BILL ANALYSIS Ó
AB 507
Page 1
Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 507 (Garcia) - As Introduced: February 20, 2013
SUBJECT : Public employees' retirement: postretirement death
benefits.
SUMMARY : Increases, over a period of four years, the
postretirement death benefit paid to the beneficiary of a school
member of the California Public Employees' Retirement System
(CalPERS) from $2,000 to $6,000. Specifically, this bill :
1)Increases the postretirement death benefit for school members
as follows:
a) $4,000, or $5,000 if specified by the employer in its
contract, for deaths occurring from January 1, 2014, to
December 31, 2014;
b) $4,500, or $5,000 if specified by the employer in its
contract, for deaths occurring from January 1, 2015, to
December 31, 2015;
c) $5,000 for deaths occurring from January 1, 2016, to
December 31, 2016;
d) $5,500 for deaths occurring from January 1, 2017, to
December 31, 2017; and,
e) $6,000 for deaths occurring from January 1, 20187, to
March 31, 2018.
f) For deaths occurring on or after April 1, 2018, the
amount will be adjusted annually by CalPERS in the same
manner as retiree cost-of-living adjustment (COLA)
payments.
EXISTING LAW : The California Public Employees' Retirement Law
provides varying levels of death benefits according to
membership category and status, each providing a "lump-sum" of
money to survivors at the time of the member's death. The
original lump-sum death benefit of $300 for all retired CalPERS
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members was enacted in 1945. However, over the years, the
Legislature began to provide different benefit levels to
different categories of members: state, school, local, Judges'
Retirement Systems (JRS and JRS II), Legislators' Retirement
System (LRS), active, and retired.
Currently, state and school members have a retiree death benefit
of $2,000. School employers also have the ability to amend
their individual contracts with CalPERS to provide enhanced
retiree death benefits of $3,000, $4,000 or $5,000. Local
members have a minimum benefit of $500, with an option to
provide up to $5,000 through contract amendment. Members of JRS
have no retiree burial benefit, while members of LRS receive
$600.
The California State Teachers' Retirement System currently
provides a lump sum death payment for survivors of retired
members of $6,163. The amount of the death payment may be
adjusted by the Teachers' Retirement Board following each
actuarial valuation based on changes to the All Urban California
Consumer Price Index.
CalPERS benefits paid to retired school members can change from
year to year based on whether an annual COLA is paid. The COLA
allowance paid each May is limited to the lesser of two
compounded numbers - the rate of inflation as measured by the
All Urban Consumer Price Index, U.S. City (Annual) Average, from
the member's retirement date, or 2% of the member's initial
retirement allowance, compounded annually.
To determine the applicable COLA percentage to apply against the
base, CalPERS compares the actual rate of inflation to the 2%
adjustment each year, compounds each number, and then keeps a
running total each year. It is the lesser of the two figures
that is applied to the member's initial retirement allowance, or
"base allowance." According to CalPERS, under AB 2606, the
retired school member lump-sum death benefit would be adjusted
annually using a "base allowance" amount of $6,000 and a
"retirement date" of March 31, 2017.
FISCAL EFFECT : Unknown.
COMMENTS : According to the 2010 funeral price survey by the
National Funeral Directors Association, the average funeral cost
for an adult funeral is $7,775.00. This is based on the most
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commonly selected items for a traditional funeral including a
casket and vault. However, it does not include cemetery costs.
Therefore, even when combined with the Social Security lump-sum
death benefit of $255, the current CalPERS school retiree
lump-sum death benefit does not appear sufficient to pay for a
basic funeral and burial.
According to the author, "School members of CalPERS should be
provided a death benefit that would fully offset the costs
associated with a funeral. Survivors of classified school
members of CalPERS bear the same funeral costs as other public
servants and, as such, should receive an equitable benefit to
other public employees. This bill would help remedy the
existing benefit inequity by providing classified staff a more
comparable benefit to the one provided to other educators."
AB 2606 (Mendoza) from last year would have increased, over a
period of four years, the postretirement death benefit paid to
the beneficiary of a school member of CalPERS from $2,000 to
$6,000. This bill was held in the Assembly Appropriations
Committee.
AB 617 (Davis) of 2011 would have increased the postretirement
death benefit paid to the beneficiary of a school member of
CalPERS from $2,000 to $6,163. This bill was not heard in the
Assembly PER&SS Committee at the request of the author.
SB 1209 (Romero) of 2010 would have increased the postretirement
death benefit paid to the beneficiary of a CalPERS school member
from $2,000 to $5,000 incrementally over a period of three years
with cost of living adjustments (COLA) annually thereafter.
This bill failed passage in the Senate Public Employment and
Retirement Committee.
AB 1477 (Krekorian) of 2009, would have increased the
postretirement death benefit paid to the beneficiary of a
CalPERS school member from $2,000 to $6,163. This bill was held
in the Assembly Appropriations Committee.
AB 844 (Negrete McLeod) of 2005 would have increased the
postretirement death benefit for state members of CalPERS who
retired on or before July 1, 2006 from $2,000 to $5,000. This
bill was held in the Assembly Appropriations Committee.
AB 2688 (Alquist) of 2002, would have increased the various
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death benefits paid to all members and retirees in the
retirement systems administered by CalPERS to $7,500. This bill
was held in the Assembly Appropriations Committee.
AB 1162 (Alquist) of 2001, would have increased from $2,000 to
$5,000 the lump sum death benefit available to retired CalPERS
state and school members who retired on or before July 3, 2002,
and whose death occurred on or after January 1, 2001. This bill
was held in the Assembly Appropriations Committee.
AB 50 (Migden), Chapter 947, Statutes of 2000, raised the death
benefit for retired school members from $600 to $2,000.
AB 1829 (Correa) of 2000, would have increased the death benefit
for both state and school members who retired prior to July 3,
2001 to $5,000. This bill was held in the Assembly
Appropriations Committee.
AB 1640 (Migden), Chapter 296, Statutes of 1998, authorized
school employers and contracting agencies the option to amend
their contract to provide a $2,000, $3,000, $4,000, or $5,000
lump sum retired member death benefit.
REGISTERED SUPPORT / OPPOSITION :
Support
California Federation of Teachers (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957