BILL NUMBER: AB 1247 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 25, 2011
AMENDED IN ASSEMBLY MARCH 31, 2011
INTRODUCED BY Assembly Member Fletcher
FEBRUARY 18, 2011
An act to amend Section 7503 20229
of the Government Code, relating to public employees' retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 1247, as amended, Fletcher. Public retirement systems:
reporting.
The Public Employees' Retirement Law provides a defined benefit to
members of the Public Employees' Retirement System (PERS) based on
age at retirement, service credit, and final compensation, as those
terms are defined. The management and control of PERS is vested in
the Board of Administration of PERS, including the calculation of the
contribution rates for specified state employees and state
employers. Existing law requires the board to submit a report to the
Legislature, the Governor, and the Treasurer describing the
investment return assumptions, discount rates, and amortization
periods utilized by the board in the calculations of the contribution
rates and to include recalculations of those rates based on
specified adjustments of the investment return assumptions,
amortization periods, and discount rates utilized by the board any
time it calculates the contribution rates. Existing law requires the
Treasurer, within 30 days following receipt of the report, to provide
each house of the Legislature, at a publicly noticed floor session,
with an explanation of the role played by the investment return
assumption and amortization period in the calculation of the
contribution rates and the consequences for future state budgets if
the investment return assumptions are not realized, to report whether
the board's amortization period exceeds the estimated average
remaining service periods of employees covered by the contributions,
and to express his or her opinion of the reasonableness of the board'
s calculation of the contribution rates.
This bill would require the Board of Administration of PERS to
submit that report annually, would limit the scope of the report to
state employee retirement plans, and would revise the adjustments of
the investment return assumptions and discount rates utilized by the
board any time it calculates the contribution rates. The bill would
delete the requirement that the Treasurer express his or her opinion
of the reasonableness of the board's calculation of the contribution
rates.
Existing law also requires the board, at any time it forecasts
contribution rates, to submit a report to the Legislature with a
revised calculation of the forecasted contribution rates utilizing a
specified investment rate assumption.
This bill would delete this reporting requirement of the board.
The California Constitution grants the retirement board of a
public pension or retirement system, consistent with the exclusive
fiduciary responsibilities vested in it, the sole and exclusive power
to provide for actuarial services in order to assure the competency
of the assets of the public pension or retirement system. Existing
law requires all state and local public retirement systems to prepare
an annual report in accordance with generally accepted accounting
principles. Existing law requires the Boards of Administration of the
Public Employees' Retirement System and the State Teachers'
Retirement System to file with the Governor and the Legislature a
report of its financial statements and investments for the fiscal
year. That report is required to include time-weighted market value
rate of return on a 5-year, 3-year, and one-year basis and portfolio
return comparisons by asset class that compare investment returns
with an alternative theoretical portfolio of comparable funds,
universes, and indexes regarding the rate of return of the system by
asset type.
This bill would require the annual report of all state and local
public retirement systems to include projections of the fair market
value of system assets for each of the next 20 years based on assumed
rates of returns of 6%, 73/4 %, and 91/2 %.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 20229 of the
Government Code is amended to read:
20229. (a) The board, notwithstanding Section 10231.5,
any time it adopts the contribution rates described in Chapter 8
(commencing with Section 20671) and Chapter 9 (commencing with
Section 20790), shall provide the Legislature, the
Governor, and the Treasurer with a an annual
report that includes all of the following , as these items
apply to state employee retirement plans :
(1) (A) A description of the investment return assumption utilized
by the board when determining the contribution rates.
(B) A calculation of the contribution rates utilizing an
investment return assumption based on the lesser of 6
percent per annum or one percentage point 2 percentage
points above and 2 percentage points below the investment
return assumption utilized by the board.
(2) (A) A description of the amortization period for any unfunded
liabilities utilized by the board when determining the contribution
rates.
(B) A calculation of the contribution rates based on an
amortization period equal to the estimated average remaining service
periods of employees covered by the contributions.
(3) (A) A description of the discount rate utilized by the board
for reporting liabilities.
(B) A calculation of those liabilities based upon a
discount rate equal to the rate of the 10-year United States Treasury
Note as of 30 days before the date of the report the
assumptions described in subparagraph (B) of paragraph (1) .
(4) The market value of the assets controlled by the board and an
explanation of how the actuarial value assigned to those assets
differs from the market value of those assets.
(b) The board, notwithstanding Section 10231.5, at any time it
forecasts the contribution rates described in Chapter 8 (commencing
with Section 20671) and Chapter 9 (commencing with Section 20790),
shall provide the Legislature with a revised calculation of the
forecasted contribution rates utilizing an investment rate assumption
based on the lesser of 6 percent or one percentage point below the
investment return assumption utilized by the board in the calculation
of the forecasted contribution rates.
(c)
(b) The Treasurer within 30 days of receipt of the
report required by subdivision (a) shall, during a publicly noticed
floor session of each house of the Legislature, do all of the
following:
(1) Explain the role played by the investment return assumption
and amortization period in the calculation of the contribution rates.
(2) Describe the consequences for future state budgets should the
investment return assumption not be realized.
(3) Report whether the board's amortization period exceeds the
estimated average remaining service periods of employees covered by
the contributions.
(4) Express his or her opinion of the reasonableness of the board'
s selection of the investment return assumption and the amortization
period.
(d)
(c) The reports required by subdivisions (a)
and (b) report required by subdivision (a) shall
be submitted in compliance with Section 9795.
SECTION 1. Section 7503 of the Government Code
is amended to read:
7503. (a) All state and local public retirement systems shall
prepare an annual report in accordance with generally accepted
accounting principles.
(b) The report described in subdivision (a) shall include
projections of the fair market value of system assets for each of the
next 20 years based on the following assumed rates of returns: 6
percent, 73/4 percent, and 91/2 percent.