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)
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          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%.