BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 468
Lou Correa, Chair Hearing date: June 22, 2009
AB 468 (Hayashi) as amended 6/16/09 FISCAL: NO
PEMHCA: VESTING AND EMPLOYER CONTRIBUTION SCHEDULE FOR
ALAMEDA COUNTY TRANSPORTATION DISTRICT ONLY
HISTORY :
Sponsor: Alameda County Transportation Improvement
Authority (ACTIA)
Prior legislation: AB 524 (Hancock) 2008
Vetoed
ASSEMBLY VOTES :
PER & SS 4-2 4/01/09
Assembly Floor 50-30 5/11/09
SUMMARY :
Would:
a) create a specific vesting schedule and employer
contribution amount for annuitant health care premiums for
the ACTIA employees hired on or after October 1, 2004, and
b) provide that an employee that works for ACTIA for 15
years shall be eligible to participate in the health care
plan when they retire regardless of the length of the
period between their separation for ACTIA employment and
their actual retirement.
BACKGROUND AND ANALYSIS :
1) What is PEMHCA ?
Existing law establishes the Public Employees Medical and
Hospital Care Act (PEMHCA) under the administration of the
California Public Employees Retirement System (PERS).
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2) How are employer contributions to PEMHCA determined for
contracting agencies ?
If a governmental agency elects to cover their employees for
health care under PEMHCA, they have the following options in
determining contribution amount for their retirees:
a) a PEMHCA contracting agency could opt to make the
employer contribution amount equal for both active
employees and retirees, providing that when an employee who
is eligible retires (minimum 5 years of service and age
50), they become 100% vested and receive an employer PEMHCA
contribution amount equal to what the active employees
receive, or
b) a contracting agency that joins PEMHCA on or after
January 1, 1986, has the option to pay a lesser employer
PEMHCA contribution amount for retirees than for active
employees, as long as the agency increases its contribution
for retirees each year until it equals the agency's
contributions for active employees (based on this statutory
formula, it may take 20 years for the lesser retiree
contribution amount to equal the active employee
contribution amount), or
c) a PEMHCA contracting agency also has the option to
establish a "vesting schedule" of specific percentages
based on an employee's credited years of service to
determine the employer contribution amount after they
retire, providing that 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 for the
full employer contribution.
3) What is ACTIA, and how long will it exist, and why is
this bill needed ?
The committee is advised that 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
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Date: 6/16/09 Page 3
cease to exist in 2022 .
ACTIA contracts with PERS to implement PEMHCA for active and
retiree health benefits.
The sponsor states that existing PEMHCA law does not provide
flexibility to address the fact that ACTIA sunsets in 2022 ,
which produces unique staff recruitment challenges.
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4) This bill would affect ACTIA only
This bill :
a) requires ACTIA to pay 50% of the employer contribution
for employees who retire after 5 years of credited service
with the agency, and increase the employer contribution by
5% each year until the employer contribution reaches 100%
after 15 years of credited service,
b) specifies that the employer contribution rate is
determined by the weighted average of the health benefit
plan premiums for an employee or retiree enrolled for
"self-alone", and
c) provide that an employee that works for ACTIA for 15
years shall be eligible to participate in the health care
plan when they retire regardless of the length of the
period between their separation for ACTIA employment and
their actual retirement.
FISCAL EFFECT :
Unknown
COMMENTS :
1) Arguments in support
According to the sponsor,
"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
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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 state:
"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 4.5%
in total overhead costs to deliver $3 billion-plus in
transportation projects over a fixed 20-year term."
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2) Additional information
The committee is advised that since 2005, ACTIA has
contracted with PERS to provide PEMHCA health benefits to its
employees and retirees. 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
currently available to contracting agencies under PEMHCA.
AB 524 (Hancock) 2008 (vetoed), would have given the West
County Waste Water District a contract option under PEMHCA to
provide an employer contribution 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.
3) SUPPORT :
American Federation of State, County and Municipal
Employees (AFSCME)
4) OPPOSITION :
None to date
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