BILL ANALYSIS �
SB 350
Page 1
SENATE THIRD READING
SB 350 (Negrete McLeod)
As Introduced February 15, 2011
Majority vote
SENATE VOTE :25-14
PUBLIC EMPLOYEES 4-2 APPROPRIATIONS 11-5
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|Ayes:|Furutani, Allen, Ma, |Ayes:|Fuentes, Blumenfield, |
| |Wieckowski | |Bradford, Charles |
| | | |Calderon, Campos, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Mansoor, Harkey |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Merges the first, second, and third levels of the
1959 Survivor Benefit for contracting local agencies of the
California Public Employees' Retirement System (CalPERS) that
currently provide one of those levels of benefits, and allows
CalPERS to suspend employee premiums of $2 monthly when the
funding pool is determined to contain surplus funds.
Specifically, this bill allows:
1)CalPERS to transfer pooled assets from the first two levels to
the third level, and to increase survivor benefits in the
first two levels to the third level of benefits. Survivors in
the first two levels will receive a better benefit and the
infusion of assets into the third level funding pool will
strengthen the funded status of that pool and ensure continued
full funding of premiums so that employers will not be
required to contribute for this benefit.
2)CalPERS to suspend employee premiums of $2 per month as long
as the third level funding pool contains surplus funds equal
to 200% or more of the total liabilities of the funding pool.
EXISTING LAW :
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1)Establishes the 1959 Survivor Benefit, a survivor benefit paid
in a similar manner to the survivor benefit provided by Social
Security. The benefit is provided for survivors of employees
who do not participate in Social Security and who die prior to
retirement from non-work-related issues.
2)Defines an eligible survivor as a spouse or a registered
domestic partner who either cares for dependent children or
has reached age 62 or older. A dependent child is defined as
one who has never been married, is living with the surviving
spouse or domestic partner, and is under age 22. The
dependent child may be over age 22 if the child is
incapacitated due to a disability that began prior to age 22.
Finally, if there is no surviving spouse or child, a surviving
parent who was dependent on the employee at the time of his or
her death may receive the benefit.
3)Establishes six levels of the 1959 Survivor Benefit, including
the following:
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|LEVEL |WHO |MONTHLY BENEFIT AMOUNT |STATUS OF LEVEL |
| |PARTICIPATES| | |
| | | | |
|-------+------------+---------------------------+----------------|
|First |Local |With 1 child: $360 |Closed since |
| |Contracting |With 2 or more children: |1/1/94 |
| |Agencies |$430 | |
| | |Spouse only at age 62: | |
| | |$180 | |
|-------+------------+---------------------------+----------------|
|Second |Local |With 1 child: $450 |Closed since |
| |Contracting |With 2 or more children: |1/1/94 |
| |Agencies |$538 | |
| | |Spouse only at age 62: | |
| | |$225 | |
|-------+------------+---------------------------+----------------|
|Third |Local |With 1 child: $700 |Closed since |
| |Contracting |With 2 or more children: |7/1/2001 |
| |Agencies |$840 | |
| | |Spouse only at age 62: | |
| | |$350 | |
|-------+------------+---------------------------+----------------|
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|Fourth |Local |With 1 child: $1,900 |Contract option |
| |Contracting |With 2 or more children: |since 7/1/2001 |
| |Agencies |$2,280 | |
| | |Spouse only at age 62: | |
| | |$950 | |
|-------+------------+---------------------------+----------------|
|Fifth |State and |With 1 child: $1,500 |Established |
| |School |With 2 or more children: |level since |
| |Employers |$1,800 |1/1/2000 |
| | |Spouse only at age 62: | |
| | |$750 | |
|-------+------------+---------------------------+----------------|
|Indexed|Local |With 1 child: $1,149 |Contract option |
| (2% |Contracting |With 2 or more children: |since 1/1/2000 |
|annuall|Agencies |$1,723 | |
|y) | |Spouse only at age 62: | |
| | |$574 | |
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4)Requires that participating employees pay $2 per month and
that employers pay any remaining costs to fund the benefit, up
to $2 per month, after which the cost (if it is more than $4
per month) is to be split equally between employer and
employee.
5)Allows CalPERS to pool the premiums for this benefit and
requires that premiums paid for the 1959 Survivor Benefit may
only be used to pay for that benefit.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)No direct costs to employers or employees of CalPERS
contracting agencies. There will be a decrease in a projected
actuarial surplus in the survivor benefit program, due to the
increased benefits for survivors in the first two benefit
levels. However, the projected surplus for the combined pool
would remain about 300% of projected benefits according to
CalPERS.
2)Administrative costs to CalPERS to merge the survivor benefit
pools are minor and absorbable.
COMMENTS : According to the sponsor, CalPERS, "There are
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approximately 13,000 participants in the first two levels. The
3rd level has approximately 46,000 participants. Benefits in
the first three levels are set in statute and do not increase;
therefore, premiums are extremely stable."
"The Program was designed as a replacement benefit for members
who are not eligible for Social Security. However, unlike
Social Security, there is no mechanism allowing eligible
survivors to receive a cost-of-living adjustment (COLA). The
1st and 2nd level pools are no longer open to new members
because the benefit they provide is insufficient for its
original purpose. New benefit pools were created in order to
provide a more realistic replacement benefit for eligible
survivors. Merging the pools and paying the 3rd level survivor
benefit would provide a needed COLA increase to participants in
the 1st and 2nd level pools."
"Because statute requires Program assets to be used only for
payment of 1959 Survivor benefits, the CalPERS Board of
Administration is sponsoring this bill to merge the members and
assets in the 1st and 2nd levels into the 3rd level pool and
suspend the $2.00 required monthly employee premium in the 3rd
level pool as long as the pool is running a surplus in excess of
200% of total liabilities."
"While this would result in a higher benefit for the small
number of members currently in the 1st and 2nd level pools, the
large surpluses that exist in the first two pools will be used
to minimize the probability of future employer contributions for
contracting agencies in the 3rd level pool.
"After combining the three pools, the funding level of the 3rd
pool is estimated to exceed 300%."
This bill is similar to AB 1821 (Ma) of 2010 which would have
used the excess reserves from the CalPERS 1959 Survivor Benefit
Program to merge the first, second, and third benefit levels
into a single contracting agency pool paying the current Level 3
survivor benefit. The bill was vetoed by the Governor. In his
veto message, the Governor stated:
"This bill results in arbitrarily increasing the level of
benefits being paid out to those beneficiaries that did not
contribute towards this increased level of benefit. While I
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recognize that surplus funds are not being utilized in the
specified 1959 Survivor Benefit Program funds, it does not make
sense to increase the benefit amounts to even the small number
of participants that would be affected by this measure. That is
a policy that runs counter to the overall pension reform
direction I believe the state should be adopting."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0001543