BILL ANALYSIS Ó
AB 160
Page 1
Date of Hearing: April 24, 2013
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 160 (Alejo) - As Amended: April 11, 2013
SUBJECT : California Public Employees' Pension Reform Act of
2013: exceptions.
SUMMARY : Excludes from the provisions of the Public Employees'
Pension Reform Act of 2013 (PEPRA) certain Taft-Hartley
multiemployer retirement plans and retirement plans for public
employees whose collective bargaining rights are protected by
provisions of the Federal Transit Act, as specified.
Specifically, this bill :
1)Excludes the following retirement plans from the definition of
"public retirement system" as used in PEPRA:
a) Multiemployer plans authorized by the Taft-Hartley Act
if the employer participated in the plan prior to January
1, 2013 and the plan is regulated under the Employee
Retirement Income Security Act of 1974 (ERISA).
b) Retirement plans for public employees whose collective
bargaining rights are protected by provisions of the
Federal Transit Act if the United States Department of
Labor (DOL) has determined, in writing, that the PEPRA
requirements are in conflict with federal law.
2)Excludes from provisions of PEPRA prohibiting an employer from
offering supplemental defined benefit plans after January 1,
2013, multiemployer plans, as defined in federal law, in which
a public employer is participating pursuant to a collective
bargaining or similar agreement.
EXISTING FEDERAL LAW :
1)Establishes the Employee Retirement Income Security Act of
1974 (ERISA) which provides a comprehensive federal scheme for
the regulation of employee pension and welfare benefit plans
offered by private-sector employers. ERISA contains various
provisions intended to protect the rights of plan participants
and beneficiaries in employee benefit plans. These
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protections include requirements relating to reporting and
disclosure, participation, vesting, and benefit accrual, as
well as plan funding. ERISA also regulates the
responsibilities of plan fiduciaries and other issues
regarding plan administration. ERISA contains various
standards that a plan must meet in order to receive favorable
tax treatment, and also governs plan termination.
2)Authorizes the establishment of multiemployer pension plans
which cover workers from more than one employer.
Multiemployer pension plans have a specific definition under
the Labor Management Relations Act of 1947, known as the
Taft-Hartley Act. Under Taft-Hartley, a multiemployer pension
plan is established by negotiating an employer contribution as
part of a labor-management agreement and establishing a trust
fund. Then, labor organizations bargain with additional
employers to have workers covered by these plans. Employer
contributions, determined by collective bargaining, fund the
multiemployer pension plans. A Taft-Hartley multiemployer
pension plan is characterized by provisions allowing
individual employees to gain credits toward pension benefits
from work with multiple employers, as long as each employer
has a collective bargaining agreement requiring plan
contributions. Often, many employers in the same industry in
a geographic area contribute toward the same multiemployer
plan. Thus, individual workers moving from job to job
continue to earn credits toward future pension benefits.
3)Requires, under Section 13(c) of the Federal Transit Law, that
employee protections, commonly referred to as "protective
arrangements" or "Section 13(c) arrangements" must be
certified by the Department of Labor and in place, before
Federal transit funds can be released to a mass transit
provider. As a general rule, Section 13(c) protects transit
employees who may be affected by Federal transit funding.
Section 13(c) requires, among other things, the continuation
of collective bargaining rights, and protection of transit
employees' wages, working conditions, pension benefits,
seniority, vacation, sick and personal leave, travel passes,
and other conditions of employment.
EXISTING STATE LAW :
1)Establishes comprehensive public employee pension reform
through enactment of PEPRA (and related statutory changes)
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that apply to all public employers and public pension plans on
and after January 1, 2013, excluding the University of
California and charter cities and counties that do not
participate in a retirement system governed by state statute.
Under PEPRA, new members are subject, in part, to the
following:
a) Requires new public retirement system members to have
lower retirement formulas and higher retirement ages.
b) Requires new members to have no less than a three-year
final compensation period.
c) Requires new members to pay at least 1/2 of the
actuarial annual normal cost of their benefit plans as
member contributions and prohibits employers from making
those contributions on behalf of employees.
d) Limits the amount of compensation that a public employee
may have counted towards a defined benefit based on the
Social Security wage index with subsequent adjustments
based on annual changes in the Consumer Price Index for All
Urban Consumers.
e) Prohibits certain items of pay from being included in
"pensionable compensation."
FISCAL EFFECT : Unknown.
COMMENTS : Last year the state adopted PEPRA. Since that time,
labor unions representing certain public transit employees have
asserted to the United States Department of Labor (DOL) that
PEPRA impairs pension benefits contained in existing collective
bargaining agreements and restricts collective bargaining
rights, in violation of the protections in Section 13(c) of the
Federal Transit Act. Before federal transit funds can be
disbursed, the DOL must certify that grant recipients are
compliant with Section 13(c) and has withheld certification of
grants to California transit agencies.
According to the author, PEPRA reduces the collective bargaining
rights of public transit employees and conflicts with federal
law regarding 'protective arrangements' between transit unions
and the State of California. Under the Federal Transit Act,
affected labor unions may challenge Federal transit funding for
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the state upon a finding by the United States Department of
Labor (Department). Since the passage of PEPRA, numerous
objections have been filed with the Department. What is more,
the Department must approve of all 'protective arrangements'
before releasing Federal transit funds. Consequently, the
Department has refused to release any transit funds. Failure to
amend PEPRA could result in a loss of over $1 billion in annual
transit funding. This bill will exempt from PEPRA any public
employees who have Federal Transit Act section 13(c) rights,
thereby saving the stat over $1 billion annually.
"In addition, some public employers are participants in ERISA
regulated Taft-Hartley Pension Trusts. These pension trusts are
essentially private sector multiemployer pension plans that
allow public agencies to participate. The provisions of PEPRA
conflict with the terms of these plans and complete withdrawal
from the plans is the only option that would put the state in
compliance with ERISA regulations. However, ERISA subjects a
withdrawing employer to withdrawal liability, which can
potentially be very substantial?This bill will also exempt from
PEPRA any employee whose employer began participation in an
ERISA protected Taft-Hartley pension trust prior to January 1,
2013, thereby saving local agencies millions of dollars in
liabilities."
Supporters state, "This bill is not an effort to undermine
PEPRA. However, when the original bill was passed, the
Legislature was simply not aware of these federal preemption
questions. Just as the Legislature exempted charter cities and
the University of California for constitutional reasons when it
passed AB 340, it should have also enacted these exemptions. In
order to save state and local governments from losing hundreds
of millions in federal funding and avoiding costly pension
withdrawal liability, it should enact these minor exemptions
now."
In response to a request from the DOL, the Secretary of the
California Labor and Workforce Development Agency, sent a legal
memorandum to the DOL outlining why he believes PEPRA does not
violate the goals and requirements of section 13(c). The
response states, in part, "My legal staff and I have reviewed
this matter carefully and concluded that PEPRA does not limit a
local transit authority's ability to bargain or to enter into
fair and equitable protective agreements or arrangements that
satisfy Section 13(c)?the changes in state pension law
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implemented by PEPRA do not impede Section 13(c)'s goal of
assuring a continued right to collective bargaining.
California's effort to bolster the sustainability of defined
benefit pension systems for public employees also does not
eliminate the important right of employees to engage in
'meaningful, good faith, negotiations with their employer over
wages, hour and other terms and conditions of employment. To
the contrary, PEPRA merely modifies, prospectively, certain
aspects of the defined benefit pension plan than can be offered
by a public employer. It does not permit employers to
unilaterally determine and impose terms under which defined
benefit pensions may be provided. And, most importantly, PEPRA
retains the ability of current and future employees to engage in
good faith collective bargaining."
REGISTERED SUPPORT / OPPOSITION :
Support
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Teamsters Public Affairs Council
United Transportation Union
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957