BILL ANALYSIS Ó SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1144 Jim Beall, Chair HEARING DATE: June 10, 2013 AB 1144 (Hall) as amended 4/29/13 FISCAL: YES PUBLIC EMPLOYEES: POST-RETIREMENT HEALTH BENEFITS HISTORY : Sponsor: City of Carson Other legislation:AB 1346 (Pan) 2013, Currently in Senate PE&R Committee AB 2510 (Fletcher), Chapter 600, Statutes of 2010 ASSEMBLY VOTES : PER & SS 5-2 4/24/13 Appropriations 12-5 5/08/13 Assembly Floor 51-19 5/16/13 SUMMARY : AB 1144 would require the City of Carson, upon a conforming MOU with the exclusive representatives of city employees, to use an alternative vesting schedule than what is currently available in statute for providing its employees post-retirement health benefits under the Public Employees' Medical and Hospital Care Act (PEMHCA). Under the proposed schedule, an employee would have to work 5 years to get post-retirement benefits with a 50% employer contribution toward the premium. The schedule would increase by 10% annually so that an employee who had worked for the city for 10 years would receive 100% of the employer contribution. BACKGROUND AND ANALYSIS : 1) Existing law : a) establishes the Public Employees' Medical and Hospital Care Act (PEMHCA), administered by the California Public Glenn A. Miles Date: May 31, 2013 Page 1 Employees' Retirement System (CalPERS), to provide health coverage for employees and annuitants of the State and the California State University. b) allows a school or local agency employer to contract with CalPERS for PEMHCA and requires the employee or annuitant contribution, when added to the employer contribution, to cover the total cost of the PEMHCA coverage premium. c) defines an annuitant as one who, among other requirements, retires from the system within 120 days of separation from public employment. d) does not allow contracting employers to provide PEMHCA coverage to active employees without also covering retired annuitants. However, with respect to the employer contribution for annuitants, provides specified options available to the contracting agency, including: i. an equal employer contribution amount for both active employees and 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; or ii. for a contracting agency that joins PEMHCA on or after January 1, 1986, 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 as specified; or iii. a pre-set "vesting schedule" based on an employee's credited years of service to determine a set percentage of the employer contribution amount for annuitants. Under this option, an annuitant would have at least 10 years of CalPERS credited service to qualify for 50% of the employer contribution and would need 20 years, all with the employer providing PEMHCA, to become eligible for 100% of the employer Glenn A. Miles Date: May 31, 2013 Page 2 contribution. At least 5 years must be with the employer providing PEMHCA. iv. allows under the 10-20 year vesting schedule, an employer contribution of 100% if the annuitant retired for disability or if the annuitant had 20 years of service, regardless of the length of separation from service prior to retirement. e) provides specified and individual variations to the above options and requirements under separate statutes specific to the City of San Diego, school employers, Alameda County Transportation Improvement Authority, and Mariposa County. These statutes are subject to collective bargaining agreements. 2) This bill : a) requires the City of Carson, upon a conforming MOU with its employees' exclusive representative, to use an alternative vesting schedule than what is currently available in statute for providing its employees post-retirement health benefits under PEMHCA. b) provides that a City of Carson annuitant would have to be credited with 5 years of service with the city to receive an employer contribution for post-retirement health care benefits equal to 50% of the employer contribution provided to active employees. The percentage of the employer contribution would increase 10 % annually until reaching 100% for annuitants who have 10 years of credited service. c) requires the employer contribution to be agreed upon through collective bargaining, permits the city to adjust the employer contribution from time to time through an MOU that has been collectively bargained, and requires that such changes also be ratified by a resolution passed by the city council. d) with respect to employees who are not represented by a bargaining unit, requires the City of Carson to certify to CalPERS that there is not an applicable MOU. Glenn A. Miles Date: May 31, 2013 Page 3 e) defines credited service as credited service performed with the City of Carson. f) requires the city to provide to CalPERS any information as determined by CalPERS as necessary to implement the provisions of AB 1144. g) specifies that the proposed vesting schedule does not apply to any employee who retirees before the effective date of the MOU, or in the case where an MOU is retroactive, before the MOU is signed. FISCAL : According to the Assembly Appropriations Committee, AB 1144 would result in minor and absorbable costs for CalPERS. COMMENTS : 1) Argument in Support : According to the sponsor, the City of Carson does not currently have a vesting schedule (i.e., annuitants currently get 100% of the employer contribution toward post-retirement PEMHCA if they have 5 years of CalPERS credited service). The City of Carson and its employees' representative have collectively bargained to implement a vesting schedule that would require annuitants to have at least 10 years of credited service with the city to get 100% of the employer contribution. However, "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." 2) SUPPORT : City of Carson, Sponsor American Federation of State, County and Municipal Employees (AFSCME), Local 809 City of Carson Association of Confidential Employees (ACE) City of Carson Association of Management Employees (AME) City of Carson Professional and Supervisors Association Glenn A. Miles Date: May 31, 2013 Page 4 3) OPPOSITION : None to date ##### Glenn A. Miles Date: May 31, 2013 Page 5