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  
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          Date:  May 31, 2013                                     Page  
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              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  
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                 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.
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          Date:  May 31, 2013                                     Page  
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            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
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          3)   OPPOSITION  :

            None to date



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          Date:  May 31, 2013                                     Page  
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