BILL ANALYSIS Ó
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
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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
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(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
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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.
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