BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 344
Gloria Negrete McLeod, Chair Hearing date: June 27, 2011
AB 344 (Furutani) as amended 4/25/11 FISCAL: YES
CALPERS: INEQUITABLE PAY INCREASES AND LIMITS ON WORKING
AFTER RETIREMENT
HISTORY :
Sponsor: Author
Prior legislation: SB 53 (Russell)
Chapter 1297, Statutes of 1993
AB 2177 (Assembly PER&SS Committee)
Chapter 1030, Statutes of 2000
ASSEMBLY VOTES :
PER & SS 6-0 5/04/11
Appropriations 17-0 5/18/11
Assembly Floor 15-0 5/26/11
SUMMARY :
AB 344 accomplishes two objectives:
1) It prohibits the California Public Employees' Retirement
System (CalPERS) from granting exceptions, for small groups
or individuals, to increases in "compensation earnable"
that are not consistent with compensation increases
reported for all individuals in the same retirement
membership classification.
2) It eliminates the ability of a CalPERS employer to
request that a retired worker be allowed to work beyond the
960 hour annual limit without being subject to
reinstatement and cessation of the retiree's allowance.
BACKGROUND AND ANALYSIS :
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1) Existing law :
a) establishes CalPERS, which provides defined benefits
for state employees, school classified employees, and
employees in over 1,500 pubic agencies.
b) provides that a defined benefit is calculated by
multiplying a member's years of service, age factor, and
final compensation, which is the highest average
compensation earnable over either a 12 month or 36 month
period, as specified.
c) defines "compensation earnable" as including payrate
and special compensation, and specifies which portions of
compensation may be included in compensation earnable for
the purpose of determining final compensation.
d) requires that increases in compensation earnable for an
individual who is not in a group or class shall be
limited, for the purpose of determining final
compensation, to the average increase in compensation
earnable for all employees of that employer who are in
the same retirement membership classification, but allows
employers to request, and CalPERS to grant, exceptions to
this rule.
e) allows a retiree of the system to work for a CalPERS
employer following retirement, while receiving a
retirement allowance and not reinstating into active
public service, as long as that employment does not
exceed 960 hours per fiscal year.
f) allows an employer to request, and CalPERS to grant,
exceptions to the 960 hour limitation.
2) This bill :
a) eliminates CalPERS' ability to make exceptions to the
rules requiring increases to compensation earnable for an
individual to be consistent with increases to other
employees in the same retirement class.
b) eliminates the ability of an employer to request, and
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CalPERS to grant, an exception to the 960 hour limitation
on working after retirement.
COMMENTS :
1) Argument in Support
According to the author,
"The recent City of Bell scandal brought to light an
area of the Public Employees' Retirement Law that needs
to be changed. Under current law, an increase in
compensation earnable granted to an employee who is not
in a group or class is limited to the average increase
in compensation earnable for all employees who are in
the same membership classification. This prohibition
was added to the law to eliminate the ability of high
level managers to inappropriately 'spike' their
retirement allowances during their final years of
employment. Unfortunately, existing law also allows
CalPERS to grant exceptions to this rule.
"When CalPERS initially learned of the 47% pay hike
given to the city manager during an audit of the City of
Bell, they informed city officials that an exemption
could be needed in order for CalPERS to recognize
increase for retirement purposes. When CalPERS
officials learned that several of the city's
administrators were getting similar pay hikes, they
decided that an exemption was not needed. Based upon
those representations, CalPERS granted a one-time
approval of the city manager's 2005 salary increase.
"Even though an exception to the 'group or class' rule
was never granted in the City of Bell case, removing
this provision from current law, this bill will make
sure that option never exists in the future. This bill
would also eliminate CalPERS' ability to extend
employment of retired annuitants beyond the current 960
hour limit."
CalPERS, writing in support, states that eliminating the
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ability to make exceptions to compensation earnable
restrictions for individuals could "protect the system
form potential pension spiking."
2) Argument in Opposition
Those in opposition want to retain the ability to allow a
retired worker to exceed 960 hours in exceptional cases.
They state that "eliminating this option would impede our
agencies' ability to immediately fill highly technical
positions," and that "only a very small fraction of
petitioners are granted the ability to exceed the
limitation."
3) SUPPORT :
California Association of Psychiatric Technicians (CAPT)
California Correctional Supervisors Organization (CCSO)
California Professional Firefighters (CPF)
California Public Employees' Retirement System (CalPERS)
Glendale City Employees Association (GCEA)
Organization of SMUD Employees (OSE)
Retired Public Employees Association (RPEA)
San Bernardino Public Employees Association (SBPEA)
San Luis Obispo County Employees Association (SLOCEA)
Santa Rosa City Employees Association (SRCEA)
Service Employees International Union (SEIU)
4) OPPOSITION :
California Special Districts Association (CSDA), Oppose
unless amended
California State Association of Counties (CSAC), Oppose
unless amended
City of Santa Maria
League of California Cities (LCC), Oppose unless amended
Regional Council of Rural Counties (RCRC), Oppose unless
amended
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