BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 410|
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THIRD READING
Bill No: AB 410
Author: Jones-Sawyer (D)
Amended: 6/4/13 in Senate
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 4-0, 6/10/13
AYES: Beall, Block, Gaines, Yee
NO VOTE RECORDED: Walters
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 72-3, 5/13/13 - See last page for vote
SUBJECT : Public employee health benefits: enrollment
SOURCE : California Professional Firefighters
DIGEST : This bill permits a California Public Employees'
Retirement System (CalPERS) retiree to reinstate to active
employment without losing his/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.
ANALYSIS :
Existing law
1. Establishes PEMHCA, which provides health care coverage for
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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.
2. 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.
3. 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.
4. 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).
5. Requires, in most cases, that the retiree enroll in PEMHCA
within 60 days of retirement.
6. 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.
7. Allows, as a contract option for a local employer that the
retiree will not be subject to the 120-day rule if he/she had
20 years of service with the local employer.
This bill:
1. 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/she
first retired. In such cases, the retiree would be eligible
for the employer contribution toward retiree health care that
he/she had when first retired.
2. 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
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than that provided by the first employer.
3. 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.
4. 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.
5. Requires that the retiree must enroll in PEMHCA within 60
days of re-retirement.
6. States that these provisions only apply to an annuitant who,
after reinstatement, subsequently retires on or after January
1, 2014.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
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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.
SUPPORT : (Verified 8/30/13)
California Professional Firefighters (source)
California Association of Professional Scientists
California Fire Chiefs Association
California Public Employees' Retirement System
Glendale City Employees' Association
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
ARGUMENTS IN SUPPORT : The California Professional
Firefighters, the sponsor of this bill 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.
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
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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.
ASSEMBLY FLOOR : 72-3, 5/13/13
AYES: Achadjian, Alejo, Atkins, Bigelow, Bloom, Blumenfield,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Hagman,
Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine,
Linder, Logue, Maienschein, Medina, Melendez, Mitchell,
Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,
Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Salas, Skinner, Stone, Ting, Torres, Wagner, Waldron, Weber,
Wieckowski, Wilk, Williams, Yamada, John A. Pérez
NOES: Donnelly, Grove, Mansoor
NO VOTE RECORDED: Allen, Ammiano, Holden, Lowenthal, Vacancy
JL:d 8/30/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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