BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 11|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 11
Author: Negrete McLeod (D)
Amended: As introduced
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 7-0, 4/20/09
AYES: Correa, Ashburn, Benoit, Ducheny, Liu, Padilla,
Wiggins
SUBJECT : San Bernardino County Board of Retirement
SOURCE : San Bernardino County Employees Retirement
Association
DIGEST : This bill authorizes 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.
ANALYSIS : The Governmental Accounting Standards Board
(GASB), a non-profit organization that formulates
accounting standards for state and local governments,
recently issued 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.). GASB standards are
CONTINUED
SB 11
Page
2
not law, but are accounting principals that improve the
relevance of financial reporting. 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.
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.
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:
1. 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 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.
2. The new Fund shall be a separate entity from the San
Bernardino County retirement fund.
SB 11
Page
3
3. 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.
4. 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.
5. The Board is authorized to adopt rules and regulations
implementing the Fund, and shall act as the Fund's
fiduciaries, trustees and investment manager.
6. The Board is authorized to obtain fiduciary insurance,
and
7. 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.
Prior Legislation
A similar bill, SB 1586 (Negrete McLeod) of 2008, was
vetoed by the Governor. 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/30/09)
San Bernardino County Employees' Retirement Association
SB 11
Page
4
(source)
American Federation of State, County and Municipal
Employees
Aurora Capitol Group
County of San Bernardino
Glendale City Employees Association
Organization of SMUD Employees
Safety Employees' Benefit Association
San Bernardino County District Attorney's Office
San Bernardino County Professional Firefighters, Local 935
San Bernardino County Sheriff's Department
San Bernardino County Treasurer-Tax Collector
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
South Coast Air Quality Management District
ARGUMENTS IN SUPPORT : According to the San Bernardino
County Employees' Retirement Association (SBCERA),
"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."
DLW:nl 4/30/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****