BILL ANALYSIS Ó AB 1346 Page 1 ASSEMBLY THIRD READING AB 1346 (Pan) As Amended April 25, 2013 Majority vote PUBLIC EMPLOYEES 5-2 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Bonta, Jones-Sawyer, |Ayes:|Gatto, Bocanegra, | | |Mullin, Rendon, | |Bradford, | | |Wieckowski | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Hall, | | | | |Ammiano, Pan, Quirk, | | | | |Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Allen, Harkey |Nays:|Harkey, Bigelow, | | | | |Donnelly, Linder, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Creates a specific vesting schedule and employer contribution amount for annuitant health care premiums for the Sacramento Metropolitan Fire District (SMFD), as specified. Specifically, this bill : 1)Requires SMFD to pay 25% of the employer contribution after five years of credited service and increases the employer contribution by 5% each year until the employer contribution reaches 100% after 20 years of credited service. 2)Requires the employer contribution to be determined pursuant to a memorandum of understanding (MOU) that is not subject to impasse procedures. 3)Allows all of the employees' years of credited service to be used to determine the employer contribution but requires that at least five years of service must have been with the SMFD. 4)Requires SMFD to provide the California Public Employees' Retirement System (CalPERS) with notification of the MOU and any additional information requested by CalPERS. 5)Specifies that the new vesting schedule applies to employees who retire for service on or after the effective date of the AB 1346 Page 2 MOU. 6)Specifies that employees who retire for disability or who retire for service with 20 or more years of service with SMFD regardless of the number of days between separation from employment and retirement will receive 100% of the employer contribution. EXISTING LAW : 1)Establishes the Public Employees' Medical and Hospital Care Act (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 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. AB 1346 Page 3 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 10 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 determined by an MOU which is mutually agreed upon through collective bargaining. FISCAL EFFECT : According to the Assembly Appropriations Committee, this bill would result in minor and absorbable costs to CalPERS. COMMENTS : According to the sponsor, the California Professional Firefighters, "For PEMHCA contracting agencies, only one alternative "optional" vesting schedule is available and is contained in Section 22893 of the Government Code. Some PEMHCA contracting agencies, like the City of San Diego, the County of Mariposa, and the Alameda County Transportation Improvement Authority, have bargained with their employee groups and, through previously enacted legislation, have statutorily imposed alternative vesting schedules that are consistent with their respective collective bargaining agreements. "As amended, 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. This bill applies only to the Sacramento Metropolitan Fire District. AB 1346 Page 4 "The vesting schedule proposed by AB 1346 strikes the appropriate balance between much needed cost savings for SMFD and the assurance and security of a vested retiree health care contribution for the firefighters of SMFD. "Specifically, for firefighters who retire from SMFD on or after the effective date of the collectively bargained memorandum of understanding (MOU), which establishes the retiree healthcare contribution amount, they will be vested in an employer-provided post-retirement health care contribution based on a revised formula in which the obligation of the employer to provide that contribution starts with 25% of the amount agreed to in the MOU at five years of service and reaches 100% of the specified amount if the retiree attained 20 years of credited service. AB 1364 exempts from the vesting requirement those annuitants who have retired for industrial disability or who have a normal service retirement with 20 or more years of service with SMFD. In those limited instances, 100% of the specified amount would be extended in those cases." Supporters conclude, "The provisions of AB 1346 exemplify how, in difficult economic times, employers and employees can work together at the bargaining table to achieve compromises. This bill appropriately protects those firefighters who have faithfully delivered life and property saving services to their communities, while at the same time, provides much needed cost savings to the employer and subsequently the taxpayers who fund those services." Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957 FN: 0000442