APD obtained a GVRO against John Adams Crockett, who owned numerous firearms and thousands of rounds of ammunition.

At the evidentiary hearing, the trial court found the requisite clear and convincing evidence that John Adams Crockett failed to adequately secure his firearms from his son, Tyler, and that Tyler posed a significant danger of carrying out gun violence. The court determined that John Adams Crockett’s conduct to allow Tyler access to firearms, despite Tyler’s lifetime prohibition and mental health history, created a substantial risk of personal injury to others. The trial court issued a three-year GVRO, and Crockett appealed.

In the California Court of Appeal, John Adams Crockett argued there was insufficient evidence to support the GVRO, and he challenged Penal Code section 18175 on several grounds, including vagueness, overbreadth, and violation of his Second Amendment rights. The Court rejected these arguments and affirmed the order.

The Court emphasized that section 18175 is preventative and forward-looking, and that a person may “cause” a danger of injury under this law by giving another person, who poses a credible threat, access to firearms. The Court further held that the law was sufficiently clear and that Crockett forfeited several claims by failing to raise them in the trial court.

Anaheim Police Dept. v. Crockett (2026) CalApp.LEXIS 101.

Note:

LCW attorneys regularly win Workplace Violence Restraining Orders on behalf of employers who need to protect employees. The law governing Workplace Violence Restraining Orders is Code of Civil Procedure section 527.8. Similar to Penal Code section 18175, an employer must show a credible threat of violence by clear and convincing evidence to receive the Workplace Violence Restraining Order.

New Leadership Appointments!

Liebert Cassidy Whitmore is pleased to announce new leadership appointments across three of its offices.

Alysha Stein-Manes will serve as Co-Managing Partner of the Los Angeles office. Gage Dungy and Michael Youril have been named Office Managing Partners of the Sacramento and Fresno offices, respectively.

In their new roles, Alysha, Gage, and Michael will advance LCW’s strategic growth, strengthen client relationships, and support the continued development of attorneys and staff across the firm.

Legal Updates

Approved Regulatory Action – Revisions To Title 5 Relating To Academic Progress Notice And Pause & Academic Renewal.

The California Community Colleges Board of Governors approved regulatory action entitled “Academic Progress Notice & Pause and Academic Renewal.” This action was filed with the Office of Administrative Law and the California Secretary of State on March 18, 2026. The regulation becomes effective on April 17, 2026, 30 days from the date of filing. The college district may conform its policies and procedures to the regulatory requirements within one hundred and eighty (180) days of the effective date.

U.S. Department Of Justice Files Title VII Lawsuit Against UCLA.

On February 24, 2026, the U.S. Department of Justice (DOJ) filed a lawsuit against the Regents of the University of California in federal court. The DOJ alleges that UCLA violated Title VII of the Civil Rights Act by failing to address a hostile work environment affecting Jewish and Israeli employees following the October 7, 2023, Hamas attack and subsequent campus protests. The complaint alleges that UCLA ignored threats, antisemitic harassment, and other discriminatory conduct directed at faculty and staff, and failed to adequately investigate or respond to internal complaints. The DOJ seeks injunctive relief requiring UCLA to revise and enforce its anti-discrimination and antiretaliation policies, as well as damages for affected employees.

The lawsuit arises from broader federal scrutiny of UCLA’s response to antisemitic incidents following the October 7, 2023, attack. In July 2025, the DOJ determined that UCLA violated Title VI and the Equal Protection Clause by acting with deliberate indifference to harassment of Jewish and Israeli students during campus protests, particularly in connection with a 2024 protest encampment that allegedly restricted some students’ access to campus spaces. The February 2026 complaint extends the government’s focus to alleged discrimination affecting faculty and staff under Title VII.

U.S. Department Of The Treasury And IRS Issue FAQ On Deductions For Qualified Overtime Compensation Under The One Big Beautiful Bill Act.

The Department of the Treasury and the Internal Revenue Service (IRS) issued a Frequently Asked Questions (FAQ) addressing the new deduction for qualified overtime compensation under the One, Big, Beautiful Bill Act. The FAQ provides clarification on eligibility requirements for deductions as well as supplemental information on eligibility, reporting, limitations, and related rules. This guidance is informal, subject to revision, and does not carry the same authority as published IRS guidance.

Business & Facilities

Terminated Resident Manager Employee Is Not Entitled To Landlord/ Tenant Protections.

In December 2020, John R. De Paolo, as trustee of the De Paolo Trust, hired Jenny Rosales as the on-site resident manager for an apartment property in Sherman Oaks owned by the De Paolo Trust. The parties executed a written resident manager’s agreement that required Rosales to reside on the property for the convenience of the owner. The agreement expressly stated their relationship was solely one of employer and employee, that her employment was “at will,” that the owner could terminate the agreement at any time with or without cause, and that upon termination, she was required to vacate the unit within 30 days and restore possession to the owner free of all occupants.

In November 2020, Rosales moved into the property and began working as the resident manager. Her partner, Richard Charlemagne, later moved into the unit as an additional occupant. He never signed a separate lease or resident agreement with the owner.

On August 9, 2023, the owner sent Rosales a written termination letter stating that her employment as resident manager would end effective August 10, 2023. The letter referenced the resident manager’s agreement and directed her to vacate the unit within 30 days. Rosales sent an email acknowledging receipt of the letter and stating, “I consider this retaliation due to reports I have made against your illegal business practices.”

Rosales did not vacate the premises after her employment ended. The owner testified that after termination, she continued to attempt to pay rent, but he returned all rent payments. He later discovered that Rosales had deposited money into his account without authorization and returned those funds as well.

In July 2024, the owner served a 30-day notice to quit based on Rosales’s failure to vacate following termination of her employment. Rosales and Charlemagne remained in possession. In August 2024, the owner filed an unlawful detainer action seeking possession of the premises. He sought possession only and did not seek holdover damages.

Rosales and Charlemagne filed an answer asserting that they were tenants entitled to protections under the Tenant Protection Act of 2019 (TPA). They argued that the 30-day notice to quit was void because the landlord failed to provide the Tenant Protection Act’s required written disclosure about rent limits and just-cause protections when Rosales first signed the resident manager’s agreement. They contended that without that disclosure, the termination notice was legally ineffective. They also asserted that the TPA required just cause for termination and a 60-day notice rather than a 30-day notice. They raised improper notice and retaliatory eviction as defenses.

The trial court entered judgment for the owner. The trial court found that Rosales’s right to occupy the unit was contingent upon her employment as resident manager and that her occupancy ended when her employment lawfully terminated. The trial court further found that Charlemagne had no independent tenancy and occupied only as an additional occupant under Rosales’s agreement. The trial court rejected the retaliatory eviction defense and awarded possession to the owner. Rosales and Charlemagne appealed.

The appellate court explained that when housing is provided as part of employment, the right to remain in the unit ends when the job ends. If the employee stays after lawful termination, the owner may file an unlawful detainer action.

The written manager’s agreement expressly provided that Rosales’s occupancy was required for the owner’s convenience, that employment was at will, and that she must vacate within 30 days following termination. The appellate court concluded that the agreement was unambiguous and that Rosales’s right of possession was entirely dependent upon her employment.

The appellate court explained that once Rosales’s employment terminated and the 30 days had elapsed, her right to occupy the unit ended. At that point, her continued presence was no longer lawful. A terminated resident manager who unlawfully remains in possession is at most a tenant at sufferance or a licensee, not a tenant with an independent right of possession. Because the TPA protects only lawful tenancies, it did not apply to Rosales’s post-termination occupancy. Although the TPA lists failure to vacate after termination of employment as an at-fault just cause ground for eviction, that provision does not convert employment-based housing into a protected tenancy after the employment ends.

The appellate court also concluded that Charlemagne had no independent leasehold interest. He occupied the unit only as Rosales’s additional occupant, and his right to remain ended when hers did.

The appellate court next addressed the retaliatory eviction defense under Civil Code section 1942.5. The appellate court explained that a tenant-employee may defeat an unlawful detainer action if the employment termination was unlawful or retaliatory. The burden rests on Rosales to prove a retaliatory motive by a preponderance of the evidence.

Aside from Rosales’s assertion that the termination was retaliatory because she had reported alleged illegal business practices, the record contained no evidence that the owner acted with a retaliatory motive. The appellate court concluded Rosales failed to show that her termination was retaliatory.

The appellate court also addressed Rosales’s claim that the notice of termination was defective. The appellate court held that because Rosales was not a lawful tenant after termination of her employment, she was not entitled to tenant notice protections.

The appellate court affirmed the trial court’s judgment and awarded costs to the owner.

De Paolo v. Rosales (2025) 118 Cal.App.5th Supp. 1.

Note:

When an employee’s right to live in housing exists solely because of employment (e.g., a resident manager or on-site employee), that right ends when the employment ends. A terminated employee who remains in the unit is not treated as a protected “tenant” under the Tenant Protection Act (TPA). Instead, the individual is considered at most a tenant at sufferance or licensee and does not receive TPA just-cause or notice protections.

Benefits Corner

Beyond Processing Payroll: Managing Retirement Benefit Administration Risk.

While defined benefit pensions may be administered through CalPERS, CalSTRS, or a county retirement system established under the County Employees Retirement Law of 1937 (external public retirement system), public agencies still retain significant responsibility for how retirement benefits are implemented and administered at the employer level. Auditors, governing boards, and even employee representatives increasingly expect agencies to be able to produce written evidence of how retirement benefit decisions are reviewed and monitored.

Agencies participating in an external public retirement system may understandably view pension oversight as primarily the responsibility of the retirement system. However, any agency that sponsors a 457(b), 401(a), 403(b), OPEB, or other

supplemental arrangement retains direct governance responsibility. In addition, employer-level processes such as contribution reporting, eligibility determinations, and payroll coordination remain within the agency’s control.

The practical risk for most agencies does not arise from investment selection within an external public retirement system. It arises from how accurately and consistently the agency executes its administrative responsibilities. Contribution timing, payroll reporting accuracy, eligibility determinations, and coordination with plan vendors are the areas where issues most often occur. Those issues, not market performance, typically drive audit findings, corrective action requirements, and employee disputes.

Recent litigation and audit trends underscore a consistent theme: when retirement benefit decisions or practices are questioned, the focus is on the agency’s process. The issue is not whether an outcome later appears imperfect, but whether the agency can demonstrate that it followed a structured, documented approach to oversight and administration. Agencies are better positioned when they can produce written evidence of regular review, clearly defined responsibilities, and consistent monitoring of vendors and internal processes. They are more vulnerable when decisions are informal, undocumented, or handled on an ad hoc basis.

A structured approach focuses on several core administrative controls.

Contribution Timing Matters

Employee contributions should be transmitted promptly and in accordance with plan terms. Clear written procedures, defined internal timelines, and periodic validation of remittance practices help ensure compliance and reduce audit exposure. Payroll should confirm that its processes align with the governing plan document and any applicable vendor agreements.

System Alignment Matters

Payroll configuration should be periodically reviewed to ensure eligibility rules, contribution limits, and formulas remain consistent with governing plan documents. Regular reconciliation between system settings and plan terms is a straightforward but important internal control.

Fee

Oversight Matters

Agencies should periodically assess recordkeeping fees, understand compensation structures, and document how service providers and investment options are evaluated. Clear documentation of these reviews demonstrates that fees and service provider performance are monitored on a consistent basis.

Committee Process Matters

Participation in a public defined benefit retirement system may limit the agency’s role in pension investment decisions, but agencies that sponsor 457(b), 401(a), 403(b), OPEB, or other supplemental arrangements retain direct governance responsibility for those programs. Where a retirement plan committee or similar body is established, it should operate under a clear charter with defined responsibilities and regular meetings. Meeting materials and minutes should reflect a substantive review of fees, service providers, and administrative practices. Written records of these discussions allow the agency to demonstrate that oversight responsibilities are being exercised in a consistent and disciplined manner.

Operational Error Correction Matters

Even with strong controls, administrative errors can occur. Agencies should maintain a defined process for identifying, documenting, and correcting issues in a timely and consistent manner. Written procedures and clear records of corrective actions help demonstrate that issues are addressed systematically and in accordance with plan terms, protecting both the agency and its employees.

A structured internal review should confirm the following elements are in place and functioning as intended.

• Clear identification of the plan administrator and any delegated responsibilities;

• A current committee charter, if applicable, and meeting minutes reflecting substantive review;

• Documentation of periodic fee assessment and service provider evaluation;

• Written payroll procedures governing contribution processing and remittance timing;

• Ongoing alignment between payroll systems and plan documents; and

• A defined and documented process for handling participant inquiries and administrative corrections.

Where documentation or procedures have not been reviewed recently, a structured governance assessment can help ensure roles, controls, and vendor oversight remain aligned. Periodic review and targeted staff training strengthen internal controls and reduce the likelihood of audit findings or participant disputes.

The objective is not to eliminate every risk. It is to ensure that retirement benefit administration is intentional, structured, and consistently documented. When an audit occurs or a participant raises a concern, clear documentation of oversight activities, defined roles, and internal controls becomes the primary evidence that the agency fulfilled its responsibilities.

Voluntary Employer Pick-Up Contributions For State Disability Insurance Are Taxable In 2026.

Any public agencies that have opted to participate in California’s State Disability Insurance (SDI) program and that voluntarily pick up any part of an employee’s SDI contribution will be required to treat such employer contributions as gross income and wages for federal employment tax purposes.

SDI provides partial compensation for wage loss sustained by an employee who is unable to work due to their own illness or injury or for paid family leave reasons. SDI is generally funded through employee contributions, with no required employer contributions. Most public agencies are exempt from providing SDI to employees. (Unemp. Ins. Code, section 2606.) The only public agency employees who are subject to SDI are district hospital employees, public housing administration agency employees, certain state employees, and employees of public agencies that have elected SDI coverage. As such, some public agencies participate in SDI because they have elected coverage for all or select groups of employees.

On January 15, 2025, the IRS released Notice 2025-4, which provided guidance on the tax treatment of contributions and benefits paid in certain situations under a state’s paid family and medical leave programs. Most of Notice 20254 focused on how the state and employers should tax state-mandated employer contributions to such programs. However, California’s SDI program only requires employee contributions and does not mandate employer contributions. The applicable part of Notice 2025-4 is where it addresses how to tax an employer’s voluntary pick up of an employee’s otherwise required SDI contribution. Notice 2025-4 provided that employers that voluntarily pay any part of the SDI contribution on behalf of employees must treat the contribution as gross income and wages for federal employment tax purposes. IRS Notice 2025-4 initially provided that calendar year 2025 would be a transition period for purposes of IRS enforcement and administration.

The IRS recently released Notice 2026-6, which clarified that the transition period for employer pick-up contributions ended in 2025. Thus, beginning this year in 2026, public agencies that have opted into SDI and that either voluntarily or through negotiated agreement (e.g., memorandum of understanding or other contract) pick up and pay for any portion of an employee’s SDI contribution must include such contribution as gross income and wages for federal employment tax purposes. While Notice 2026-6 extended transition relief for other types of contributions, it made clear that there is no more transition relief for pick-up contributions. Any public agency that is picking up employees’ SDI contributions must report such contributions as taxable beginning in 2026.

Benefits Compliance Question

Question:

Can an employer provide employees with a cash refund of their unused transportation benefits after the end of the plan year?

Answer:

Unfortunately, no. There are limited ways in which unused transportation benefits may be used. When an employee makes pre-tax payroll deductions for an employerprovided transportation benefit, the funds may only be disbursed to the employee for reimbursement of qualified transportation expenses under Sections 132(a)(5) and 132(f) of the Internal Revenue Code.

In IRS Information Letter 2012-0027 (December 30, 2021), the IRS provided the following guidance on what employees and employers could and could not do with unused transportation benefits. The letter states that an employee cannot “cash out” unused transportation benefits. The IRS made clear that once an employee has agreed to reduce their compensation on a pre-tax basis to pay for qualified transportation fringe benefits, the employee cannot receive that compensation as a “cash refund” at any point. Instead, the employee is only entitled to receive nontaxable qualified transportation fringe benefits.

Despite the no-cash-out rule, employees do have some flexibility when it comes to when they can use the transportation benefits. The IRS Information letter states that there is no “use-it-or-lose-it” rule for transportation benefits. The IRS allows employees to carry over unused benefits from month to month. Other IRS guidance has provided that transportation benefits may carry over to future plan years and never expire while an employee remains actively employed. (Treasury Regulation 1.132-9(b), Q&A 15; IRS Information Letter 2024-0004.)

LCW BENEFITS BEST PRACTICES TIMELINE

Each month, LCW presents a monthly benefits timeline of best practices.

March:

• Furnish Form 1095-C to each full-time employee by Monday, March 2, 2026, for the 2025 calendar year. Retain a record of your agency furnishing the forms to employees. See LCW’s Special Bulletin regarding an optional exception where employers may skip furnishing Form 1095-C and the complexities with using the exception. Also, ensure that vendors who conduct filings are doing so correctly, as the agency will ultimately be responsible for errors.

• E-file Forms 1094-C and 1095-C by Tuesday, March 31, 2026. Retain a record of the forms and proof of the e-filing. To the extent a vendor performs these filings on behalf of the agency, the agency should secure copies of the filings from the vendor. In the event of a potential future assessment, the agency will need to see the details of exactly what was filed.

• If the District would like an automatic 30-day extension to file Forms 1094-C and 1095-C, the agency must submit Form 8809 on or before the due date of the returns.

• If District administers the maximum grace period for health FSAs or DCAPs, the period ends March 15 for plan years that ended December 31, 2025.

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Consortium Call Of The Month

Members of Liebert Cassidy Whitmore’s consortiums are able to speak directly to an LCW attorney free of charge to answer direct questions not requiring in-depth research, document review, written opinions or ongoing legal matters. Consortium calls run the full gamut of topics, from leaves of absence to employment applications, student concerns to disability accommodations, construction and facilities issues and more. Each month, we will feature a Consortium Call of the Month in our newsletter, describing an interesting call and how the issue was resolved. All identifiable details will be changed or omitted.

Question: Answer:

A Community College District asked LCW whether there was Education Code language regarding management’s right to assignment, specifically related to faculty work.

An LCW attorney explained that Education Code section 70902 gives the District the right to assign personnel in a manner that is not inconsistent with the minimum standards set by the Board of Governors. They also pointed out that, typically, the right to assignment is addressed in the collective bargaining agreement between the District and faculty, often in the District’s rights.