BILL ANALYSIS �
AB 410
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CONCURRENCE IN SENATE AMENDMENTS
AB 410 (Jones-Sawyer)
As Amended June 4, 2013
Majority vote
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|ASSEMBLY: |72-3 |(May 13, 2013) |SENATE: |38-0 |(September 9, |
| | | | | |2013) |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : Permits a California Public Employees' Retirement
System (CalPERS) retired annuitant to reinstate to active
employment without losing his or her accrued retiree health
benefits earned with the previous employer, as specified.
Specifically, 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 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.
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
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.
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6)Specifies that these provisions only apply to an annuitant
who, after reinstatement, subsequently retires on or after
January 1, 2014.
The Senate amendments :
1)Clarify that an annuitant who reinstates to active service and
subsequently retires may elect to enroll in a health benefit
plan as an annuitant of the employer that provided the
employer contribution for health benefits during his or her
first period of retirement.
2)Specify that an annuitant retiring a second time would be
enrolled in annuitant health coverage with their last
employer, unless the annuitant requests to be covered under a
prior employer, and other technical amendments to match the
author's intent.
FISCAL EFFECT : 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.
COMMENTS : Generally, the 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, based on the length of service or
vested status. It 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 amount of the employer
contribution for annuitants varies widely among employers.
Alternatively, the state and some contracting agency employers
use PEMHCA vesting schedules to determine eligibility for
retiree health coverage and the employer contribution toward
participant premiums.
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
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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
coverage. As a result, retired annuitants whose financial
circumstances or desire to serve leads to a return to full-time
active status, results in them returning to work for a CalPERS
employer other than their prior employer, may experience a
reduction in, or outright loss of, the employer contribution
toward annuitant health coverage.
In an example provided to the Assembly Public Employees,
Retirement and Social Security Committee by CalPERS, if an
annuitant who had worked for the state earns the full employer
contribution for health coverage under the 100/90 formula after
20 years of service, later reinstates to active service with a
PEMHCA contracting agency, when the employee subsequently
retires from that contracting agency, he or she would only be
eligible to receive the employer contribution from the
contracting agency, whereas, if the person had returned to
active CalPERS-covered service with the state, he or she would
experience no reduction in retiree health benefits. This
discrepancy could result in a substantial increase in the
annuitant's out-of-pocket costs for health care in retirement.
According to the author, "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."
Supporter state, "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.
Additionally, the previous employer experiences a cost-savings
as the retirement allowance and related benefits for that
retiree cease when the retiree returns to full time employment
and any obligation to pay a health care contribution is
suspended until that employee subsequently re-retires."
Supporters conclude, "AB 410 has been crafted to discourage
'double dipping' (i.e. a practice where an employee is
collecting a retirement allowance and a paycheck) by only
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applying to a retiree who reinstates to active employment
causing the retirement allowance to cease."
This bill is similar to SB 695 (Wiggins) of 2008 which would
have allowed an annuitant who, after reinstatement to active
employment, subsequently retires to enroll as an annuitant of
the employer from which he or she first retired, unless the
annuitant is entitled to a higher contribution from the employer
from which he or she subsequently retires. This bill was held
in the Senate Appropriations Committee.
This bill is also similar to AB 2132 (Levine) of 2006 which
would have allowed an annuitant who, after reinstatement to
active employment, subsequently retires to enroll as an
annuitant of the employer from which he or she first retired,
unless the annuitant is entitled to a higher contribution from
the employer from which he or she subsequently retires. This
bill was vetoed by the Governor. In his veto message, Governor
Schwarzenegger stated, in part, that while the bill is intended
to eliminate disincentives for retirees to return to work and
encourage experienced public employees to return to public
service, it is premature given recent changes in the
Governmental Accounting Standard Board rules that require both
state and local governments to undertake an actuarial assessment
of their unfunded retiree health benefits and that until that
information is available, this bill is premature.
Finally, this bill is also similar to AB 1611 (Levine) of 2003
which would have allowed an annuitant who, after reinstatement
to active employment, subsequently retires to enroll in PEMHCA
as an annuitant of the employer from which he or she first
retired, unless the annuitant is entitled to a greater
contribution from the employer from which he or she subsequently
retires. This bill was held in the Assembly Appropriations
Committee.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN:
0002105
AB 410
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