BILL ANALYSIS Ó
AB 507
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 507 (Garcia) - As Introduced: February 20, 2013
Policy Committee: PERSSVote:4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases, beginning January 1, 2014, the existing
$2,000 post retirement death benefit paid to the beneficiary of
a school member of the California Public Employees' Retirement
System (CalPERS). Each successive year the amount is increased
until the benefit reaches $6,000 on January 1, 2018. Beginning
April 1, 2018, the death benefit is increased in the same manner
as retiree cost-of-living adjustments.
FISCAL EFFECT
The increase in the death benefit would result in an immediate
increase in accrued liability for CalPERS. In keeping with
their policy, CalPERS would adjust the rates for schools after
the benefit goes into effect and after their fiscal year review
in mid-2014. At that time, CalPERS estimates the accrued
liability for the schools pool at almost $750 million.
The CalPERS policy is to amortize the liability over a 20-year
period. As such, school contributions would increase by an
estimated $61 million in 2014-2015 growing to $107 million in
2034-2035.
COMMENTS
1)Purpose . According to the author, school members of CalPERS
should be provided a death benefit that fully offsets the
costs associated with a funeral. The author notes survivors
of classified school members of CalPERS bear the same funeral
costs as other public servants and should receive a benefit
that is equitable.
AB 507
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2)Background . 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.
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 the Judges' Retirement Systems have no retiree burial
benefit, while members of Legislators' Retirement System
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 in California's consumer
price index.
3)Funeral costs . According to the 2010 funeral price survey by
the National Funeral Directors Association, the average cost
for an adult funeral is $7,775. It does not include cemetery
costs.
4)Previous legislation. Following are the most recent bills on
this issue:
a) AB 2606, Mendoza, of 2012, was virtually identical to
this bill. This bill was held in this committee.
b) AB 617 (Davis), 2010, increased the post retirement
death benefit paid to the beneficiary of a school member of
CalPERS from $2,000 to $6,163. At the request of the
author, this bill was not heard in the Assembly PERSS
Committee.
c) SB 1209 (Romero), 2010, increased the post retirement
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.
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d) AB 1477 (Krekorian), 2009, increased the post retirement
death benefit paid to the beneficiary of a CalPERS school
member from $2,000 to $6,163. This bill was held in this
committee.
e) AB 844 (Negrete McLeod), 2005, increased the post
retirement 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 this committee.
5)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081