BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 616
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          AB 616 (Calderon)
          As Amended September 7, 2001
          Majority vote
          |ASSEMBLY:  |76-0 |(June 4, 2001)  |SENATE: |22-7 |(September 13, |
          |           |     |                |        |     |2001)          |
           Original Committee Reference:    P.E.,R. & S.S.  

           SUMMARY  :  Provides three additional retirement formulas that  
          local contracting agencies of the California Public Employees'  
          Retirement System (CalPERS) may provide their local  
          miscellaneous members.  They include a 3% at age 60 formula, a  
          2.5% at age 55 formula, and a 2.7% at age 55 formula.  The same  
          optional formula would be provided to county retirement systems  
          under the County Employees Retirement Act of 1937 ('37 Act).

           The Senate amendments  add 2.5% at age 55 formula and 2.7% at age  
          55 formula to this bill and provide the same optional formula to  
          county retirement systems under the '37 Act.  It also makes  
          technical changes to avoid chaptering out problems.

           EXISTING LAW  provides local contracting agencies of CalPERS the  
          option of providing their local miscellaneous members with a 2%  
          at age 60 or a 2% at age 55 retirement formula.  Both formulas  
          provide a maximum benefit of 2.418% at age 63 and the normal  
          member contribution rate for both formulas is 7% of  

           AS PASSED BY THE ASSEMBLY  this bill allowed local contracting  
          agencies of CalPERS the option of providing a 3% at age 60  
          retirement formula to their miscellaneous members.   
          Specifically,  this bill  :  

          1)Created a new optional retirement formula (3% at age 60) for  
            local contracting agencies of CalPERS.

          2)Increased the normal member contribution rate for local  
            miscellaneous members subject to the new formula from 7% to 8%  
            of their monthly compensation.

           FISCAL EFFECT  :  According to the Assembly Appropriations  


                                                                  AB 616
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          Committee analysis, the increase in retirement benefits  
          authorized by this bill would have a present value of up to $1.6  
          billion, if all of the contracting agencies choose to provide  
          the 3% at age 60 retirement formula.  The member contribution  
          rate would increase from 7% to 8% of payroll to cover part of  
          this benefit increase.  The remainder would be born by employer  
          contribution rate increases of 3% to 4.7% of payroll, varying by  

           COMMENTS  :  Supporters of this bill contend that as the labor  
          market in California becomes more competitive, attractive  
          benefit packages are necessary in order to attract and retain  
          qualified, experienced individuals in public service.  The  
          increased retirement formulas provided by this bill not only  
          allow employers to improve the retirement formulas overall but  
          it also encourages experienced, skilled workers to stay in their  
          jobs longer.

          Supporters further state that with the passage of SB 400  
          (Ortiz), Chapter 555, Statutes of 1999, local safety members  
          received authorization to negotiate a 50% increase in their  
          benefit while local miscellaneous members were not offered a  
          commensurate formula.  This bill seeks to provide a local option  
          formula for these members that would increase their retirement  
          benefits by 33%. 

          This bill is similar to AB 2642 (Calderon) of 2000, which was  
          vetoed by the Governor.  AB 2642 would have added two new  
          retirement formulas for miscellaneous members of CalPERS local  
          contracting agencies (a 2.5% at age 55 formula and a 2.7% at age  
          55 formula).  The Governor's veto message stated, in part, that  
          he was "?not aware of a business or policy need to provide a  
          new, higher level of retirement benefits for non-safety public  

          Analysis Prepared by  :  Karon Green / P.E., R. & S.S. / (916)  

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