BILL ANALYSIS �
AB 1144
Page 1
Date of Hearing: April 24, 2013
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 1144 (Hall) - As Amended: April 15, 2013
SUBJECT : Public Employees' Medical and Hospital Care Act:
contracting agencies.
SUMMARY : Allows a contracting agency that elects to
participate in the Public Employees' Medical and Hospital Care
Act (PEMHCA) to provide an employer contribution for
postretirement health coverage that is determined by the amount
of credited years of service an employee worked for the agency,
as specified. Specifically, this bill :
1)Allows a contracting agency to provide an employer
contribution for postretirement health coverage that is
determined by the amount of credited years of service an
employee worked for the agency.
2)Applies to represented employees only if adopted through
collective bargaining in a memorandum of understanding (MOU)
that is not subject to impasse procedures.
3)Applies to unrepresented employees upon notification by the
contracting agency in a manner prescribed by the California
Public Employees' Retirement System (CalPERS).
4)Prohibits any employer contribution for an employee with less
than five years of service with the contracting agency.
5)Prohibits any change in benefits for existing retirees from
occurring through an MOU.
EXISTING LAW :
1)Establishes PEMHCA under the administration of CalPERS. If a
contracting agency elects to cover their employees for health
care under PEMHCA, they have the following options to choose
from in determining contribution amount for annuitants:
a) A contracting agency could opt to make the employer
contribution amount equal for both active employees and
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annuitants. Under this option, an employee who retires and
meets the definition of annuitant becomes 100% vested and
receives an employer contribution amount equal to what the
active employees receive.
b) A contracting agency that joins PEMHCA on or after
January 1, 1986, has the option to pay a lesser employer
contribution amount for annuitants than for active
employees as long as the agency increases its contribution
for annuitants each year until it equals the agency's
contributions for active employees. Based on the formula,
it may take 20 years for the lesser contribution amount to
equal the active employee contribution amount. Under this
option, an employee who retires and meets the definition of
annuitant becomes 100% vested and receives an employer
contribution amount equal to the lesser contribution
amount.
c) A contracting agency has the option to establish a
pre-set "vesting schedule" of specific percentages based on
an employee's credited years of service to determine the
employer contribution amount for annuitants. Under this
option, an employee would have to work at least 10 years to
qualify for an employee contribution and would have to work
20 years to become 100% vested.
2)Permits Mariposa County to provide a higher employer
contribution for health benefits for its retirees than for its
active employees. This must be executed through an MOU or by a
resolution adopted by a majority of its County Board of
Supervisors.
3)Permits the City of San Diego to contribute to postretirement
health care coverage for the San Diego Police Officers
Association members, and also for unclassified or
unrepresented employees with at least ten years credited
service. The employer contribution amount is subject to an
MOU, and applies only to those employees retiring on or after
the effective date of the MOU. In addition, the City of San
Diego is permitted to establish different vesting schedules
for employees in the same category with similar job duties,
notwithstanding other provisions of PEMHCA.
4)Permits school employers to base the contracting agency's
postretirement health benefit on credited years of service as
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determined by an MOU which is mutually agreed upon through
collective bargaining.
FISCAL EFFECT : Unknown.
COMMENTS : Vesting is the amount of time in employment needed
to be eligible to receive employer contributions towards the
cost of retirees' monthly health premiums. The vesting
requirements for employer-paid retiree health benefits are
different for CalPERS' State, California State University,
judicial, public agency, and school members.
According to the author, "The City of Carson does not have a
vesting schedule for their post-retirement medical program. The
vesting schedule agreed upon through the collective bargaining
process between the City and their respective bargaining units
adopted a post-retirement local service vesting schedule of 10
years, decreasing the pre-set schedule of vesting schedule
requirement from 20 years of service to 10 years. This vesting
schedule is not currently authorized by law and would require
legislative action to authorize an exemption from the pre-set
vesting schedule currently in statute."
According to CalPERS, "In January 2012, following a yearlong
Health Benefits Purchasing Review Project CalPERS staff
presented and the Board approved a list of strategies and
initiatives which included providing regulatory flexibility for
public agencies. Providing contracting agencies and their
employees the ability to agree to a health vesting schedule
through collective bargaining is consistent with that
initiative. And although CalPERS does not have an official
position on this bill, from an administrative standpoint it
would recommend a statute that is flexible enough that other
contracting agencies could be added to it at a later date rather
than each contracting agency having an individual statute."
The Committee recommends that the bill be amended to apply these
new vesting provisions only to the City of Carson.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Carson (Sponsor)
American Federation of State, County and Municipal Employees
AB 1144
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Local 809
California State Association of Counties
Opposition
California School Employees Association (unless amended)
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957