BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1380|
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CONSENT
Bill No: AB 1380
Author: Assembly Public Employees, Retirement and Social
Security Cmte.
Amended: 6/18/13 in Senate
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM : 5-0, 6/24/13
AYES: Beall, Walters, Block, Gaines, Yee
ASSEMBLY FLOOR : 70-0, 5/16/13 (Consent) - See last page for
vote
SUBJECT : County employees retirement
SOURCE : State Association of County Retirement Systems
DIGEST : This bill 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.
ANALYSIS :
1.Existing law:
Establishes the CERL, which governs twenty independent
county retirement systems, also referred to as the '37 Act.
Establishes comprehensive public employee pension reform
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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.
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).
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.
2.Existing law specifies that the definitions and general
provisions of CERL govern its laws unless the context
otherwise requires.
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.
3.Existing law defines "final compensation" in CERL as the
highest average annual compensation earnable during a 36 or 12
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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 three
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.
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.
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.
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.
6.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.
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7.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.
8.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.
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9. 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 (vs.
the federal limit) applies to members who are subject to
those limits.
10.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.
11.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
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supersede the CERL.
12.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.
13.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.
14.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.
15.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 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.
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This bill amends CERL to ensure that the provision allowing a
system of replacement benefits is in compliance with the
requirements of PEPRA.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/25/13)
State Association of County Retirement Systems (source)
ARGUMENTS IN SUPPORT : According to the State Association of
County Retirement Systems, this bill ensures continued
implementation of PEPRA as intended by placing the '37 Act's
requirements in the CERL.
ASSEMBLY FLOOR : 70-0, 5/16/13
AYES: Achadjian, Alejo, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dahle, Daly, Dickinson, Donnelly, Fong, Fox, Frazier, Garcia,
Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall, Harkey,
Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Logue,
Lowenthal, Maienschein, Mansoor, Medina, Mitchell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,
Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Allen, Buchanan, Eggman, Beth Gaines, Grove,
Holden, Melendez, Morrell, Stone, Vacancy
JL:nl 6/25/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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