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