BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1821
Lou Correa, Chair Hearing date: June 14, 2010
AB 1821 (Ma) as amended 3/25/10 FISCAL: YES
CALPERS: 1959 SURVIVOR BENEFIT
HISTORY :
Sponsor: California Public Employees' Retirement System
(CalPERS)
Prior Legislation: none
ASSEMBLY VOTES :
PER & SS 4-2 4/21/10
Appropriations 12-5 5/05/10
Assembly Floor 50-25 6/01/10
SUMMARY :
Would merge the first, second, and third levels of the 1959
Survivor Benefit for contracting local agencies of CalPERS
that currently provide one of those levels of benefits to
employees, and allow CalPERS to suspend employee premiums of
$2 monthly when the funding pool is determined to contain
surplus funds.
This merge would result in higher benefit levels for
survivors currently in the first and second levels (who would
be paid at the third level) and provide increased funding
stability for the employers participating in the third level.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) establishes the 1959 Survivor Benefit, a survivor
benefit paid in a similar manner to the survivor benefit
provided by Social Security. The benefit is provided
for survivors of employees who do not participate in
Social Security and who die prior to retirement from non
work-related causes.
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b) defines an eligible survivor as a spouse or
registered domestic partner who either cares for
dependent children or has reached age 62 or older. A
dependent child is defined as one who is has never been
married, is living with the surviving spouse or domestic
partner, and is under age 22. The dependent child may
be over age 22 if the child is incapacitated due to a
disability that began prior to age 22. Finally, if
there is no surviving spouse or child, a surviving
parent who was dependent on the employee at the time of
his or her death may receive the benefit.
c) establishes six levels of 1959 Survivor Benefit,
including the following:
---------------------------------------------------------------
| Level | Who | Monthly Benefit Amount | Status of |
| | Participates | | Level |
|--------+---------------+-------------------------+------------|
|First |Local |With 1 child: |Closed |
| |Contracting | $360 |Since |
| |Agencies |With 2 or more children: |1/1/1994 |
| | | $430 | |
| | | Spouse only at age 62: | |
| | | $180 | |
|--------+---------------+-------------------------+------------|
|Second |Local |With 1 child: |Closed |
| |Contracting | $450 |Since |
| |Agencies |With 2 or more children: |1/1/1994 |
| | | $538 | |
| | | Spouse only at age 62: | |
| | | $225 | |
|--------+---------------+-------------------------+------------|
|Third |Local |With 1 child: |Closed |
| |Contracting | $700 |Since |
| |Agencies |With 2 or more children: |7/1/2001 |
| | | $840 | |
| | | Spouse only at age 62: | |
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| | | $350 | |
|--------+---------------+-------------------------+------------|
|Fourth |Local |With 1 child: |Contract |
| |Contracting | $1900 |Option |
| |Agencies |With 2 or more children: |since |
| | | $2280 |7/1/2001 |
| | | Spouse only at age 60: | |
| | | $950 | |
|--------+---------------+-------------------------+------------|
|Fifth |State and |With 1 child: |Established |
| |School | $1500 |level |
| |Employers |With 2 or more children: |since |
| | | $1800 |1/1/2000 |
| | | Spouse only at age 60: | |
| | | $750 | |
|--------+---------------+-------------------------+------------|
|Indexed |Local |With 1 child: |Contract |
|(increas|Contracting | $1149 |option |
|e of |Agencies |With 2 or more children: |since1/1/200|
|2% | | $1723 |0 |
|annually| | Spouse only at age 60: | |
|) | | $574 | |
---------------------------------------------------------------
d) requires that participating employees pay $2 per
month and that employers pay any remaining costs to fund
the benefit, up to $2 per month, after which the cost
(if it is more than $4 per month) is to be split equally
between employer and employee.
e) allows CalPERS to pool the premiums for this benefit
and requires that premiums paid for the 1959 Survivor
Benefit may only be used to pay for that benefit.
2) This bill :
a) allows CalPERS to transfer pooled assets from the
first two levels to the third level, and to increase
survivor benefits in the first two levels to the third
level of benefits. Survivors in the first two levels
will receive a better benefit and the infusion of assets
into the third level funding pool will strengthen the
funded status of that pool and ensure continued full
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funding of premiums.
b) allows CalPERS to suspend employee premiums of $2 per
month as long as the third level funding pool contains
surplus funds.
FISCAL IMPACT :
According to the Assembly fiscal analysis, this bill creates
no direct costs to employers or employees of CalPERS'
contracting agencies. There would be a decrease to the
actuarial
surplus in the survivor benefit program, due to the increased
benefits for survivors in the first two benefit levels;
however, the projected surplus for the combined pool would
remain above $58 million-and total assets of the merged pool
are expected to be more than three times needed to fund
projected benefits.
COMMENTS :
1) Argument in support
According to the sponsor:
CalPERS, there are approximately 13,000 participants in the
first two levels. The third level has approximately 46,000
participants. Benefits in the first three levels are set
in statute and do not increase; therefore, premiums are
extremely stable.
While employers are not required to pay when the pools are
fully funded, existing law requires participating employees
to pay monthly premiums of a minimum of $2, even when the
pools are fully funded. Thus, in some of the funding
pools, large surpluses build up over the years. In the
case of the first and second levels, they are funded at
approximately 1000% and 300% respectively. The third level
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is estimated to be funded at approximately 250%. These
funding levels take into account recent losses generated by
the economic downturn. After combining the three pools,
the funding level of the third pool will be an estimated
300%.
While this bill "would result in a higher benefit or
potential higher benefit for the small number of members
currently in the 1st and 2nd level pools, the large
surpluses that exist in the first two pools will be used to
reduce the probability of future employer contributions for
contracting agencies in the 3rd level pool".
2) SUPPORT:
California Public Employees' Retirement System
(CalPERS)
California State Sheriffs' Association (CSSA)
3) OPPOSITION :
None to date
#####
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