BILL ANALYSIS Ó
AB 1028
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Date of Hearing: March 30, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 1028 (P.E.,R.& S.S. Com.) - As Introduced: February 18,
2011
SUBJECT : State employees' retirement.
SUMMARY : Makes several minor or technical amendments to
various sections of the Government Code administered by the
California Public Employees' Retirement System (CalPERS) that
are necessary for the continued efficient administration of the
system. Specifically, this bill :
1)Conforms the Public Employees' Retirement Law (PERL) to the
changes made in statute last year by SB 1007 (Hancock),
Chapter 633, Statutes of 2010, which required candidates for
elected positions to the (CalPERS and California State
Teachers' Retirement System boards to file periodic campaign
reports in generally the same manner as candidates for other
state offices.
2)Clarifies the definition of "payrate" to include any amount
deducted from participation in a deferred compensation plan;
payment for participation in a 401(k) or 403(b) plan; payment
into a qualified 401(a) plan; and, participation in a flexible
benefits program.
3)Allows the CalPERS Board of Administration to reflect in the
employer contribution rates changes in retirement benefits or
member contribution rates for the State plans immediately upon
the effective date of the change or as soon thereafter as can
be accomplished given the Board's meeting schedule, instead of
at the beginning of the succeeding fiscal year.
4)Requires that appointments of specified retired CalPERS
members conform to the following:
a) They must be temporary and require specialized skills;
b) An employer may only allow a member to exceed the 960
hour limit once;
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c) Annuitant payrates must be limited to the maximum
published pay schedule for the vacant position.
5)Clarifies that a member retired for disability who has been
employed by an employer without reinstatement, as specified,
cannot be concurrently employed as a retired annuitant under a
separate provision allowing for employment after retirement.
6)Allows CalPERS to accept a will or trust as a beneficiary
designation if the document specifically names the retirement
account as an asset; or the document specifically disinherits
one or all persons who would otherwise be entitled to benefits
provided by CalPERS.
7)Authorizes CalPERS to pay lump-sum death benefits to a Public
Administrator when certain requirements are met and the estate
of the member qualifies for summary disposition as a small
estate with a value of $30,000 or less.
8)Conforms the PERL to the federal Heroes Earnings Assistance
and Relief Tax (HEART) Act which entitles survivors of a
member who dies while performing qualified military service to
any additional benefits that they would have received had the
member died as an active employee.
9)Makes other technical wording and grammatical corrections and
corrects or deletes inaccurate or obsolete code section
references
FISCAL EFFECT : Unknown.
COMMENTS : The following information regarding this bill has
been provided by CalPERS:
1)Board Candidate Campaign Statements:
In 1998 a modified campaign statement filing process for elected
members of the CalPERS Board of Administration was added to
the Political Reform Act (PRA) and mirrored in the PERL.
Under these provisions candidates for the CalPERS board,
including incumbent board members running for re-election,
were required to file one pre-election statement and one
post-election statement disclosing contributions received and
expenditures made.
Last year this modified process for CalPERS board candidates was
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deleted from the PRA and CalPERS board candidates are now
required to follow the same reporting requirements as other
elected officials. However, the provision in the PERL was not
amended to conform to this increased reporting requirement.
2)Definition of Payrate:
The PERL was amended in 2000 in an effort to clarify and
standardize the reporting of compensation and service for
school employees. The amendments defined the terms
"compensation earnable", "payrate", and "special compensation"
as they relate to school employees.
The original intent of these changes was to mirror other
provisions of the PERL that included in the definition of
"payrate" amounts deducted from a member's salary for
participation in a tax-deferred retirement plan, in a deferred
compensation plan and in a flexible benefits program. This
was the current practice at the time the language was drafted
and remains so today.
Unfortunately, when the changes were made in 2000, not all of
the relevant language was included.
This bill would add the relevant language so that the definition
of "payrate" for school members would include any amount
deducted for participation in a deferred compensation plan,
payment for participation in a 401(k) plan, payment into a
qualified 401(a) plan and participation in a flexible benefits
program.
3)Employer Contribution Rates:
Current law requires as part of the annual budget process that
the Governor include in his budget proposal the retirement
contribution rates for liability for benefits on account of
State employees, as established by the Board. The Legislature
is then required to adopt the submitted rates and authorize
the appropriation in the Budget Act.
Over the past six months, the State has negotiated and adopted
Memoranda of Understanding with a majority of its bargaining
units that have, among other things, increased normal
retirement ages for new hires and increased employee
retirement contribution rates.
In August, the Board implemented a policy change so that, to the
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extent consistent with the Board's legal and fiduciary
responsibilities, changes in retirement benefits or member
contribution rates are reflected in the employer contribution
rates for the State plans immediately upon the effective date
of the change or as soon thereafter as can be accomplished
given the Board's meeting schedule, instead of at the
beginning of the succeeding fiscal year.
This bill would align statute with the Board's current rate
setting process and reflect the recently adopted Board policy.
4)Strengthening and Clarifying Rules Regarding Post-Retirement
Employment:
CalPERS employers may hire retired annuitants for a number of
reasons. Under certain situations, a retired annuitant must
possess specialized skills that are needed for a limited time
or during an emergency to prevent a stoppage of public
services. Existing law limits these appointments to 960 hours
of service in a given fiscal year and requires the total
compensation for these appointments not to exceed the maximum
pay scale for the vacant position.
Not all of the legal provisions that administer these types of
appointments include identical language. This creates the
potential for inconsistency, as well as potential abuse of the
system with regard to the temporary nature of these
appointments and the limits on payrates.
This bill would clarify that these types of appointments are 1)
temporary and must require specialized skills; 2) members may
only be permitted to exceed the 960 hours once; and 3)
annuitant payrates are limited to the maximum published pay
schedule for the vacant position.
Another provision of the PERL provides for permanent employment
of a member retired for industrial or ordinary disability with
a CalPERS employer under certain conditions. One of these
conditions is that the sum of the member's monthly disability
retirement pension and his or her monthly earnings cannot
exceed the maximum monthly compensation currently paid in the
position from which the member retired.
In order to ensure that a disabled retired member does not
exceed this limit, this bill will clarify the member cannot be
concurrently employed as a retired annuitant under a separate
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employment after retirement provision.
5)Accepting A Will Or Trust As Beneficiary Designation:
Under existing law, CalPERS retirees or beneficiaries receiving
a monthly allowance have the right to designate any
beneficiary they choose, as long as their designation does not
interfere with a spouse's community property rights. However,
CalPERS must receive a properly completed beneficiary
designation form to implement a beneficiary designation. If a
beneficiary designation is not received, CalPERS relies on the
beneficiary order outlined in statute to pay the member's
benefits.
Many participants neglect to provide CalPERS with an up-to-date
beneficiary designation form. Instead, they assume a will or
trust will serve as a beneficiary designation. Upon the
participant's death, CalPERS is frequently asked to accept a
will or trust in lieu of a beneficiary designation form. When
CalPERS is presented with a will or trust that specifically
cites the retirement account or disinherits one or more
persons who would otherwise be eligible by statute, staff can
administratively accept the document as a "writing filed with
the Board" and pay benefits to the participant's estate.
This bill will allow CalPERS to accept a will or trust as a
beneficiary designation if the document specifically names the
retirement account as an asset or the document specifically
disinherits one or all persons who would otherwise be entitled
to benefits provided by CalPERS.
6)Death Benefit Payments to Public Administrators:
Existing law provides for payment of lump sum death benefits to
a member's designated beneficiary or, in the absence of a
designated beneficiary, to survivors in the following order:
spouse or registered domestic partner; children; parent; or
siblings. If there is no designated beneficiary or survivor
entitled to receive the lump sum death benefit, the benefit
becomes payable to the member's estate. In some case, the
Public Administrator may be authorized to dispose of an estate
without probate.
A statutory change is needed to clarify that in the case of a
small estate with a value of $30,000 or less, CalPERS may pay
death benefits to a the Public Administrator without first
requiring the Public Administrator to provide Letters of
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Administration.
The death benefits at issue are sometimes as low as $500, or
consist of just the prorated allowance for the days the payee
was living in the month of his or her death. In these
situations, the death benefit is not substantial enough for
the Public Administrator to justify incurring the expense of
obtaining Letters of Administration.
This bill will authorize CalPERS to pay lump sum death benefits
to a Public Administrator when certain requirements are met
and the estate of the member qualifies for summary disposition
as a small estate.
7)CalPERS compliance with the Federal HEART Act:
The federal HEART Act was signed into law by President Bush in
2008 to provide tax and retirement advantages to military
personnel and their families. Among other things, the HEART
Act protects survivor benefits for employees who die during
active military service. Specifically, when a member dies
while performing qualified military service, the member's
survivors are entitled to any additional benefits that they
would have received had the member died as an active employee.
Pension plans must be amended to comply with the HEART Act. In
CalPERS' case, amendments to the PERL must be made by June 30,
2013. This bill will add needed language to the PERL to bring
it into compliance with the HEART Act requirements.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
AB 1028
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