BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 410
                                                                  Page  1

          Date of Hearing:   May 1, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

              AB 410 (Jones-Sawyer) - As Introduced:  February 15, 2013 

          Policy Committee:                              PERSSVote:7-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill permits a California Public Employees' Retirement  
          System (CalPERS) retired annuitant to reinstate to active  
          employment with a different CalPERS employer without losing his  
          or her accrued retiree health benefits earned with a previous  
          employer, as specified.  

           FISCAL EFFECT  

          There are no significant net costs to this bill.

          Historically, very small numbers of CalPERS members have retired  
          from state service, reinstated to work full time with a local  
          agency employer, and then retired again.  This number is small  
          because few people are willing to give up what is likely to be a  
          generous health care benefit to work for another employer where  
          they are unlikely to vest and obtain a significant retiree  
          health care benefit.  

          Under existing law CalPERS saves money when this occurs because  
          it is the most recent employer, not the state, who will bear the  
          health benefit costs in retirement.  This bill could reduce  
          state savings, likely in the tens of thousands of dollars, for  
          any retiree who makes the choice to go from a state employer to  
          a local CalPERS employer. 
           
           However, there are savings to the state because during the time  
          period in which an annuitant has reinstated as an active  
          employee, the state will not be paying that member's PEMHCA  
          coverage or the member's pension benefit while they are  
          employed.  To the extent this measure encourages additional  
          state employees to retire and then reinstate to active  








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          employment with another agency, without losing their accrued  
          health benefits, and retire again after working long enough to  
          meet the vesting requirements of the second CalPERS employer,  
          these savings will increase.

           COMMENTS  

           1)Purpose  .  According to the author, escalating, uncapped health  
            benefits costs and the threat of losing employer-provided  
            health care coverage under PEMHCA has created a major  
            disincentive among retired public employees to return to work  
            in the public sector.  Current law also discourages skilled,  
            experienced employees who retire as a result of a job-related  
            injury to go back to work in a less physically demanding job.

           2)Support  .  The California Professional Firefighters states the  
            bill provides an incentive for a public agency retiree to  
            return to work because the retiree is protected against the  
            risk of losing his or her earned health care benefit.   
            Additionally, the previous employer experiences a savings as  
            the retirement allowance and related benefits for that retiree  
            are suspended until that employee subsequently re-retires.   
            Supporters note AB 410 has been crafted to discourage the  
            practice of an employee collecting a retirement allowance and  
            a paycheck by applying only to a retiree who reinstates to  
            active employment causing the retirement allowance to cease.

           3)Background  .  Generally, the Public Employees' Medical and  
            Hospital Care Act (PEMHCA) specifies that the last employer of  
            record before a member's retirement is the employer  
            responsible for paying the employer contribution for the  
            annuitant's health coverage.  PEMHCA also requires  
            participants to perform a minimum number of years of service,  
            typically five, prior to obtaining eligibility for annuitant  
            health coverage or any employer contribution toward that  
            coverage.  In addition, eligibility for enrollment in PEMHCA  
            requires most annuitants to retire within a specified number  
            of days of permanent separation from a CalPERS employer.

            The enactment of the Public Employees' Pension Reform Act of  
            2013, AB 340 (Furutani), Chapter 296, Statutes of 2012,  
            eliminated most exemptions to the requirement that a retired  
            annuitant work no more than 960 hours per year for a CalPERS  
            employer before automatic reinstatement to active service and  
            suspension of the retirement allowance and retiree health  








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            coverage.  As a result of this legislation, retired annuitants  
            will have less opportunity to work and keep their retired  
            status.  As a result, if they want to work, they will probably  
            have to reinstate and could lose their health coverage if they  
            return to a CalPERS employer, other than their prior employer.

           4)Previous legislation  .  This bill is similar to SB 695  
            (Wiggins) of 2008.  This bill was held in the Senate  
            Appropriations Committee. 

           5)There is no registered opposition to this bill.
                 
           
           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081