BILL ANALYSIS                                                                                                                                                                                                    






          SENATE PUBLIC EMPLOYMENT & RETIREMENT    BILL NO:  AB 837
          Norma Torres, Chair           HEARING DATE:  June 9, 2014
          AB 837 (Wieckowski)    as amended   9/06/13  FISCAL:  YES

           PUBLIC EMPLOYEES' PENSION REFORM ACT OF 2013:  EXEMPTION FOR  
          SPECIFIED JUDGES
           
           HISTORY  :

            Sponsor:  California Judges Association (CJA)

            Other legislation:  AB 340 (Furutani),
                           Chapter 296, Statutes of 2012


           ASSEMBLY VOTES  :

           Not relevant - new bill with, September 6, 2013, amendments
          
          SUMMARY  :

          AB 837 would exempt certain judges who were elected in 2012,  
          but who did not take office until 2013, from the requirement  
          in the Public Employees' Pension Reform Act of 2013 (PEPRA)  
          to make employee contributions equal to one half of the  
          normal cost of the retirement benefit plan.

           BACKGROUND AND ANALYSIS  :
          
           1)Existing law  :

             a)   establishes the Judges Retirement System II (JRSII),  
               which is administered by the board of the California  
               Public Employees' Retirement System (CalPERS).

             b)   provides a JRSII retirement formula equal to 3.75% of  
               the judge's final compensation for each year of service;  
               however, in order to receive this benefit, the judge  
               must be either age 70 or older with at least 5 years of  
               service, or be age 65 or older with at least 20 years of  
               service.

             c)   provides that the final compensation period shall be  
          Pamela Schneider
          Date:  May 29, 2014                                     Page  
          1









               the highest 12 months and limits the final benefit  
               amount to no more than 75% of final compensation.

             d)   requires that a judge accrue monetary credits equal  
               to 18% of compensation.  These monetary credits accrue  
               to the judge's individual account; in addition, interest  
               is paid to the account equal to the net earnings  
               achieved by the JRSII fund during the prior fiscal year  
               (this credited interest amount cannot be less than  
               zero).  So for example, if the JRSII earns a net of 7%  
               in investment returns in a fiscal year, the judges'  
               monetary credit accounts increase by 7% in the following  
               fiscal year; if the fund loses 7%, the judges receive no  
               interest payments in the following year.

             e)   requires that a judge who is not eligible for the  
               retirement benefit earned at age 65 or 70 based on 3.75%  
               per year shall instead receive the monetary credits in  
               either a lump sum or an annuity.

             f)   requires a judge who is not subject to PEPRA to pay  
               8% of compensation as member contributions.

             g)   establishes PEPRA, which provides a statewide benefit  
               plan for public employees who first become members of  
               public retirement systems on or after January 1, 2013.

             h)   allows, in PEPRA, a legacy employee (i.e., a public  
               employee who first became a member of a public  
               retirement system prior to 2013) to move between public  
               employers or retirement systems, as specified, and be  
               "grandfathered" under the plans that existed on December  
               31, 2012, prior to implementation of PEPRA.

             i)   requires the following of all new public employees  
               subject to PEPRA:

               i)     for non-safety employees, a benefit based on 2%  
                 of final compensation at age 62, increasing to 2.5% at  
                 age 67;
            ii)    a final compensation period of 3 years;
            iii)   a limit on the compensation that can count toward a  
                 pension, established as the Social Security wage base  
          Pamela Schneider
          Date:  May 29, 2014                                     Page  
          2









                 (approximately $113,000 in 2013) with annual increases  
                 to the limit based on increases to the Consumer Price  
                 Index, as specified; and
            iv)    the requirement that all employees subject to PEPRA  
                 pay one half of the normal cost of their retirement  
                 benefits as member contributions.

             a)   exempts, in PEPRA, new members in JRSII from the  
               requirements of PEPRA  except  for the requirement to pay  
               one half of the normal cost of their retirement benefits  
               as member contributions.  For JRSII members, this is  
               currently 15%.

           1)This bill  would exempt from PEPRA judges who were elected  
            in 2012, but who did not take office until 2013, and thus  
            became new members of JRSII on or after that date.  
           
           FISCAL  :

          Unknown.

           COMMENTS  :

           1)Background
           
          According to the author, seven judges were elected in 2012  
          who did not take office until 2013.  These seven judges came  
          out of private practice, and are therefore subject to PEPRA  
          because they are new public employees and new members of  
          JRSII.

          Other judges elected in 2013 were former public employees,  
          such as district attorneys and county councils, and those  
          former public employees were grandfathered under the PEPRA  
          rules that allow public employees to move between public  
          employers and retirement systems without the loss of their  
          status as legacy employees.

          PEPRA exempted judges in JRSII from all reforms with one  
          exception; it requires that new members of the system pay one  
          half of the normal cost of their benefits-the same as was  
          required of all employees subject to PEPRA.  At this time the  
          normal cost of the JRSII plan is slightly over 30%, and new  
          Pamela Schneider
          Date:  May 29, 2014                                     Page  
          3









          judges subject to PEPRA are currently paying 15% as member  
          contributions.

          2)Arguments in Support  :  

           According to the sponsor:

               AB 837 is designed to insure that judges elected to  
               office during 2012 are subject to retirement provisions  
               in effect at the time of their election.  By our count,  
               the bill applies to seven judges.  These are individuals  
               who came from private legal positions and were elected  
               in 2012.  Most were elected in June, but a small number  
               were elected in November run-off elections.  They were  
               not able to assume office until early in January, 2013,  
               because the seats they were filling were not yet vacant.

               We believe that simple fairness suggests that these  
               judges should be subject to the retirement law in effect  
               when they were elected to office.  
                
           3)SUPPORT  :

            California Judges Association (CJA), Sponsor
            

           4)OPPOSITION  :

            None.





                                      #####
          





          Pamela Schneider
          Date:  May 29, 2014                                     Page  
          4