BILL ANALYSIS Ó SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 373 Gloria Negrete McLeod, Chair Hearing date: April 11, 2011 SB 373 (DeSaulnier) as introduced 2/15/11 FISCAL: NO CONTRA COSTA COUNTY RETIREMENT SYSTEM: DEPUTY SHERIFFS' RETIREMENT BENEFITS HISTORY : Sponsor: Contra Costa County Prior legislation: SB 524 (Torlakson) Chapter 633, Statutes of 2006 SUMMARY : SB 373 eliminates the sunset date on provisions allowing Contra Costa County, as agreed to in a MOU with the Contra Costa County Deputy Sheriffs' Association (DSA), to provide a lower tier of benefits to employees who either elected to participate in the lower tier prior to 2007, or who were first hired and placed in the lower tier since 2007. BACKGROUND AND ANALYSIS : 1) Existing law : a) establishes the 1937 Act County Retirement Law, which covers 20 independent county retirement systems, including the Contra Costa County Employees Retirement Association (CCCERA). b) authorizes participating counties to provide retirement benefits to general members and safety members of a county retirement system, and generally requires that the benefits be the same for all members of a retirement category (such as "safety" or "general"). c) authorizes the Board of Supervisors of Contra Costa County, pursuant to a memorandum of understanding with Pamela Schneider Date: 4/1/11 Page 1 employees, to provide different retirement benefits for different bargaining units of safety employees represented by the DSA, the unrepresented groups of safety employees in similar job classifications, and the supervisors and managers of those employees. d) authorizes the Board of Supervisors in Contra Costa County, by resolution or ordinance and subject to the provisions of the applicable MOU, to terminate increased benefits above the basic level, as specified, for employees who elect by written notice to terminate the higher benefits and thereby receive a lower tier of benefits. e) requires the Board of Supervisors, prior to adopting such an ordinance, to provide a written explanation of the effect and impact of the lower tier for each member requesting a termination of increased benefits, and to specify how the retirement allowance for employees electing the lower tier of benefits will be calculated. f) prohibits an employee who elects the lower benefit tier from rescinding that election, except as specified. g) provides that these provisions sunset as of January 1, 2012. 2) This bill a) eliminates the January 1, 2012 sunset date. FISCAL : According to the sponsor, There is currently a 5.65% difference in the cost to the County for employees in Tier A versus employees in Tier C. For each $80,000 deputy - Tier C saves the County approximately $4,534 per year. For example, 100 Tier C deputies would cost the County $453,366 less a year than Tier A, and 500 of them would be $2.3 million less. Currently, the County reports that of the 619 current sworn Pamela Schneider Date: 4/1/11 Page 2 staff, 507 are in Tier A and 112 are in Tier C. As each Tier A employee retires or separates, the County realizes permanent savings for every new employee hired into Tier C. COMMENTS : 1) Argument in support According to the sponsor, The DSA contract ratified in October, 2005, included provisions for "Tier B," which was intended to create an optional lower tier for current employees. Due to Internal Revenue Code issues, the county was never able to implement Tier B. "Tier C" was created for new hires beginning January 1, 2007. Since then, Tier A has been closed to new employees. The website for CCCERA defines the current benefit structure for employees in the two tiers: -------------------------------------------------------------- |Benefit |Tier A |Tier C | |--------------------+--------------------+--------------------| |Retirement Formula |3% at age 50 |3% at age 50 | |--------------------+--------------------+--------------------| |Final Compensation |Highest 1 Year |Highest 3 Years | |Period | | | |--------------------+--------------------+--------------------| |Post-Retirement |3% Annually |2% Annually | |Cost of Living | | | |Adjustments | | | -------------------------------------------------------------- --------------------------------------------------------------- |Basic member contribution rates for employees in Tier C are | |approximately 3% to 4% lower than for employees in Tier A in | |fiscal year 2010/2011. | --------------------------------------------------------------- The statutory provision allowing the county and the deputy sheriff's to negotiate the lower tier is expiring on January 1, 2012. The sponsor states that Contra Costa County and the Pamela Schneider Date: 4/1/11 Page 3 DSA would like to retain the ability to negotiate lower retirement tiers, which saves money for the County and reduces the contribution rate for employees in the lower tiers, thus allowing them more take-home pay. 2) SUPPORT : Contra Costa County Board of Supervisors, sponsor Contra Costa County Deputy Sheriffs Association (DSA) Peace Officers Research Association of California (PORAC) 3) OPPOSITION : None to date ##### Pamela Schneider Date: 4/1/11 Page 4