BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1821 (Ma)
Hearing Date: 08/12/2010 Amended: 06/23/2010
Consultant: Maureen Ortiz Policy Vote: PE&R 4-1
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BILL SUMMARY: AB 1821 merges the assets and liabilities of the
first, second, and third benefit levels of the 1959 Survivor
Benefit Program into a single contracting agency pool which will
be used to pay the higher Level 3 benefit to eligible survivors
effective July 1, 2011.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Admin costs -----------------minor,
absorbable--------------- Special*
Higher benefit ------unknown,
potentially over $150-------- Special*
*Public Employees Retirement Fund
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STAFF COMMENTS: SUSPENSE FILE.
According to CalPERS, the first and second levels of the program
have significant excess reserves which can only be used for
payment of 1959 Survivor Benefits. Merging the first and second
levels into the third level will result in paying those
survivors who are currently recently Level 1 and Level 2 benefit
payments, the higher Level 3 benefit. The average increase
would be about $295 per month, therefore if more than 42
individuals are currently receiving the Level 1 or Level 2
benefits, annual costs will exceed $150,000. There are
currently 139 survivors who are receiving the reduced benefit.
It should be noted, however, that the payments for this benefit
will come from funds that can only be used for these purposes,
and merging the three pools will minimize the probability of
further employer premiums and simplify administration of the
program by reducing the number of levels.
The projected assets and liabilities as of June 30, 2009 of the
first, second, and third pools indicate that Level 1 has assets
of approximately $24 million and liabilities of only $2 million;
Level 2 has assets of about $6 million with liabilities of
approximately $1.8 million; and, Level 3 has assets of $65
million and liabilities of $24 million. It is estimated that
combining the three levels and paying the higher level 3
benefits will provide an overall funding rate of about 304%.
The provisions of AB 1821 would result in higher benefit levels
for survivors currently in the first and second levels since
they would receive a benefit at the third and higher level. At
the same time, the bill would provide increased funding
stability for the employers participating in the third level.
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AB 1821 (Ma)
The 1959 Survivor Benefit was established to provide a benefit
that is similar to the survivor benefit provided by Social
Security, but it is for survivors of employees who do not
participate in Social Security and who die prior to retirement
from non work-related causes. There are six levels of the 1959
Survivor Benefits as follows:
---------------------------------------------------------------
| 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: | |
| | | $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 | |
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Unlike Social Security, the 1959 Survivor Benefit does not pay a
cost-of-living allowance (with the exception of the indexed
formula). The first and second level pools are no longer open
to new members because the benefit they provide is insufficient
for its original purpose. New benefit pools have been created
in order to provide a more realistic replacement for eligible
survivors. The benefit is funded by a $2 monthly fee for
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AB 1821 (Ma)
members who wish to participate, and the employer pays any
additional costs that are necessary. AB 1821 will allow the
Board to suspend the $2 employee monthly premium if the combined
pool has a surplus in excess of 200 percent of the total
liabilities of the pool.
Eligible survivors include a surviving spouse if that spouse has
care of an eligible child, or if he or she is at least age 62.
A child or stepchild who has never been married is eligible for
benefits while under age 22.
AB 1821 also provides that if the combined surplus exceeds 200%
of the total liabilities of the pool, members will pay only the
normal contribution, and will cease paying the additional $2 per
month contribution, as determined by the CalPERS board.