BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 373 (Mullin) - Public Employees: Long-Term Care
Amended: March 19, 2013 Policy Vote: PE&R 4-0
Urgency: No Mandate: No
Hearing Date: June 24, 2013
Consultant: Maureen Ortiz
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 373 expands enrollment eligibility for the
CalPERS Long-Term Care program to include the adult children,
domestic partners, and same-sex spouses if permitted under the
Internal Revenue Code and other applicable law, of CalPERS'
members and annuitants.
Fiscal Impact:
Minor administrative costs to CalPERS (Special Fund).
There are no state costs associated with administrative expenses
as plan participants pay a surcharge to the third-party
administrator to manage the program.
Background: The CalPERS Long-Term Care (LTC) Program was
implemented in 1995 and has over 148,000 members and
approximately $3.8 billion in Long-Term Care Fund assets. The
program is a voluntary, self-funded, not-for-profit program that
is funded entirely by policyholder premiums and investment
earnings. It is a tax-qualified plan under federal law and
member benefits are exempt from federal taxation.
The CalPERS LTC Program is available to all California public
employees and retirees, as well as their spouses, parents,
parents-in-law and adult siblings between the ages of 18 and 79.
Proposed Law: AB 373 expands enrollment eligibility for the
CalPERS Long-Term Care program to include the adult children,
domestic partners, and same-sex spouses if permitted under the
Internal Revenue Code and other applicable law, of members and
AB 373 (Mullin)
Page 1
annuitants of the following pension systems: CalPERS, CalSTRS,
the Judges' Retirement System, the Judges' Retirement System II,
the Legislators' Retirement System, as well as members of the
California Assembly and Senate, and classified school employees.
The bill also grants CalPERS with the authority to expand
eligibility in the future to other individuals as permitted
under federal law.
Staff Comments: The CalPERS LTC has experienced significant
premium increases lately. In fact, the board recently approved
an 85 percent premium increase for certain policies bought by
early purchasers, which will be applied over a two-year period
starting in 2015.
In 2012, the CalPERS board took numerous actions to restructure
the Long-Term Care Program including approving a more
conservative investment portfolio, and lowering the discount
rate to 5.75 to reflect expected investment returns.
Additionally, the board approved a new benefit design and
pricing of a fourth generation product, and beginning in
December 2013 will provide for a continuous open enrollment
period.
AB 373 is intended to help stabilize the program by opening it
to new and younger participants.
The United States Supreme Court is reviewing the Defense of
Marriage Act this year which could affect Internal Revenue Code
provisions governing federally-qualified long-term care plans.
AB 373 will allow the CalPERS board to streamline any changes
into the Long-Term Care Program.