BILL ANALYSIS                                                                                                                                                                                                    Ó






          SENATE PUBLIC EMPLOYMENT & RETIREMENT    BILL NO:  AB 410
          Jim Beall, Chair             HEARING DATE:  June 10, 2013
          AB 410 (Jones-Sawyer)    as amended   6/04/13FISCAL:  YES

           PUBLIC EMPLOYEES' MEDICAL AND HOSPITAL CARE ACT:  RIGHT TO  
          POST-RETIREMENT HEALTH CARE COVERAGE
           
           HISTORY  :

            Sponsor:  California Professional Firefighters (CPF)

            Other legislation:  SB 695 (Wiggins), 2008
                          Died in Senate Appropriations Committee
                          AB 2132 (Levine), 2006
                          Vetoed by the Governor
                          AB 1611 (Levine), 2003
                          Died in Assembly Appropriations Committee

           ASSEMBLY VOTES  :

            PER & SS                 7-0       4/10/13
            Appropriations           17-0      5/01/13
            Assembly Floor           72-3      5/13/13
           
          SUMMARY  :

          AB 410 permits a California Public Employees' Retirement  
          System (CalPERS) retiree to reinstate to active employment  
          without losing his or her accrued retiree health benefits  
          earned with the prior employer under the Public Employees'  
          Medical and Hospital Care Act (PEMHCA), which is administered  
          by CalPERS, as specified.

           BACKGROUND AND ANALYSIS  :
          
          1)   Existing law  :
           
              a)   establishes PEMHCA, which provides health care  
               coverage for state and California State University  
               employees and retirees who meet specific vesting  
               requirements, and for employees and retirees of  
               participating local public employers that contract with  
               CalPERS for PEMHCA coverage.
          Pamela Schneider
          Date:  June 04, 2013                                    Page  
          1










             b)   requires participants to perform a  minimum  number of  
               years of service, typically five, prior to obtaining  
               eligibility for retiree health coverage or any employer  
               contribution toward that coverage.

             c)   specifies that the last employer of record before a  
               member's retirement from CalPERS is the employer  
               responsible for paying the employer contribution for the  
               retiree's health coverage.

             d)   makes eligibility for enrollment in PEMHCA for  most   
               retirees dependent on retirement within a specified  
               number of days of permanent separation from a CalPERS  
               employer (usually 120 days).

             e)   requires, in most cases, that the retiree enroll in  
               PEMHCA within 60 days of retirement.

             f)   provides varying employer contribution levels for  
               retiree health care depending upon whether the employer  
               is the state or a local contracting agency and the  
               employee's years of service with that employer.

             g)   allows, as a contract option for a local employer,  
               that the retiree will not be subject to the 120-day rule  
               if he or she had 20 years of service with the local  
               employer.

          2)   This bill  :

             a)   allows a retiree who reinstates to active employment  
               with a CalPERS employer to subsequently re-retire and  
               enroll in PEMHCA as a retiree of the prior employer from  
               which he or she first retired.  In such cases, the  
               retiree would be eligible for the employer contribution  
               toward retiree health care that he or she had when first  
               retired.

             b)   allows the retiree to enroll for retiree health care  
               coverage under the subsequent employer upon  
               re-retirement if the employer contribution under the  
               subsequent employer is higher than that provided by the  
          Pamela Schneider
          Date:  June 04, 2013                                    Page  
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               first employer.

             c)   specifies that the subsequent retirement must occur  
               within 120 days after separation from employment from  
               the most recent employer.  The 120-day rule would not  
               apply in cases in which a local contracting employer  
               contracts for the option to allow coverage regardless of  
               the length of separation for employees who had 20 years  
               of service with that local employer.

             d)   requires that any creditable service acquired with  
               the subsequent employer after reinstatement will not be  
               applicable with regard to vesting for the employer  
               contribution from the prior employer upon re-retirement.

             e)   requires that the retiree must enroll in PEMHCA  
               within 60 days of re-retirement.

             f)   states that these provisions only apply to an  
               annuitant who, after reinstatement, subsequently retires  
               on or after January 1, 2014.
           
          FISCAL  :

          According to the Assembly Appropriations committee, "There  
          are no significant net costs to this bill."




           COMMENTS  :

          1)   Arguments in Support  :

          The sponsor states:

               Under PEMHCA, the last employer of record before an  
               employee retires is the employer responsible for paying  
               any earned employer-contribution for that retiree's  
               health care coverage, regardless of that employee's  
               tenure or any previously accrued retiree healthcare  
               contribution.

          Pamela Schneider
          Date:  June 04, 2013                                    Page  
          3









               If a retired member reinstates to active employment, the  
               new employer is considered the last employer of record  
               for purposes of determining health coverage eligibility.  
                When that member retires a second time, regardless of  
               the amount of the employer-paid health care contribution  
               already earned from service with the employer they  
               retired from the first time, the retiree is only  
               eligible for the contribution earned by work with the  
               second employer.

               Given escalating, uncapped health benefit costs, 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.  Similarly, current law discourages skilled,  
               experienced employees who retire as a result of a  
               job-related injury to rehabilitate from their injury and  
               go back to work in a less physically demanding job.  AB  
               410 incentivizes a public agency retiree to return to  
               work because he or she is protected against the risk of  
               losing his or her earned health care contribution.   
               Those who have reinstated are not receiving a retirement  
               allowance and continue to contribute to the assets of  
               the retirement system, rather than drawing from them.

          Other supporters note that AB 410 incentivizes retirees to  
          return to work because they will be protected from  
          permanently losing their earned retiree health benefits, and  
          acknowledge the cost savings to prior employers for  
          unrequired health care and pension payments during the  
          reinstatement period.

          2)   SUPPORT  :

            California Professional Firefighters, Sponsor
            California Association of Professional Scientists (CAPS)
            California Fire Chiefs Association (CFCA)
            California Public Employees' Retirement System (CalPERS)
            Glendale City Employees' Association (GCEA)
            Organization of SMUD Employees (OSE)
            San Bernardino Public Employees Association (SBPEA)
            San Luis Obispo County Employees Association (SLOCEA)
            Santa Rosa City Employees Association (SRCEA)
          Pamela Schneider
          Date:  June 04, 2013                                    Page  
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          3)   OPPOSITION  :

            None to date




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          Pamela Schneider
          Date:  June 04, 2013                                    Page  
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