BILL NUMBER: SB 1123 CHAPTERED
BILL TEXT
CHAPTER 371
FILED WITH SECRETARY OF STATE SEPTEMBER 27, 2008
APPROVED BY GOVERNOR SEPTEMBER 27, 2008
PASSED THE SENATE AUGUST 29, 2008
PASSED THE ASSEMBLY AUGUST 13, 2008
AMENDED IN ASSEMBLY AUGUST 8, 2008
AMENDED IN ASSEMBLY JUNE 11, 2008
AMENDED IN SENATE MAY 27, 2008
AMENDED IN SENATE MAY 15, 2008
AMENDED IN SENATE APRIL 8, 2008
AMENDED IN SENATE MARCH 24, 2008
INTRODUCED BY Senator Wiggins
(Principal coauthor: Assembly Member Hernandez)
(Coauthor: Senator Margett)
JANUARY 28, 2008
An act to add Section 7507.2 to, and to repeal and add Section
7507 of, the Government Code, relating to public employee benefits.
LEGISLATIVE COUNSEL'S DIGEST
SB 1123, Wiggins. Public employee benefits.
(1) Existing law requires a state or local retirement system to
secure, not less than triennially, the services of an enrolled
actuary, who is to perform a valuation of the system. Existing law
requires the Legislature and local legislative bodies to secure the
services of an enrolled actuary to provide a statement of the
actuarial impact upon future annual costs before authorizing
increases in public retirement plan benefits. Existing law requires
the future annual costs of the public retirement plan benefits, as
determined by the actuary, to be made public at a public meeting at
least 2 weeks prior to the adoption of any increases in the benefits.
This bill would revise and recast provisions regarding the
services of an enrolled actuary and the disclosure of public
retirement plan benefits, as described above. The bill would redefine
the qualifications of actuaries for these purposes. The bill would
include other postretirement benefits, with specified exceptions,
within the subject matter of the actuary's statement that is provided
before the Legislature or a local legislative body may authorize an
increase in benefits. The bill would require the future annual costs
of other postemployment benefits to be made public, as specified, and
would require local legislative bodies to have an actuary present to
provide information at the meeting where the adoption of a new
benefit will be considered, subject to certain exceptions. The bill
would prohibit the adoption of any benefit to which its provisions
apply by means of a consent calendar. The bill would require, upon
the adoption of any benefit change to which its provisions apply,
that the person with the responsibilities of a chief executive
officer acknowledge in writing that he or she understands the current
and future cost of the benefit as determined by the actuary, and
would specify that the Director of the Department of Personnel
Administration perform this function for the adoption of benefit
changes by the state. By increasing the duties of local entities,
this bill would impose a state-mandated local program. The bill would
except from these provisions a school district or a county office of
education and specify that these entities remain subject to other
regulations.
The bill would also create the California Actuarial Advisory
Panel, which would be required to provide impartial and independent
information on pensions, other postemployment benefits, and best
practices to public agencies. The bill would specify various
responsibilities of the panel, including defining actuarial model
policies and best practices for public retirement plan benefits and
postemployment benefits, developing pricing and disclosure standards
for California public sector benefit improvements, and developing
quality control standards for California public sector actuaries. The
panel would consist of 8 actuaries who would be appointed by
specified entities and parties and who would serve terms of 3 years,
except as specified. The bill would provide that the panel be located
in the Controller's office, which would be required to provide
support staff to the panel. The bill would provide that the opinions
of the panel are nonbinding and advisory only and would prohibit the
opinions of the panel from being used as the basis of litigation. The
bill would require that a member of the panel receive reimbursement
for expenses, to be paid by the authority that appointed the member.
The bill would require the panel to report to the Legislature on or
before February 1 of each year.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares the following:
(a) The Public Employee Post-Employment Benefits Commission was
jointly formed by the Governor and the Legislature to determine how
best to fund postemployment benefits for the employees and retirees
of California's state and local governments.
(b) The Public Employee Post-Employment Benefits Commission
concluded that the best way to ensure that these benefits are
delivered as promised is to prefund them.
(c) The Public Employee Post-Employment Benefits Commission
further concluded that in order to gain and maintain public support
for these benefits, the benefits should be adopted in well-noticed
public hearings, with their costs clearly and publicly reported
annually, and any fraud or abuse addressed directly.
SEC. 2. Section 7507 of the Government Code is repealed.
SEC. 3. Section 7507 is added to the Government Code, to read:
7507. (a) For the purpose of this section:
(1) "Actuary" means an actuary who is an associate or fellow of
the Society of Actuaries.
(2) "Future annual costs" includes, but is not limited to, annual
dollar changes, or the total dollar changes involved when available,
as well as normal cost and any change in accrued liability.
(b) (1) Except as provided in paragraph (2), the Legislature and
local legislative bodies, including community college district
governing boards, when considering changes in retirement benefits or
other postemployment benefits, shall secure the services of an
actuary to provide a statement of the actuarial impact upon future
annual costs, including normal cost and any additional accrued
liability, before authorizing changes in public retirement plan
benefits or other postemployment benefits.
(2) The requirements of this subdivision do not apply to:
(A) An annual increase in a premium that does not exceed 3
percent under a contract of insurance.
(B) A change in postemployment benefits, other than pension
benefits, mandated by the state or federal government or made by an
insurance carrier in connection with the renewal of a contract of
insurance.
(c) (1) (A) With regard to local legislative bodies, including
community college district governing boards, the future costs of
changes in retirement benefits or other postemployment benefits, as
determined by the actuary, shall be made public at a public meeting
at least two weeks prior to the adoption of any changes in public
retirement plan benefits or other postemployment benefits. If the
future costs of the changes exceed one-half of 1 percent of the
future annual costs, as defined in paragraph (2) of subdivision (a),
of the existing benefits for the legislative body, an actuary shall
be present to provide information as needed at the public meeting at
which the adoption of a benefit change shall be considered. The
adoption of any benefit to which this section applies shall not be
placed on a consent calendar.
(B) The requirements of this paragraph do not apply to:
(i) An annual increase in a premium that does not exceed 3 percent
under a contract of insurance.
(ii) A change in postemployment benefits, other than pension
benefits, mandated by the state or federal government or made by an
insurance carrier in connection with the renewal of a contract of
insurance.
(2) With regard to the Legislature, the future costs as determined
by the actuary shall be made public at the policy and fiscal
committee hearings to consider the adoption of any changes in public
retirement plan benefits or other postemployment benefits. The
adoption of any benefit to which this section applies shall not be
placed on a consent calendar.
(d) Upon the adoption of any benefit change to which this section
applies, the person with the responsibilities of a chief executive
officer in an entity providing the benefit, however that person is
denominated, shall acknowledge in writing that he or she understands
the current and future cost of the benefit as determined by the
actuary. For the adoption of benefit changes by the state, this
person shall be the director of the Department of Personnel
Administration.
(e) The requirements of this section do not apply to a school
district or a county office of education, which shall instead comply
with requirements regarding public notice of, and future cost
determination for, benefit changes that have been enacted to regulate
these entities. These requirements include, but are not limited to,
those enacted by Chapter 1213 of the Statutes of 1991 and by Chapter
52 of the Statutes of 2004.
SEC. 4. Section 7507.2 is added to the Government Code, to read:
7507.2. (a) There is hereby enacted the California Actuarial
Advisory Panel. The panel shall provide impartial and independent
information on pensions, other postemployment benefits, and best
practices to public agencies and shall meet quarterly.
(b) The responsibilities of the California Actuarial Advisory
Panel shall include, but are not limited to:
(1) Defining the range of actuarial model policies and best
practices for public retirement plan benefits, including pensions and
other postemployment benefits.
(2) Developing pricing and disclosure standards for California
public sector benefit improvements.
(3) Developing quality control standards for California public
sector actuaries.
(4) Gathering model funding policies and practices.
(5) Replying to policy questions from public retirement systems in
California.
(6) Providing comment upon request by public agencies.
(c) The California Actuarial Advisory Panel shall consist of eight
members. Each member shall be an actuary, as defined in Section
7507, with public sector clients. Members shall be appointed by the
entities listed below, and each member shall serve a three-year term,
provided that, in the initial appointments only, the panelists named
by the University of California, the Senate, and one of the
panelists named by the Governor shall serve two-year terms. The
Governor shall appoint two panelists, and one panelist shall be
appointed by each of the following:
(1) The Teachers' Retirement Board.
(2) The Board of Administration of the Public Employees'
Retirement System.
(3) The State Association of County Retirement Systems.
(4) The Board of Regents of the University of California.
(5) The Speaker of the Assembly.
(6) The Senate Committee on Rules.
(d) The California Actuarial Advisory Panel shall be located in
the Controller's office, which shall provide support staff to the
panel.
(e) The opinions of the California Actuarial Advisory Panel are
nonbinding and advisory only. The opinions of the panel shall not, in
any case, be used as the basis for litigation.
(f) A member of the California Actuarial Advisory Panel shall
receive reimbursement for expenses that shall be paid by the
authority that appointed the member.
(g) The California Actuarial Advisory Panel shall report to the
Legislature on or before February 1 of each year.
SEC. 5. If the Commission on State Mandates determines that this
act contains costs mandated by the state, reimbursement to local
agencies and school districts for those costs shall be made pursuant
to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of
the Government Code.