BILL ANALYSIS �
AB 1346
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1346 (Pan) - As Amended: April 25, 2013
Policy Committee: PERSSVote:5-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows the Sacramento Metropolitan Fire District
flexibility from existing Public Employees' Medical and Hospital
Care Act (PEMHCA) requirements. Specifically, this bill:
1)Provides a schedule for specified employer contributions for
postretirement health benefits for an employee of the district
based on the employee's completed years of credited service.
2)Specifies the employer contribution shall be mutually agreed
upon through collective bargaining by the Sacramento
Metropolitan Fire District and the exclusive representatives
of district employees.
FISCAL EFFECT
Minor and absorbable costs to the California Public Employees'
Retirement System (CalPERS).
COMMENTS
1)Purpose . According to the sponsor, the California
Professional Firefighters, PEMHCA contracting agencies have
only one alternative vesting schedule available. The sponsor
states AB 1346 adds an additional alternative vesting schedule
to PEMHCA, which reflects the terms of the collective
bargaining agreement between the Sacramento Metropolitan Fire
District (SMFD) and Sacramento Area Firefighters, Local 522
with respect to employer-provided retiree healthcare
contributions. A few PEMHCA contracting agencies have
bargained with their employee groups and, through previously
enacted legislation, have statutorily imposed alternative
AB 1346
Page 2
vesting schedules. The sponsor argues the vesting schedule
proposed by AB 1346 strikes the appropriate balance between
cost savings for SMFD and the assurance and security of a
vested retiree health care contribution for the firefighters
of SMFD.
2)CalPERS view . According to CalPERS, in January 2012 the Board
approved a list of strategies and initiatives for providing
health benefits, which included providing regulatory
flexibility for public agencies. CalPERS states providing
contracting agencies and their employees the ability to agree
to a health vesting schedule through collective bargaining is
consistent with the Board's direction. CalPERS does not have
an official position on this bill.
3)Background . Vesting is the amount of time of 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.
4)PEMHCA . The Public Employees Medical and Hospital Care Act
(PEMHCA) is a health plan administered by the California
Public Employees Retirement System (PERS) that provides health
benefits for all active and retired state employees. Local
governmental entities such as cities, counties, school
districts and special districts can also opt to participate in
PEMHCA. Upon choosing to provide health benefits under PEMHCA
for their employees and retirees, participating local
governmental entities enter into a contract with the PERS
Board of Administration. These contracting agencies then pay
the health benefit premiums to PERS in the manner specified in
PEMHCA.
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
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.
AB 1346
Page 3
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.
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.
There are already exceptions in existing law for the County of
Mariposa and the City of San Diego.
5)Related legislation . AB 1144 (Hall) creates a specific
vesting schedule and employer contribution amount for
annuitant health care premiums for the City of Carson.
6)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081