BILL ANALYSIS
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AB 1821
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CONCURRENCE IN SENATE AMENDMENTS
AB 1821 (Ma)
As Amended June 23, 2010
Majority vote
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|ASSEMBLY: |50-25|(June 1, 2010) |SENATE: |22-12|(August 19, |
| | | | | |2010) |
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Original Committee Reference: P.E.,R. & S.S.
SUMMARY : Uses the excess reserves from the California Public
Employees' Retirement System's (CalPERS) 1959 Survivor Benefit
Program (Program) to merge the 1st and 2nd and 3rd benefit
levels into a single contracting agency pool paying the current
Level 3 survivor benefit. Specifically, this bill :
1)Merges, beginning on July 1, 2011, the assets and liabilities
of the Program's 1st and 2nd benefit levels into the 3rd
level.
2) Increases the benefits for participants in the 1st and 2nd
benefit levels to those of the 3rd level.
3)Authorizes CalPERS to suspend the $2 monthly employee premium
if the Board determines that the combined pool contains a
surplus in excess of 200% of the total liabilities of the
pool.
The Senate amendments authorize the CalPERS Board to suspend
employee contributions as long as the surplus exceeds 200% of
the total liabilities of the pool.
EXISTING LAW :
1)Contains the 1959 Survivor Benefit Program which was created
to provide a continuing pre-retirement monthly death benefit
for CalPERS members not covered by Social Security, such as
firefighters and police officers, and who elect to enroll in
the program and pay the monthly fee of $2 per month. The
employer pays any additional costs over and above the $2 per
employee.
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AB 1821
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2)The program provides a monthly allowance to eligible survivors
of members who were not covered by Social Security but who
elected to be covered by this benefit program and died prior
to retirement. Eligible survivors include a spouse or legally
registered domestic partner to whom the member was married or
registered for at least one year prior to death, or the
occurrence of the injury or onset of illness resulting in the
member's death. A surviving spouse is entitled to the 1959
Survivor Benefit as long as they have care of an eligible
child, or are at least age 62. A child who has never been
married or stepchild (if the child was living with member in a
parent-child relationship) who has never married is eligible
for benefits while under age 22. A child who has never been
married, who is incapacitated because of a disability that
began before attaining age 22 may be entitled to the benefit
until married or the disability ends. A parent who is at
least age 62 may be eligible if there were no surviving
spouse/domestic partner or eligible children and if the parent
was dependent on the member for at least half of their support
at the time of the member's death.
AS PASSED BY THE ASSEMBLY, this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)No direct costs to employers or employees of CalPERs
contracting agencies. Decrease in a projected 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.
2)Administrative costs to CalPERs to merge the survivor benefit
pools are minor and absorbable.
COMMENTS : According to CalPERS, "The Public Agency Pool
consists of five benefit levels and covers approximately 145,000
active members and 1.970 existing or deferred benefit
recipients. The 1st and 2nd level benefit has just over 13,000
participants and has been closed since 1994, while the 3rd
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AB 1821
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benefit level has over 46,000 participants and has been closed
since 2001.
"In 2008, an actuarial valuation of the program showed that the
1st and 2nd levels have large surpluses. Notwithstanding the
recent market downturn during the most recent fiscal year, these
pools are projected to experience continued surpluses.
"Because statute requires Program assets to be used only for
payment of 1959 Survivor benefits, AB 1821 will merge the
members and assets in the 1st and 2nd levels into the 3rd level
pool, and eliminated the $2.00 required monthly premium in the
3rd level pool as long as the pool has surplus assets. While
this would result in a higher benefit or potential higher
benefit for the small number of members currently in the 1st and
2nd level pool, 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."
The Regional Council of Rural Counties (RCRC) has taken a
"support if amended" position on the bill. They are asking that
the bill be amended to eliminate the employer contribution to
the new merged pool created by this bill. According to RCRC,
"We recognize that the surplus in the combined asset pool should
cover the benefits (even at an increased level) for all
participants, but if the Legislature is going to eliminate the
mandatory $2 employee contribution, then employers should no
longer pay for this benefit."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0006010