BILL ANALYSIS
AB 468
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Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Ed Hernandez, Chair
AB 468 (Hayashi) - As Introduced: February 24, 2009
SUBJECT : Public Employees' Medical and Hospital Care Act:
employer contributions.
SUMMARY : Creates a specific vesting schedule and employer
contribution amount for annuitant health care premiums for the
Alameda County Transportation Improvement Authority (ACTIA)
employees hired on or after November 1, 2004. Specifically,
this bill :
1)Requires ACTIA to pay 50% of the employer contribution after 5
years of credited service and increase the employer
contribution by 5% each year until the employer contribution
reaches 100% after 15 years of credited service.
2)Specifies that the employer contribution rate is determined by
the weighted average of the health benefit plan premiums for
an employee or annuitant enrolled for 'self-alone'.
EXISTING LAW establishes the Public Employees' Medical and
Hospital Care Act (PEMHCA) under the administration of CalPERS.
If a contracting agency elects to cover their employees for
health care under PEMHCA, they have the following options to
choose from in determining contribution amount for annuitants:
1)A contracting agency could opt to make the employer
contribution amount equal for both active employees and
annuitants. Under this option, an employee who retires and
meets the definition of annuitant becomes 100% vested and
receives an employer contribution amount equal to what the
active employees receive.
2)A contracting agency that joins PEMHCA on or after January 1,
1986 has the option to pay a lesser employer contribution
amount for annuitants than for active employees as long as the
agency increases its contribution for annuitants each year
until it equals the agency's contributions for active
employees. Based on the formula, it may take 20 years for the
lesser contribution amount to equal the active employee
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contribution amount. Under this option, an employee who
retires and meets the definition of annuitant becomes 100%
vested and receives an employer contribution amount equal to
the lesser contribution amount.
3)A contracting agency has the option to establish a pre-set
"vesting schedule" of specific percentages based on an
employee's credited years of service to determine the employer
contribution amount for annuitants. Under this option, an
employee would have to work at least 10 years to qualify for
an employee contribution and would have to work 20 years to
become 100% vested.
FISCAL EFFECT : Unknown.
COMMENTS : According to the sponsor, "ACTIA was created with
the passage of Measure B in 2000, to administer a half-cent
sales tax program dedicated to funding transportation projects
and programs. In Alameda County ACTIA is an independent entity
that will cease to exist in 2022. ACTIA contracts with CalPERS
to implement PEMHCA laws and regulations in the administration
of its retiree health benefits. Unfortunately, existing PEMHCA
law does not provide flexibility to address the fact that ACTIA
sunsets in 2022, which produces unique staff recruitment
challenges."
The sponsor goes on to state, "ACTIA generally recruits staff
from local jurisdictions to fill administrative and professional
positions. In order to stay competitive, the post retirement
health benefit is an essential element in ACTIA's employee
benefits package. Retiree health coverage is an important
benefit as our prospective employee pool ages. Nearly all
competing agencies offer some post employment health coverage.
Having coverage that accommodates ACTIA as a sunsetting agency,
place it in a competitive position for future employees. While
the default of 100% vesting after completing ACTIA's
probationary period is an option, this would not be a fiscally
responsible decision. The modified vesting period proposed in
AB 468 will provide ACTIA employees the chance to fully vest in
this benefit before the Authority sunsets."
Supporters conclude, "Sunset agencies such as ACTIA are unique
and efficient in delivering large county-wide transportation
projects. ACTIA operates with only 9 employees, costing less
than 1% of annual sales tax revenues in staff costs and under
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4.5% in total overhead costs to deliver $3 billion-plus in
transportation projects over a fixed 20-year term."
Since 2005, ACTIA has contracted with CalPERS to provide health
benefits to its employees and annuitants. The employer
contribution for current employees in based on the single party
basic rate for Kaiser-North (approximately $508 per month).
Although health benefits are available to dependents, ACTIA does
not contribute to these benefits. ACTIA's postretirement health
coverage is based on the graduating vesting schedule available
to contracting agencies under PEMHCA.
AB 524 (Hancock) of 2008, would have given the West County Waste
Water District a contract option under PEMHCA to provide an
employer contribution at the 100/90 formula for post retirement
health coverage if the employee completes at least 10 years of
state service with the District at retirement. AB 524 was
vetoed by the Governor due to the 2008-2009 State Budget delay.
REGISTERED SUPPORT / OPPOSITION :
Support
Alameda County Transportation Improvement Authority (Sponsor)
American Federation of State, County and Municipal Employees
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957