BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 1346 (Pan) - Postemployment Health Benefits
Amended: April 25, 2013 Policy Vote: PE&R 3-1
Urgency: No Mandate: No
Hearing Date: June 24, 2013
Consultant: Maureen Ortiz
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 1346 authorizes the Sacramento Metropolitan
Fire District (SMFD) to contract with CalPERS for health
benefits for a retiree health care vesting schedule that is not
currently available. This new option will be subject to a
memorandum of understanding between the SMFD and the affected
employees' exclusive representative.
Fiscal Impact:
Unknown potential savings in health care benefits (Local
Fund)
Minor, absorbable administrative costs to CalPERS (Special
Fund)
Background: The Public Employees' Medical and Hospital Care Act
(PEMHCA) is administered by CalPERS and provides health coverage
for employees and annuitants of the state and the California
State University. PEMHCA is also available to schools and local
agencies that opt to contract for the coverage.
Existing law does not allow contracting employers to provide
PEMHCA coverage to active employees without also covering
retired annuitants. However, there are several options
available as to the employer contribution rates for employees
and annuitants. In addition, over the years separate statutes
have been enacted that provide variations of those options for
the City of San Diego, school employers, Alameda County
Transportation Improvement Authority, and Mariposa County. All
of these variations were subject to collective bargaining.
Proposed Law: AB 1346 creates a new post-retirement benefit
AB 1346 (Pan)
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option that requires SMFD to pay 25% of the employer
contribution for an annuitant 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. The bill allows all of the employees' years
of credited CalPERS service to be used to determine the employer
contribution but requires that at least five years of service
must have been with the SMFD. Under current law, it is possible
that an employee who worked for a reciprocal CalPERS agency for
more than 5 years, and then became employed by SMFD, could
qualify for lifetime health benefits from the district after
only 1 day of service.
The new vesting schedule will apply to employees who retire for
service on or after the effective date of the MOU.
Additionally, 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.
In addition, AB 1346 does the following:
a) Requires SMFD to provide a notification of the agreement
and any other additional necessary information to the CalPERS
board.
b) Requires SMFD to certify to the CalPERS board, in the case
of employees not represented by a bargaining unit, that there is
not an applicable memorandum of understanding.
c) Provides that the contribution will be 100% for any
annuitant of the SMFD who retired for disability.
Related Legislation: AB 1144 (Hall), currently pending before
this committee, creates an alternative vesting schedule and
employer contribution rate for annuitants of the City of Carson.
Staff Comments: SMFD currently contracts for the existing
vesting schedule contained in the PEMHCA which provides a 50%
employer contribution after the employee performs ten years of
CalPERS-covered service, increasing to 100% after twenty years
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of service.
In 2011, SMFD negotiated with its firefighters union a package
of cost-saving concessions that addressed both pension and
health benefits. A key part of that package would require
firefighters hired after December 1, 2011 to work five years
with SMFD before becoming eligible for annuitant health care.
That annuitant would receive 25% of the full employer
contribution after five years of service, increasing 5% annually
until the individual received 100% of the employer contribution
after twenty years of CalPERS covered service. Prior to that
2011 agreement, district employees were 100 percent vested for
retiree health care benefits after working 5 years.
Because the district's alternative vesting schedule could not be
implemented at the time of the MOUs, the district contracted
with CalPERS to provide its new employees with the existing
vesting schedule contained in PEMHCA which provides a 50%
employer contribution after the employee performs ten years of
Cal-PERS covered service, increasing to 100% for individuals who
have twenty years of services.