BILL ANALYSIS Ó AB 1542 Page 1 Date of Hearing: May 2, 2012 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL SECURITY Warren T. Furutani, Chair AB 1542 (Mansoor) - As Amended: March 29, 2012 SUBJECT : County employees' retirement: cost-of-living adjustments. SUMMARY : Prohibits a person who first becomes a member of the Orange County Employees Retirement System (OCERS) on or after January 1, 2012, from receiving the annual cost-of-living adjustment (COLA) until they have been retired at least 12 months. This provision only becomes operative upon the adoption by the Orange County Board of Supervisors. EXISTING LAW permits a retirement system established pursuant to the County Employees' Retirement Law of 1937 ('37 Act) to provide an automatic COLA for retired members each year that is capped at a set amount, usually 2% or 3%, effective April 1. The COLA is provided to a member's retirement benefit to offset changes in the Consumer Price Index. The amount of COLA, if any, is determined annually by the Board of Retirement. For 2012, the COLA set by the OCERS' Board of Retirement is 2.5 percent. FISCAL EFFECT : Unknown. COMMENTS : According to the author, "Currently, retirees under OCERS are automatically eligible for a cost-of-living adjustment on April 1 of each year regardless of their date of retirement. Consequently, many employees can retire on dates immediately before the April 1 adjustment and still receive that adjustment. The California Public Employees' Retirement System (CalPERS) currently requires a delay of at least 12 months before a retiree is eligible for a cost-of-living adjustment. This bill would make retirees under OCERS consistent with the state's retirement system." Opponents state, "Cost-of-living adjustments are simply used to maintain the buying power of pension benefits that have been earned by a worker over their career. To deny this benefit would create a possibility of bringing people into poverty, as AB 1542 Page 2 they would not be able to maintain their buying power as inflation occurs." The COLA benefit provided under CalPERS begins in the second calendar year after retirement and each May annually after that. The bill currently specifies that the COLA the member would eligible to receive after being retired for 12 months will be based on the preceding 12 months. The Committee recommends that the bill be amended to clarify the period to time that will be used to compute the COLA that members will receive after 12 months so that OCERS would not be required to compute a separate COLA amount for each retiree based on the date of retirement. REGISTERED SUPPORT / OPPOSITION : Support Orange County Board of Supervisors (Sponsor) County of Orange Opposition American Federation of State, County and Municipal Employees Orange County Employees Association Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957