BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1346
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          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
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            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
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          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.








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          "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 


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