BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL
NO: AB 1380
Jim Beall, Chair HEARING DATE: June 24, 2013
AB 1380 (Asm. PER&SS Comm) as amended 6/18/13
FISCAL: NO
1937 ACT COUNTY RETIREMENT LAW: CONFORMITY WITH PUBLIC
EMPLOYEES' PENSION REFORM ACT OF 2013
HISTORY :
Sponsor: State Association of County Retirement Systems
(SACRS)
Other legislation: SB 220 (Beall) 2013
Currently in Assembly PER&SS Committee
AB 1381 (Asm. PER&SS Comm) 2013
Currently in Senate PE&R Committee
AB 340 (Furutani),
Chapter 296, Statutes of 2012
ASSEMBLY VOTES :
PER & SS 7-0 5/08/13
Assembly Floor 70-0 5/16/13
SUMMARY :
SB 1380 makes various technical corrections and conforming
changes that align the County Employees' Retirement Law of
1937 (CERL) with the provisions of the Public Employees'
Pension Reform Act of 2013 (PEPRA), as enacted in AB 340
(Furutani), Chapter 296, Statutes of 2012.
BACKGROUND AND ANALYSIS :
1)Existing law :
a) establishes the CERL, which governs twenty
independent county retirement systems, also referred to
as the '37 Act.
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b) establishes comprehensive public employee pension
reform through enactment of PEPRA (and related statutory
changes) that applies to all public employers and public
pension plans on and after January 1, 2013, excluding
the University of California and charter cities and
counties that do not participate in a retirement system
governed by state statute.
c) requires, under PEPRA, uniform requirements for
vesting, final compensation, benefit formulas, the
definition of "compensation earnable," and the cap on
earnings that may be used to calculate a pension, and
makes these requirements applicable to all public
employees who are "new members," as defined, of a public
retirement system on and after January 1, 2013. These
uniform requirements may or may not be consistent with
requirements for legacy members of the retirement system
(i.e., members who were part of the system prior to
January 1, 2013).
d) does not specifically amend the CERL to incorporate
the requirements and provisions of PEPRA as they apply
to members and employers of the '37 Act retirement
systems.
This bill amends various code sections in CERL to provide
appropriate conformity to PEPRA.
1)Existing law imposes certain rights, responsibilities, and
entitlements for members and employers in '37 Act, subject
to provisions of CERL.
This bill clarifies that rights, responsibilities, and
entitlements imposed subject to CERL also extend to '37 Act
members and employers subject to PEPRA, as applicable.
Sections affected: GC 31452, 314542.5, 31452.6, 31454,
31551, 31670, 31705
2)Existing law specifies that the definitions and general
provisions of CERL govern its laws unless the context
otherwise requires.
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This bill specifies that that the definitions and general
provisions of CERL govern its laws unless the context
otherwise requires, or unless any provision of PEPRA
supersedes the definitions and general provisions.
Section affected: GC 31455
3)Existing law defines "final compensation" in CERL as the
highest average annual compensation earnable during a 36 or
12 month period, as specified. For members subject to
PEPRA, the final compensation period may be no less than 36
consecutive months.
This bill clarifies in CERL that a member subject to PEPRA
may not be eligible for a 12-month final compensation
period, but if the member is eligible to retire after less
than 3 years of service, the final compensation will be
calculated on the average compensation earned during the
entire length of the member's service.
This bill makes other clarifying changes to ensure that new
members who are subject to PEPRA will be subject to a 36
consecutive month final compensation period.
Sections affected: GC 31462, 31462.05, 31462.1, 31462.2,
31499.11
4)Existing law in CERL allows an elective or appointive
county official to receive '37 Act retirement credit for
that service, as specified, even if the service was not
compensated.
This bill clarifies that this does not apply to such
service if it is subject to PEPRA.
Section affected: GC 31479.1
5)Existing law in in CERL allows employers to maintain
multiple defined benefit plans for employees, including,
for example, the '37 Act defined benefit plan and one or
more private plans offered by the employer.
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Existing law in PEPRA establishes rules or limits on
participation in deferred compensation plans and
supplemental defined benefit plans, including prohibiting
an employer from providing multiple defined benefit plans.
This bill clarifies that members subject to PEPRA may not
be eligible for supplemental defined benefit plans if
prohibited by PEPRA.
Section affected: GC 31482.5
7)Existing law prohibits, under PEPRA, the purchase of
nonqualified service credit (also known as "airtime")
unless the application to purchase the credit is received
by the retirement system prior to January 1, 2013, and
subsequently approved.
This bill makes a conforming prohibition in CERL.
Section affected: GC 31490.6, 31558
8)Existing law allows an employer, under CERL, to pay all or
part of the required member contributions to the system on
behalf of the member.
Existing law also allows, in San Bernardino County
Employees' Retirement Association, or in certain cases of
reciprocity with CalPERS, as specified, that any member
having 30 years of continuous service with the may
discontinue making employee contributions.
Existing law , under PEPRA, requires members subject to
PEPRA to pay at least 50% of the normal cost of the plan as
member contributions, and prohibits an employer from paying
the required member contributions.
This bill clarifies in CERL that employers may not pay
member contributions for members subject to PEPRA, nor may
a member with 30 years of continuous service discontinue
employee contributions.
Sections affected: GC 31581.1, 31581.2, 31625.2, 31625.3,
31630, 31639.85, 31873, 31873.1, 31874.5
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9)Existing law authorizes, under CERL, a safety member who
has completed 10 years of continuous service and has
reached age 50, or who has completed 20 years of service
regardless of age, to retire, as specified. Existing law
makes other various age and service requirements for
retirement eligibility for safety members.
Existing law authorizes, under CERL, a general member who
has reached age 70, or has completed 10 years of service
and has reached age 55, or who has completed 30 years of
service regardless of age, to retire, as specified.
Existing law makes other various age and service
requirements for retirement eligibility for general
members.
Existing law , under PEPRA, requires at least five years of
service, and a minimum age of 52 for retirement
eligibility for non-safety members and age 50 for safety
members.
This bill specifies that the provisions of the CERL
that allow a member to retire at a specified age, or a
specified age with a certain amount of service credit, or
once they have attained a certain amount of service credit
regardless of age, do not apply to members who are subject
to PEPRA.
Sections affected: GC 31662.2, 31663.25, 31663.26, 31664.5,
31670, 31672, 31672.1, 31672.2, 31672.3
10)Existing federal law limits the amount of compensation
that may be considered in calculating a pension for members
of public retirement systems after July 1, 1996, as
specified.
Existing law, under PEPRA, limits the amount of
compensation that may be considered in calculating a
pension for new members of public retirement systems who
are subject to PEPRA. The limit established in PEPRA is
lower than the federal limit.
This bill clarifies that the limit established in PEPRA
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(vs. the federal limit) applies to members who are subject
to those limits.
Section affected: GC 31671
11)Existing law in CERL allows a benefit formula to be
changed for existing employees and to be applied to service
earned prior to the date of the change. In certain cases,
the formula may or may not be coordinated with Social
Security, and the employee is required to take a formal
action to forgo Social Security coverage under a
non-coordinated formula. Costs of a benefit increase may
be negotiated between the employer and members with regard
to contributions.
Existing law , under PEPRA, prohibits a retroactive benefit
change for all members after January 1, 2013, and prohibits
employer payment of the required member contribution for
new members subject to PEPRA.
This bill clarifies, in CERL, that any provision regarding
benefit changes that is in conflict with PEPRA shall be
superseded by PEPRA.
Sections affected: GC 31678.2, 31678.3, 31678.31
12)Existing law allows a retired member of the system to be
employed part-time by a public employer of the system for
limited periods without being required to reinstate from
retirement or a receive a reduction in benefits, and makes
various exceptions and requirements to the rules governing
working after retirement.
Existing law, under PEPRA, makes a uniform set of rules for
working after retirement, and eliminates exceptions.
This bill states, whenever statutes in CERL regarding
working after retirement are in conflict with PEPRA, that
PEPRA will supersede the CERL.
Sections affected: GC 31680, 31680.1, 31680.2, 31680.3,
31680.6
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13)Existing law defines rights and requirements regarding
community property and benefits payable to former spouses.
This bill clarifies that these rules apply to benefits
determined under the CERL or PEPRA, whichever is
applicable.
Section affected: GC31685.01
14)Existing law in CERL defines "compensation earnable,"
which is the compensation that may be considered in
calculating a pension.
Existing law in PEPRA defines "pensionable compensation"
for new members and changes the definition of "compensation
earnable" for legacy members.
This bill clarifies that compensation used to calculate a
benefit may be pensionable compensation or compensation
earnable, whichever is applicable.
Sections affected: GC 31835, 31836, 31839
15)Existing law allows the county to use a single member
contribution rate or a rate structure based on the member's
age of entry into the system, and requires members to
contribute to the cost of increasing post-retirement
cost-of-living adjustments (COLA).
This bill specifies that a county may use a single rate or
an age-at-entry rate when calculating the cost of member
contributions required for increasing post-retirement
COLAs.
Section affected: GC31873
16)Existing federal law prohibits preferred tax treatment on
retirement allowances in excess of specified amounts,
mostly impacting high earning individuals.
Existing law allows a public retirement system to
administer a "system of replacement benefits," paid for by
the employer, for individuals who are subject to the
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federal limits, which supplements the defined benefit and
allows the individual to receive an additional benefit
which has a different tax treatment.
Existing law , under PEPRA, prohibits a retirement system
from administering, or an employer from providing, a system
of replacement benefits for new members subject to PEPRA.
This bill amends CERL to ensure that the provision allowing
a system of replacement benefits is in compliance with the
requirements of PEPRA.
FISCAL :
This bill has been keyed non-fiscal by Legislative Counsel.
COMMENTS :
1)Argument in Support :
According to the sponsor, AB 1380 will ensure continued
implementation of PEPRA as intended by placing the act's
requirements in the CERL.
2)SUPPORT :
State Association of County Retirement Systems (SACRS),
Sponsor
3)OPPOSITION :
None to date
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