BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1163
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          Date of Hearing:   January 8, 2014

            ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL  
                                      SECURITY
                                  Rob Bonta, Chair
                   AB 1163 (Levine) - As Amended:  January 6, 2014
           
          SUBJECT  :   Public Employees' Retirement System: Board of  
          Administration: education.

           SUMMARY  :   Requires the Board of Administration (Board) of the  
          California Public Employees' Retirement System (CalPERS) to  
          adopt a policy for providing board member education, as  
          specified.  Specifically,  this bill  :  

          1)Requires the Board to establish a policy for providing  
            education for board members.

          2)Requires the policy to include, at a minimum, the following:

             a)   Appropriate topics for education;

             b)   A process for determining whether or not a program,  
               training, or educational session qualifies as board member  
               education;

             c)   A minimum requirement of 24 hours of education within  
               the first two years of becoming a board member and for  
               every subsequent two year period the person remains on the  
               board; and,

             d)   Maintaining a record of board member compliance with the  
               policy and to post the policy, along with information on  
               board member compliance, on the retirement system's  
               Internet Web site.

           EXISTING LAW  :

          1)Establishes CalPERS and designates the Board of Administration  
            with responsibility for the management and control of CalPERS,  
            including the exclusive control of the administration and  
            investment of the retirement fund.  Administration and  
            investment responsibility of the Board also includes the  
            California Employers' Retiree Benefit Trust, Legislators'  
            Retirement System, the Judges' Retirement System, the Judges'  








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            Retirement System II, the 457 Deferred Compensation Program,  
            and the Long-Term Care Program.  In addition, the Board  
            administers the Public Employees' Medical and Hospital Care  
            Act and the state's contract with the federal government for  
            Social Security.

          2)Establishes the composition of the Board which consists of 13  
            members who are elected, appointed, or hold office ex officio  
            as follows: 

             a)   Six elected members:

               i)     Two elected by and from all CalPERS members;
               ii)    One elected by and from all active State members;
               iii)   One elected by and from all active CalPERS school  
                 members;
               iv)    One elected by and from all active CalPERS public  
                 agency members (employed by contracting public agencies);  
                 and,
               v)     One elected by and from the retired members of  
                 CalPERS.

             b)   Three appointed members:

               i)     Two appointed by the Governor - an elected official  
                 of a local government and an official of a life insurer;  
                 and,
               ii)    One public representative appointed jointly by the  
                 Speaker of the Assembly and the Senate Rules Committee.

             c)   Four ex officio members:

               i)     The State Treasurer;
               ii)    The State Controller;
               iii)   The Director of the California Department of Human  
                 Resources; and,
               iv)    A designee of the State Personnel Board.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "In October of 2011,  
          Governor Brown proposed a twelve-point pension reform plan.   
          This plan included changing the composition of the CalPERS  
          Board.  Ultimately much of the reform plan was adopted in the  
          form of AB 340 (Furutani 2012, known as the Public Employees'  








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          Pension Reform Act PEPRA), but board composition was not  
          changed.  The stated purpose of reforming board composition was  
          to bring financial sophistication to the board. This bill would  
          achieve that goal while maintaining the existing board  
          structure."

          The author concludes, "AB 1163 would build upon both PEPRA and  
          board policy in a way that will codify the commitment to  
          increase the financial expertise on the board while bringing  
          greater information about board member financial training to the  
          public." 

          According to CalPERS, the Board is "?committed to continuous  
          learning and adaptation to changing conditions, and its members  
          currently engage in training associated with their fiduciary,  
          investment, actuarial and other responsibilities through  
          participation in internal workshops and industry conferences.   
          The Board also conducts a regular assessment of its performance  
          and capabilities, identifies the skills and capabilities  
          required to fulfill its fiduciary roles and responsibilities,  
          and maintains an inventory of existing trustee skills and  
          capabilities, as well as strengths, weaknesses, gaps and  
          priority development needs.
           
          "The Board recognizes the ability of continuous learning to  
          enhance its oversight and control of the numerous health and  
          retirement benefit programs it administers.  That is why it is  
          currently developing a Board Education Policy to provide current  
          and future Board members additional opportunities to improve  
          their knowledge and abilities through a formal education  
          program." 
           
          CalPERS concludes, "The Board recently adopted a set of Key  
          Competencies, in order to provide a foundational element for an  
          official Board Education Policy.  They specify more than 20  
          criteria in the areas of board governance, health care, pension  
          plans, financial markets and communication, and include such  
          things as understanding financial statements, balance sheets,  
          economic principles and actuarial methodologies.  These  
          competencies will be part of the existing CalPERS Board  
          Governance Policy and will be used to develop future training  
          and educational opportunities for Board members.  As part of  
          this process, the Board's Governance Committee has reviewed best  
          practices in board member education conducted by other public  
          pension systems, and will be presented with a draft Board  








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          Education Policy at its February meeting."

          This bill is similar to AB 1519 (Wieckowski), Chapter 15,  
          Statutes of 2012, which requires the boards of retirement or  
          investments for the 20 retirement systems established pursuant  
          to the County Employees' Retirement Law of 1937 to adopt a  
          policy for providing board member education, as specified.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Professional Firefighters

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)  
          319-3957