BILL ANALYSIS
SB 11
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Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Ed Hernandez, Chair
SB 11 (Negrete McLeod) - As Introduced: December 1, 2008
SENATE VOTE : 31-3
SUBJECT : County employees retirement: San Bernardino County
health benefits.
SUMMARY : Authorizes the San Bernardino County Board of
Retirement (Board) to establish a post-employment health
benefits fund (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. Specifically, this bill :
1)Authorizes any public agency in California, as specified, to
make deposits in the Fund established by the 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)Requires the new Fund to be a separate entity from the San
Bernardino County retirement fund.
3)Authorizes the Board 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)Specifies the conditions 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)Authorizes the Board to adopt rules and regulations
implementing the Fund, and shall act as the Fund's
fiduciaries, trustees and investment manager.
6)Authorizes the Board to obtain fiduciary insurance.
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7)Requires the Board to 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.
EXISTING LAW as established by AB 2863 (Karnette), Chapter 846,
Statutes of 2006, permits the 20 counties operating retirement
systems under the County Employees' Retirement Law of 1937 ('37
Act) to create new trust funds for the sole purpose of
prefunding health care coverage for retirees, as follows:
1)Authorizes participating counties 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.
2)Establishes 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.
3)Authorizes the county board of supervisors 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.
4)Specifies contributions to the prefunding trust may include
the proceeds of debt issued by the county or district.
FISCAL EFFECT : Unknown.
COMMENTS : The Governmental Accounting Standards Board (GASB)
is a nonprofit 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. The GASB 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
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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.
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."
This bill is similar to SB 1586 (Negrete McLeod) of 2008 which
was vetoed by the Governor due to the 2008-2009 State Budget
delay.
In his veto message of SB 1586, the Governor stated, "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."
REGISTERED SUPPORT / OPPOSITION :
Support
Aurora Capital Group
Glendale City Employees Association
Organization of SMUD Employees
Safety Employees Benefit Association
San Bernardino County District Attorney
San Bernardino County Employees' Retirement Association
San Bernardino County Professional Firefighters, Local 935
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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
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957