BILL ANALYSIS AB 1902 Page 1 ASSEMBLY THIRD READING AB 1902 (Portantino) As Amended March 9, 2010 Majority vote PUBLIC EMPLOYEES 6-0 ----------------------------------------------------------------- |Ayes:|Torrico, Harkey, | | | | |Furutani, Hernandez, Ma, | | | | |Nestande | | | | | | | | ----------------------------------------------------------------- SUMMARY : Effects changes to the Los Angeles County Employees Retirement Association's (LACERA) defined benefit Plan E that will ensure plan members are treated equitably under plan provisions for the recording of payroll data, disability eligibility, and benefit portability. Specifically, this bill : 1)Clarifies that Plan E workers will be credited with service for payroll periods in which compensation is received. 2)Allows a disabled worker who prospectively transfers to Plan D and does not meet the requirements to apply for a Plan D disability retirement benefit the option of transferring back to Plan E even though fewer than three years may have elapsed since the member's most recent transfer date. 3)Allows an active member to retain reciprocity rights when Plan E members forfeit their LACERA retirement benefit to purchase the retirement benefit through another California public employer. FISCAL EFFECT : Unknown COMMENTS : LACERA's Plan E is a noncontributory defined benefit plan available to general members of the retirement system. Since the plan is unique to LACERA, this bill will not impact any other retirement systems being operated under the County Employees' Retirement Law of 1937 ('37 Act). The following information was provided to the Committee by LACERA and describes in detail those areas addressed by AB 1902: AB 1902 Page 2 Recording Payroll Data : Los Angeles County's payroll system has transitioned from monthly payroll periods to semi-monthly payroll periods. This bill clarifies Plan E workers will be credited with service for payroll periods in which compensation is received. These amendments are consistent with LACERA's current practice. The rewording of these sections is required to accommodate Los Angles County's new payroll system, and will support any future payroll system changes. Disability Eligibility : Disabled workers who change retirement plan tiers may receive inequitable treatment that limits rehabilitation periods. A Los Angeles County non-safety worker may choose between two retirement plan tiers: contributory Plan D and non-contributory Plan E. Plan D offers disability benefits while Plan E does not. AB 399 (Havice), Chapter 778, Statutes of 2001, provided the authority for a worker to prospectively transfer between the plans no more than once every three years. A worker participating in Plan E who prospectively transfers to Plan D must meet one of two waiting period requirements before applying for Plan D disability retirement benefits: 1) complete two continuous years of active service; or, 2) earn five years of retirement service credit under Plan D. The intent of the waiting period requirement is to limit the possibility of a worker transferring from Plan E (worker does not contribute to cost and plan has no disability benefit) to Plan D and filing for disability benefits. Los Angeles County's Long Term Disability (LTD) program provides 24 months of disability benefits for workers unable to perform their job functions and extends benefits to age 65 for those workers disabled under federal Social Security standards. However, disabled workers in Plan D are required to leave employment and file for retirement benefits at the earliest possible age following the 24 month period (generally age 50 with 10 years of retirement credit). As such, a worker who prospectively transfers from Plan E to Plan D and becomes disabled prior to satisfying the waiting period receives inequitable treatment compared to other disabled workers who remained in Plan E by being forced to leave employment and losing the opportunity to participate in the employer's Return to Work rehabilitation programs. This bill allows a disabled worker who prospectively transfers to Plan D and does not meet the requirements to apply for a Plan D disability retirement benefit the option of transferring back to Plan E even though fewer than three years AB 1902 Page 3 may have elapsed since the member's most recent transfer date. Benefit Portability : The California Government Code establishes reciprocal benefits (Reciprocity) as a tool to encourage career public service and to protect the retirement benefits earned by a public worker under two or more California public employers. Reciprocity provides benefit portability through linking eligibility requirements, age, and compensation information provided the worker rehires with a California public employer with in a specified number of days and becomes a member of their retirement plan. Former Los Angeles County workers who are noncontributory Plan E members may voluntarily forfeit their retirement Plan E benefits and purchase them through their current California public employer. As Plan E requires no worker contributions, this allows the worker to contribute more towards their retirement buy purchasing a retirement benefit with their current employer. However, this action breaks the reciprocity rule requiring continuous membership. This bill re-links retirement plan benefits between California pubic retirement systems when a Plan E member forfeits their LACERA retirement benefit, and keeps intact the prohibition of workers receiving a retirement benefit from multiple California government employers for the same time period worked. This section does not apply to those who have already retired from LACERA. Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957 FN: 0004168