BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 11
Lou Correa, Chair Hearing date: April 20, 2009
SB 11 (Negrete McLeod) as introduced 12/1/08
FISCAL: NO
SAN BERNARDINO COUNTY: AUTHORITY TO CREATE AN TRUST FUND TO
ASSIST IN PROVIDING RETIREE HEALTH BENEFITS AND PERMIT OTHER
PUBLIC EMPLOYERS TO PARTICIPATE IN THIS TRUST FUND, AS
SPECIFIED
HISTORY :
Sponsor: San Bernardino County Employees Retirement
Association (SBCERA)
Prior legislation: SB 1586 (Negrete McLeod)
Vetoed
AB 2863 (Karnette)
Chapter 846 of 2006
SUMMARY :
Would authorize the San Bernardino County Board of Retirement
to establish a post-employment health benefits fund for the
investment of assets held in trust for the exclusive purpose
of providing health benefits to the retirees of that County,
and those of any participating local agency.
BACKGROUND :
1) What is GASB ?
The Governmental Accounting Standards Board (GASB) is a
non-profit organization that formulates accounting standards
for state and local governments. GASB standards are not law
but are accounting principles that improve the relevance of
financial reporting.
2) GASB 43 and 45
The committee is advised that the GASB recently issued
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Date: 4/14/09 Page 1
Statements 43 and 45 requiring all post-employment benefit
plans other than pension plans and all governmental employers
to report information about their funding progress and assets
on hand with regard to post-employment benefits other than
retirement (health care, vision care, dental care, etc.). If
employers produce financial statements that are not in
compliance with the GASB requirements, they will be
considered out of conformity with Generally Accepted
Accounting Principles and receive a qualified auditor
opinion.
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Date: 4/14/09 Page 2
ANALYSIS :
1) Existing law
Existing law, pursuant to Chapter 846 of 2006 , permits the
twenty '37 Act Counties to create new trust funds for the
sole purpose of prefunding health care coverage for retirees,
as follows:
a) participating counties are authorized to make deposits
in newly established trust funds maintained by the county
(or district) to provide for the payment of all or a
portion of the health benefit premiums,
b) the conditions under which participating in the
prefunding plan terminates, and how the assets from
terminating employers are managed, providing that in the
event the prefunding plan is terminated, the county board
of supervisors will retain sufficient funds to pay for
health care coverage for annuitants and administrative
costs before paying any remaining assets to the employer,
c) the county board of supervisors is authorized to adopt
regulations implementing the prefunding program, and the
county board of retirement (or county board of investment,
if applicable), may act as a trustee, third-party
administrator or investment manager of this prefunding
program, and
d) contributions to the prefunding trust may include the
proceeds of debt issued by the county or district.
2) This bill
This bill permits, in addition to the provisions of Chapter
846 of 2006 , San Bernardino County Employees Retirement Board
only to create a new trust fund for the sole purpose of
prefunding health care coverage for retirees (Fund), as
follows:
a) any public agency in California, as defined in Govt.
Code Section 53630, is authorized to make deposits in the
Fund established by the San Bernardino County Retirement
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Date: 4/14/09 Page 3
Board (Board) to exclusively provide for the payment of all
or a portion of the health benefit premiums of retired
employees of that public agency,
b) the new Fund shall be a separate entity from the San
Bernardino County retirement fund,
c) the Board is authorized to establish joint powers
authorities, partnerships, common trust funds, or other
mechanisms in order to combine or commingle Fund assets for
the purpose of investment,
d) the conditions are specified under which the Fund can
be terminated, and how Fund assets from participating
public agencies are disbursed in that event, providing that
the Board will only transfer moneys remaining after the
deduction of expenses to another fund maintained by the
agency for the exclusive purpose of providing retiree
health care ,
e) the Board is authorized to adopt rules and regulations
implementing the Fund, and shall act as the Fund's
fiduciaries, trustees and investment manager,
f) the Board is authorized to obtain fiduciary insurance,
and
g) the Board shall account separately for each
participating agency and report monthly in its public
records and annually to participants on earnings and
expenses charged to the Fund.
COMMENTS :
1) Board of Supervisors approval not required
The committee is advised that this bill does not require the
approval of the San Bernardino Board of Supervisors before
such a Fund is created and administered by the San Bernardino
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Date: 4/14/09 Page 4
County Board of Retirement.
2) Arguments in support
According to the sponsor:
"Currently local agencies have essentially two investment
choices, CalPERS or Wall Street. This legislation will
give public agencies a third choice for the management of
their assets set aside to pay future OPEB liabilities.
This legislation authorizes SBCERA to establish funds that
public agencies may utilize for this purpose. The
legislation provides San Bernardino County local
governments - at all levels - a cost effective investment
choice unavailable to them under current state law."
3) Last year's identical bill vetoed
The committee is advised that a bill identical to this bill
was vetoed, along with many other bills, at the end of last
year's session. The Governor stated in his veto message:
"The historic delay in passing the 2008-2009 State Budget
has forced me to prioritize the bills sent to my desk at
the end of the year's legislative session. Given the
delay, I am only signing bills that are the highest
priority for California. This bill does not meet that
standard and I cannot sign it at this time."
4) SUPPORT :
American Federation of State, County and Municipal
Employees (AFSCME)
Aurora Capitol Group
County of San Bernardino
Glendale City Employees Association
Organization of SMUD Employees
Safety Employees' Benefit Association (SEBA)
San Bernardino County District Attorney's Office
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Date: 4/14/09 Page 5
San Bernardino County Professional Firefighters, Local
935
San Bernardino Public Employees Association
San Bernardino County Sheriff's Department
San Bernardino County Treasurer-Tax Collector
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
South Coast Air Quality Management District (AQMD)
5) OPPOSITION :
None to date
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David Felderstein
Date: 4/14/09 Page 6