BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 410 (Jones-Sawyer) - Public Employee Health Benefits
Amended: June 4, 2013 Policy Vote: PE&R 4-0
Urgency: No Mandate: No
Hearing Date: June 24, 2013
Consultant: Maureen Ortiz
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 410 will allow a CalPERS annuitant, who
reinstates to active employment and subsequently retires again,
to continue receiving retiree health benefits from the employer
from which he or she first retired.
Fiscal Impact:
Unknown costs and savings to state and local employers
(General/Local Funds)
The fiscal impact will vary and will be dependent on the number
of employees who retire, reinstate with a different employer and
subsequently retire again, and on the individuals' vesting of
health benefits.
Costs : There could be a loss of savings to the state to the
extent that employees who would already otherwise retire, return
to work with a different employer, and re-retire drawing health
benefits from the last employer will now be able to receive
health benefits from their first employer under the provisions
of this bill.
Savings : There could be substantial savings to the extent that
this bill encourages more retirees to reinstate with a different
employer since during that period of time while the employee has
reinstated to active employment, the state will not pay the
health benefits that are currently being paid to the annuitant.
These costs/savings could be incurred by the state or by other
local agencies dependent on where the individual had been first
employed.
AB 410 (Jones-Sawyer)
Page 1
Background: Under current law, a member's last employer is
responsible for paying the employer contribution for the
annuitant's health coverage. The Public Employees' Medical and
Hospital Care Act (PEMHCA) employer vesting schedules require a
minimum number of years of service prior to obtaining
eligibility for annuitant health coverage. The amount of the
employer contribution for annuitants varies among employers. A
member may retire, and then return to employment as a retired
annuitant with a CalPERS employer, but the employment time may
not exceed 960 hours per year. If the retiree does work more
than 960 hours per year, then his or her retirement allowance
and benefits cease, and the member must be reinstated from
retirement as an active employee and member of the system.
Therefore, 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.
For example, if a state annuitant receives the full employer
contribution for health coverage after 20 years of service with
the state and later decides to reinstate to active employment
with a local contracting agency, when the employee subsequently
retires from that agency he or she is only eligible to receive
the employer contribution from the contracting agency (i.e. the
last employer). This can result in a substantial increase in an
annuitant's out-of-pocket costs for health care. For instance,
if an individual, who is a former state employee receiving
health coverage under PEMHCA with the state contribution paid
according to the 100/90 formula, decides to reinstate as an
active employee for a contracting agency that only pays a $64.60
employer contribution for retiree health coverage, then the
individual would receive only $64.60 per month after his or her
subsequent retirement, rather than the state's100/90 formula
contribution that was paid prior to reinstatement. This would
result in a substantial increase in annuitant out-of-pocket
costs for health care in retirement.
Proposed Law: AB 410 will allow an annuitant who reinstates and
retires a second time to receive health benefits from his or her
first employer if it will result in the annuitant receiving a
higher contribution for health care. To be eligible, the second
retirement must occur within 120 days after separation from
employment from the second employer.
AB 410 (Jones-Sawyer)
Page 2
Related Legislation: This bill is similar to SB 695 (Wiggins)
which was held on this committee's suspense file in 2008.
Staff Comments: AB 410 will remove the disincentive for retired
state employees to return to work more than half-time with a
CalPERS employer that offers less lucrative retiree health
benefits.