BILL ANALYSIS Ó SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 1294 Gloria Negrete McLeod, Chair Hearing date: April 18, 2012 SB 1294 (Berryhill) as amended 4/09/12 FISCAL: YES PUBLIC EMPLOYEES MEDICAL AND HOSPITAL CARE ACT: MARIPOSA COUNTY HISTORY : Sponsor: Mariposa County Board of Supervisors Prior legislation: AB 2544, Pavley Chapter 862, Statutes of 2006 AB 468, Hayashi Chapter 320, Statutes of 2009 AB 2510, Fletcher Chapter 600, Statutes of 2010 SUMMARY : SB 1294 ensures that current Mariposa county retirees will not receive a reduction in their retiree health care benefits as a result of bargaining agreements to change the existing health plan design with current active employees. BACKGROUND AND ANALYSIS : 1) Existing law : a) requires that public employers and official employee representatives collectively bargain over issues relative to wages and working conditions. b) establishes the Public Employees Medical and Hospital Care Act (PEMHCA), administered by the Public Employees' Retirement System (CalPERS), which creates a statutory framework for state employee and retiree health care benefits and allows local public agencies to voluntarily contract with CalPERS for health care coverage for their employees and retirees. Pamela Schneider Date: 4/16/12 Page 1 c) requires a local public employer who contracts for PEMHCA coverage for active employees to also provide PEMHCA coverage for retirees. d) requires, as a specific contracting condition, that the local public contracting employer pay the same level of premiums for active employees as for retirees, and that the employer contribution be no less than $97 per month (as set in 2009), adjusted annually for cost of living increases since that time. e) makes an exception to the equal premium rule by allowing an employer to establish a lower premium for retirees for a time, but in those cases, requires the employer to incrementally increase premiums for retirees by 5 percent per year until the retirees receive the same premium amounts as active employees. 2) This bill : a) allows Mariposa County, subject to a memorandum of understanding (MOU) or upon resolution by the board of Supervisors, to: i) Establish employer contributions for employees of no less than the statutorily required amount. ii) Provide an employer contribution that is higher for retirees than for active employees. b) requires that these changes will not apply to any employee who retired before the effective date of the MOU or resolution, and further specifies, regardless of any retroactivity required by the MOU or resolution, that any employee who retires before the MOU is signed or the resolution is adopted shall not be affected by these changes. c) requires Mariposa County to provide CalPERS with notification of the MOU agreement or resolution and to provide any necessary information in order to implement the requirements of these changes. Pamela Schneider Date: 4/16/12 Page 2 d) makes findings and declarations that a special law is necessary to enact these changes and that a general law cannot be made applicable within specific constitutional meanings due to the unique circumstances of Mariposa County with respect to public employer and employee contributions to health care coverage. COMMENTS : 1) Concerns of the PE&R Committee : This area of the Government Code defines "board" to mean the board of CalPERS. The bill references a "resolution adopted by a majority of the board" (paragraph (a) (1)) that is intended to apply to the Mariposa County Board of Supervisors. The bill should be amended to specify the county board of supervisors since it incorrectly references the CalPERS board as currently written. Additionally, the bill is intended to grandfather retiree health benefits for those who retire prior to enacting the agreement outlined in the bill. In order to clarify the bill's intent, the author has agreed to amend the bill with the attached committee amendments prior to having the bill referred out of the committee. 2) Argument in Support : According to the author: "The county has negotiated a change to their benefit package, which would reduce the health insurance benefit for some current employees. This change also eliminates an automatic escalator in benefits which was incorporated in some, but not all, of the County's labor agreements. Pamela Schneider Date: 4/16/12 Page 3 At this time the employees' overall compensation would not change; however, the health insurance benefit is being adjusted. For many employees it will increase, but others will see a decrease. Because the Public Employees' Medical and Hospital Care Act requires the county to provide retirees exactly the same health insurance benefit as current employees, when this program is enacted some of the County retirees would see a reduction in their health benefits, thus running contrary to existing statute. SB 1294 would allow Mariposa County to provide current CalPERS retirees with a different level of health insurance benefit than will be provided to current employees. This would only apply to those who have already retired. This change will ensure that actions taken by the County will not negatively impact retirees' health benefits." The sponsor states the following: "In order to address disparate treatment of County employees' health benefits, the Mariposa County Board of Supervisors has recently negotiated new terms with each of the County's bargaining units. The agreed-upon terms now provide equal medical insurance benefits for all county employees." "An unintended consequence has been a reduction in medical insurance benefits for some Mariposa County retirees. Since this was not their intent, the Board of Supervisors believes it is important to take whatever actions are possible to allow these retirees to keep their current level of medical insurance benefits. Senate Bill 1294 provides the legal means for the County to "grandfather" current retirees medical insurance benefits at their present level." 2) SUPPORT : Mariposa County Board of Supervisors, Sponsor Pamela Schneider Date: 4/16/12 Page 4 3) OPPOSITION : None to date ##### Pamela Schneider Date: 4/16/12 Page 5