BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 2140 (Lara) - California Highway Patrol: Retirement Contributions Amended: As Introduced Policy Vote: PE&R 4-0 Urgency: No Mandate: No Hearing Date: August 6, 2012 Consultant: Maureen Ortiz This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 2140 reduces the employee retirement contribution rate by 3 percent for miscellaneous and industrial members of the State Bargaining Unit 5 (California Highway Patrol), specifically the cadets, pursuant to a previously negotiated Memorandum of Understanding (MOU). Fiscal Impact: One-time reimbursement costs from CalPERS of approximately $200,000. (Special) Minor, absorbable costs to State Controller's Office and to CalPERS for readjusting member contributions. (General/Special) Background: SB 846 (Correa) Chapter 162/2010, among other things, ratified an agreement between the State and Bargaining Unit 5, but did not accurately reflect the agreement reached on the employee retirement contributions for CHP Cadet Miscellaneous Members. During negotiations that culminated in the current BU 5 MOU, it was intended that the funding methodology for the cadets' retirement contribution would correspond to that of the patrol officers - both groups would realize an increase of 2% in the employee rate. The current MOU suspends the retiree health prefunding contributions of 2 percent of monthly pay from employees, and instead redirects that amount to employee pension contributions resulting in an increase in the contribution rate from 8% to 10% of monthly pay for CHP officers. Consequently, the contribution for cadets should have increased 2% from the previous contribution rate of 5% to 7% of monthly pay in excess of $513 . AB 2140 (Lara) Page 1 However, the specifics of the CHP cadets retirement contribution did not appear in the agreement, and so was incorrectly ratified by SB 846 whereby both groups' contribution increased to 10%, meaning the cadets' contribution was erroneously increased from 5% to 10% of pay. Cadets are classified as Miscellaneous members of CalPERS, not Safety patrol members. BU 5 cadets are a group of employees who undergo a six-month CHP training academy. During this training period, cadets are classified as Miscellaneous employees for CalPERS retirement purposes. Upon graduation from the academy, cadets are promoted to the position of officer and become Patrol members of CalPERS. Proposed Law: AB 2140 will correct an oversight in the ratification of the current MOU between the State and Bargaining Unit 5 (CHP) to ensure that the employee retirement contribution for cadets is adequately withheld at a rate of 7% of monthly pay in excess of $513. Staff Comments: SB 846 (Correa) Chapter 162/2010 ratified the BU 5 MOU, but also provided that the parties may agree to a different rate of contribution without legislative action if such an agreement does not require an additional expenditure of funds. In the ongoing process of administering State employee bargaining agreements, the Department of Personnel Administration (now CalHR) was notified of the discrepancy in the contribution rate for cadets by the State Controller's Office. At this time, however, the cadets are still being subjected to an incorrect retirement contribution withholding rate of 10%.