BILL ANALYSIS �
AB 410
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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
AB 410
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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