BILL ANALYSIS Ó
AB 340
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 340 (Furutani) - As Amended: April 25, 2011
SUBJECT : County employees' retirement: postretirement service.
SUMMARY : Prohibits certain cash payments from being counted as
compensation earnable for retirement purposes in counties
operating retirement systems pursuant to the County Employees'
Retirement Law of 1937 ('37 Act) and prohibits a retiree in
those counties from immediately returning to employment with the
public employer on a part-time or contract basis. Specifically,
this bill :
1)Excludes from the definition of "compensation earnable"
payments for unused vacation time, annual leave, personal
leave, sick leave, or compensatory time off that exceeds what
is earned and payable in a 12-month period, payments for
service rendered outside of normal working hours, bonus
payments, housing allowances, severance pay, unscheduled
overtime, and vehicle allowances.
2)Authorizes a '37 Act retirement board to deny compensation
items that are provided to an employee for the principal
purpose of enhancing a member's retirement benefit.
3)Specifies that compensation paid to a retiring member to
restore compensation the member would have been entitled to
receive pursuant to a collective bargaining agreement that was
subsequently deferred or modified, as specified, will be
considered compensation earnable and not considered to have
been paid for the purpose of enhancing a member's retirement
benefits.
4)Establishes compensation reporting requirements for counties
and districts and authorizes a '37 Act retirement board to
audit to determine the correctness of specified information
and assess a county or district a reasonable cost to cover the
cost of the audit and any necessary adjustment or correction
if the board determines the county or district knowingly
failed to comply with the compensation reporting requirements.
AB 340
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5)Requires a county or district to enroll an eligible employee
into membership with the retirement system within 90 days.
Employers who fail to meet this requirement are required to
pay all costs in arrears for member contributions and
administrative costs of $500 per member.
6)Prohibits a person who retires on or after January 1, 2012,
from returning to work as a retired annuitant or as a contract
employee for a period of 180 days after retirement.
7)Specifies that a retiree hired in violation of the 180 day
rule is required to reimburse the retirement system for any
retirement allowance received during that period and any
administrative expenses incurred.
8)Specifies that a county or district that hires someone in
violation of the 180 day rule is required to reimburse the
retirement system for any administrative expenses incurred if
the county or district is determined to be at fault by the
executive officer of the retirement system.
EXISTING LAW :
1)Establishes the '37 Act which provides for retirement systems
for county and district employees in those counties adopting
its provisions. Currently 20 counties operate retirement
systems under the '37 Act. These systems provide defined
benefit retirement allowances based on employees' years of
service, age at retirement, and final compensation (highest
paid 12 or 36 months of employment).
2)Defines "compensation earnable" in the '37 Act as the average
compensation for the period under consideration with respect
to the average number of days ordinarily worked by persons in
the same grade or class of positions during the period, and at
the same rate of pay.
3)Allows a retired public employee to return to public
employment with an employer covered by the retirement system
he or she retired from on a part-time basis, as specified. An
employee who exceeds the limited time base or earnings, as
specified, may be subject to reinstatement into the retirement
system and reduction or cessation of his or her retirement
allowance or earnings.
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FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "California's public
pension systems were established to provide retirement security
for those who give their lives to public service. Recently, the
benefits provided by those systems have been tainted by a few
individuals who have taken advantage of the system. This is in
part due to the '37 Act's very broad and general definition of
"compensation earnable" (the amount on which a member's pension
is calculated). In these counties some public employees, most
of them in upper level positions, have taken advantage of this
situation to include items in their compensation that "spike"
their final compensation to create vastly increased pension
checks for themselves.
"The abusive practices engaged in by a few individual have put
retirement benefits at risk for the vast majority of honest,
hard-working public servants. Additionally, the practice of
having someone retire on Friday and come back to work on Monday
and being able to collect a full retirement benefit along with a
full paycheck, is something the public simply will not tolerate
any longer. Allowing this "double-dipping" to continue only
adds to the growing public concern over the pensions being
received by public employees."
The author concludes, "This measure will address these abusive
practices by giving the '37 Act retirement boards the authority
and the obligation to deny compensation items that are provided
to an employee for the principal purpose of enhancing a member's
retirement, specifically excluding certain payments from the
definition of 'compensation earnable', and requiring an employee
to 'sit out' for 180 days after retirement before returning to
service."
Supporters state, "AB 340 would eliminate the current law
ability for employees to manipulate their final compensation
calculations to enhance their retirement benefits.
Additionally, AB 340 restricts the ability of members to retire
immediately and return to employment as a retired annuitant and
begin collecting a salary and pension simultaneously...AB 340
ends the 'double-dipping' employed by many of the managers and
highly compensated employees."
Those opposed to the bill are concerned about the provision
prohibiting a retiree from returning to work for their previous
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employer until 180 days have elapsed from the day of retirement.
They state, "The use of recent retirees allows public agencies
to save public dollars during the recruitment period and until
the position is filled with a competent person. Many of the
positions for which retirees are re-hired temporarily are highly
skilled trade's positions which are difficult to fill."
The 180 day provision in this bill is similar to provisions
contained in SB 27 (Simitian) of this year. SB 27 prohibits,
for 180 days after the date of retirement, any member of the
California Public Employees' Retirement System (CalPERS) or the
California State Teachers' Retirement System (CalSTRS) who
retires on or after January 1, 2013, from returning to work as a
part-time, paid employee; contracting employee; or employee of a
third party contractor.
These provisions were also contained in AB 1987 (Ma) from last
year and SB 1425 (Simitian) also from last year which were
vetoed by the Governor. The Governor did not mention the 180
day provisions in his veto messages on the bills. Other
concerns with the measures were cited.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Psychiatric Technicians
Retired Public Employees Association
Service Employees International Union
Opposition
Association of California Water Agencies
California State Association of Counties (unless amended)
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957