BILL ANALYSIS Ó SB 1294 Page 1 Date of Hearing: June 20, 2012 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL SECURITY Warren T. Furutani, Chair SB 1294 (Berryhill) - As Amended: June 13, 2012 SENATE VOTE : 37-0 SUBJECT : Public employee health benefits: Mariposa County. SUMMARY : Allows Mariposa County to provide a higher employer contribution for its retirees than for its active employees, and require it be executed through a memorandum of understanding (MOU) or by a resolution adopted by a majority of the County Board of Supervisors. Specifically, this bill : 1)Allows Mariposa County, subject to a MOU or, for employees not represented by a bargaining unit, upon adoption of a resolution by the Board of Supervisors, to: a) Establish employer contributions for employees of no less than the statutorily required amount. b) Provide an employer contribution that is higher for retirees than for active employees. This provision will only apply to employees who retired prior to the effective date of the MOU or resolution, regardless of any retroactivity required by the MOU or resolution. 2)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. 3)Specifies that the obligations or benefits of either the annuitants or the county that exist at the time of the bill's enactment will not be affected. EXISTING LAW : 1)Establishes the Public Employees' Medical and Hospital Care Act (PEMHCA), administered by CalPERS, which creates a statutory framework for state employee and retiree health care benefits and allows local public agencies to voluntarily SB 1294 Page 2 contract with CalPERS for health care coverage for their employees and retirees. 2)Requires a local public employer who contracts for PEMHCA coverage for active employees to also provide PEMHCA coverage for retirees. 3)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. 4)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% per year until the retirees receive the same premium amounts as active employees. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senare Rule 28.8, negligible state costs. COMMENTS : Because PEMCHA requires contracting agencies to provide retirees the same employer health care premium contributions as current employees, Mariposa County is sponsoring SB 1294 to ensure its current retirees will not experience a reduction in benefits as a result of the change it has negotiated in employer contributions for current employees and future retirees. 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. "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 SB 1294 Page 3 existing statute." According to the sponsor, Mariposa County Board of Supervisors, "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." REGISTERED SUPPORT / OPPOSITION : Support Mariposa County Board of Supervisor (Sponsor) Opposition None on file Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957