BILL NUMBER: AB 2473 INTRODUCED
BILL TEXT
INTRODUCED BY Committee on Public Employees, Retirement and Social
Security (Bonta (Chair), Rendon, Ridley-Thomas, and Wieckowski)
FEBRUARY 21, 2014
An act to amend Sections 31564, 31592.2, 31592.4, 31649.5, 31656,
31671, 31691, 31691.1, and 31696.3 of, and to add Sections 31485.16,
31485.17, 31485.19, 31694.6, and 31698.5 to, the Government Code,
relating to county employees.
LEGISLATIVE COUNSEL'S DIGEST
AB 2473, as introduced, Committee on Public Employees, Retirement
and Social Security. County Employees Retirement Law of 1937: federal
law compliance.
Federal tax law regulates pension plans generally and regulates
public pension plans specifically based on their status as
governmental plans, as defined. In this regard, among other things,
federal law requires that accrued member retirement benefits be
nonforfeitable, as specified, establish conditions for the
distribution of funds to members from a retirement system, prescribe
requirements for the vesting of benefits, and limit the application
of pension funds for medical benefits.
The County Employees Retirement Law of 1937 (CERL) permits
counties and districts, as defined, to provide retirement benefits to
their employees pursuant to its provisions, and vests the management
of the retirement system in the board of retirement. CERL generally
conditions distribution of benefits upon compliance with federal
requirements. CERL requires a county to retain in its retirement fund
specified excess earnings to maintain a reserve against possible
future deficiencies in earnings, and to transfer certain of those
excess earnings into county advance reserves for the sole purpose of
paying the cost of benefits, as specified. CERL authorizes the use of
these reserves for the payment of certain health and medical
benefits, subject to specified limitations.
This bill would revise various provisions of CERL to explicitly
conform with federal law. In this regard, the bill would provide that
a member's accrued retirement benefits are nonforfeitable, in
accordance with federal law, once the member attains normal
retirement age, as specified, or upon termination of, or
discontinuance of contributions under, the retirement system. Upon
the withdrawal of a district from a retirement system, the bill also
would prohibit a refund, distribution, or transfer of contributions
for other funds to an employee or district unless in compliance with
prescribed federal law.
This bill would revise provisions authorizing a retirement system
to apply specified earnings to designated health benefits provided
federal requirements are met, and would allow the board of retirement
to authorize payment of those benefits with county advance reserves.
The bill would specify that, if a county establishes a
Post-Employment Benefits Trust Account as a part of its retirement
fund, that account shall be used exclusively to provide health
benefits for retired members, their spouses, and dependents.
This bill would revise county procedures applicable to providing
service credit to a member of the retirement system for all or part
of his or her military service, in accordance with federal law.
This bill would require a county that elects to provide optional
long-term care or vision benefits, to comply with applicable federal
law and regulation, including maintaining separate trust funds for
those benefits. The bill also would make various technical,
nonsubstantive changes to CERL.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 31485.16 is added to the Government Code, to
read:
31485.16. (a) Notwithstanding any other provision of this
chapter, the rights of each member to his or her accrued retirement
benefits under the retirement system shall be nonforfeitable, in
accordance with the requirements of Sections 401(a) of Title 26 of
the United States Code that are applicable to public employee plans,
as follows:
(1) On the member's attainment of normal retirement age, while
currently employed by an employer that maintains the system.
(2) To the extent then funded, on the date of the termination of
the system, the partial termination of the system, or the complete
discontinuance of contributions under the system, as provided in
Title 26 of the United States Code.
(b) When a member's accrued benefits become nonforfeitable under
this section, the member may be retired upon filing with the board a
written application in the manner provided by Article 8 and Article 9
of this chapter, as applicable.
(c) Notwithstanding subdivision (a), the vesting provisions under
Articles 8 and 9, or any other law, a member's earned and accrued
benefits may be forfeited under Sections 7522.70, 7522.72, and
7522.74.
SEC. 2. Section 31485.17 is added to the Government Code, to read:
31485.17. Notwithstanding any other provision of this chapter, no
amount shall be distributed from a retirement system established
under this chapter prior to the time that the distribution may be
made in compliance with the requirements of Section 401(a) of Title
26 of the United States Code that are applicable to public employee
plans, including, but not limited to, requirements relating to the
distribution of amounts prior to the earlier of a member's death,
disability, separation from service with all employers that maintain
the retirement system, or attainment of normal retirement age, as
defined by the retirement system.
SEC. 3. Section 31485.19 is added to the Government Code, to read:
31485.19. (a) A member who has not attained normal retirement age
shall have a bona fide separation from service to the extent
required by Section 401(a) of Title 26 of the United States Code
before working for the county or a district. The board shall
establish, by regulation, the criteria under which a bona fide
separation is satisfied.
(b) Notwithstanding any other provision of this chapter, to the
extent required or permitted by Section 401(a) of Title 26 of the
United States Code, no amount shall be paid to any member before the
date the member has attained normal retirement age or has had a bona
fide separation from service, whichever is earlier.
(c) The board may establish, by regulation, normal retirement age
consistent with federal law and eligibility requirements under state
law.
SEC. 4. Section 31564 of the Government Code is amended to read:
31564. (a) All officers and employees of
any district who have become members of the association as provided
in Section 31557, may be withdrawn by a resolution of the governing
body declaring all of the district's employees withdrawn from the
association; provided, the governing body has first received a
written petition signed by a majority of its officers and employees
requesting that the district's officers and employees be withdrawn
from the association.
Upon
(b) Upon the adoption of any
resolution to withdraw its members, all accumulated contributions
held in the association shall be refunded to the district's employees
upon the effective date of their withdrawal and in the same manner
as the accumulated contributions would be refunded upon the
termination of their employment by the district.
Upon
(c) Upon the adoption of any
resolution to withdraw its members and where there are no existing
retirees from the district, the district's contributions shall be
refunded to the district, or shall, upon the election of and
designation by the governing body of the district, be transferred to
another public retirement system that meets the requirement of a
tax-qualified retirement plan under Section 401(a) of Title 26 of
the United States Code .
(d) A refund, distribution, or transfer of contributions for other
funds shall not be made to any employee or any district unless that
action complies with the requirements of Section 401(a) of Title 26
of the United States Code.
In
(e) In the event of the transfer
of district contributions to another public retirement system, the
employee contributions shall also be transferred to the other public
retirement system.
The
(f) The effective date
of withdrawal of any resolution adopted pursuant to this section
shall be at the end of the calendar month during which such
resolution is adopted.
SEC. 5. Section 31592.2 of the Government Code is amended to read:
31592.2. (a) In any county, earnings of the
retirement fund during any year in excess of the total interest
credited to contributions and reserves during such year shall remain
in the fund as a reserve against deficiencies in interest earnings in
other years, losses on investments, and other contingencies, except
that, when such surplus exceeds 1 percent of the total assets of the
retirement system, the board may transfer all, or any part, of such
surplus in excess of 1 percent of the said total assets into county
advance reserves for the sole purpose of payment of the cost of the
benefits described in this chapter.
Where
(b) Where the board of
supervisors has provided for the payment of all, or a portion, of the
premiums, dues, or other charges for health benefits, Medicare, or
the payment of accrued sick leave at retirement to or for all, or a
portion, of officers, employees, and retired employees and their
dependents, from the county general fund or other sources, the board
of retirement may authorize the payment of all, or a portion, of
payments of the benefits described in this paragraph
subdivision from the county advance reserves.
This payment shall comply with the requirements of Section 401
of Title 26 of the United States Code. Payment may be made directly
from the county advance reserves for the benefits described in
Section 31691.1.
SEC. 6. Section 31592.4 of the Government Code is amended to read:
31592.4. (a) Notwithstanding Article 5.5 (commencing
with Section 31610) and Article 8.6 (commencing with Section 31694),
the The amount of excess earnings
available at the end of a fiscal year of the retirement fund, shall,
subject to the limitations in this section, be treated in the
immediately succeeding fiscal year, for all purposes under this
chapter, as appropriations, transfers, and contributions made to the
retirement fund by the county and applicable districts.
That treatment shall be solely for the purposes of meeting
the applicable requirements of Section 401 of the Internal Revenue
Code of the United States. That treatment shall
also occur only to the extent that, in the immediately
succeeding fiscal year, the county and applicable
districts pay for , or otherwise make reimbursement of,
an equal amount of health benefits for members
heretofore or hereafter retired and their dependents. For
dependents or make contributions in an equal amount to
an account established under Section 401(h) of Title 26 of the
United States Code solely for the purpose of providing
health benefits for retired members, their spouses, and dependents,
and for the associated administrative and investment expenses.
(b) For purposes of this section,
"excess earnings" means earnings of the retirement fund at the end
of any fiscal year that exceed the total interest credited to
contributions and reserves plus 1 percent of the total assets of the
retirement fund. The
(c) The board of supervisors
and or the board of retirement
may shall take any actions otherwise
authorized by law, necessary necessary and appropriate
to ensure that the program provided by this section complies
with all applicable federal and state income tax laws.
laws, including, but not limited to, establishing
rules and procedures for establishing and maintaining an account
under Section 401(h) of Title 26 of the United States Code.
(d) In accordance with Section 401(h) of Title 26 of the United
States Code and Section 1.401-14(c) of the Code of Federal
Regulations:
(1) The retirement system shall specify the medical benefits that
will be available and shall set out the amount that will be paid.
(2) Medical benefits shall be subordinate to the retirement
benefits when added to any life insurance benefits.
(3) A separate account shall be maintained for contributions to
fund the medical benefits.
(4) The funds in the separate account may be invested with the
funds for retirement benefits and the earnings shall be allocated to
each account in a reasonable manner.
(5) Amounts contributed for medical benefits shall be reasonable
and ascertainable.
(6) No part of the medical benefits account may be used for or
diverted to any purpose other than providing medical benefits and
paying necessary or appropriate expenses for the administration of
the medical benefits account.
(7) Any amounts remaining in the medical benefits account after
satisfaction of all medical benefits liabilities for all members,
their spouses, and dependents shall be returned to the employer.
(8) If a member's interest in the medical benefits account is
forfeited prior to plan termination, an amount equal to the
forfeiture shall reduce employer contributions to fund the account.
(e) Except to the extent allowed by Sections 401 and 420 of Title
26 of the United States Code, and related federal regulations, assets
shall not be transferred or otherwise paid from the funds held by
the retirement system for retirement benefits to a medical benefits
account. Assets shall not be transferred or otherwise paid from a
medical benefits account to the funds held by the retirement system
for retirement benefits.
(b)
(f) This section shall not be operative in any county
until the board of supervisors and the board of retirement of the
county, by resolution adopted by a majority vote of each board, make
this section operative in the county.
(c) Nothing in this section is intended to, or should
(g) This section is not intended, and
shall not be construed to, affect the validity of any agreement
entered into by a county and a retirement association whereby a
county has agreed to provide and fund a health insurance program for
retired employees and their dependents for hospital services, medical
services, dental services, and optical services, prior to the
effective date of this section.
(d) In any county in which this section becomes operative, the
payments provided pursuant to this section shall be in lieu of any
similar payments which could be made pursuant to Section 31592.2 and
no payments shall be made pursuant to Section 31592.2 for all, or a
portion, of the premiums, dues, or other charges for health benefits
for retired employees and their dependents.
(h) This section establishes a method of providing health benefits
for retired members, their spouses, and dependents to the extent
allowed under Sections 31592.2 and 31691. This section does not
authorize duplicate benefits.
(i) This section may be made applicable in any county that has
adopted Article 5.5 (commencing with Section 31610), in which case
the Supplemental Retiree Benefits Reserve shall be substituted for
the excess earnings described in this section. This section also may
be made applicable to any arrangement established under Article 8.6
(commencing with Section 31694).
SEC. 7. Section 31649.5 of the Government Code is amended to read:
31649.5. (a)
Notwithstanding Section 31649, any member who resigned, or obtained a
leave of absence, to enter and did enter the armed forces of the
United States on a voluntary or involuntary basis and returned to
county service within one year after separation therefrom, under
honorable conditions, shall receive credit for service and prior
service for all or any part of his or her military service, if,
before retirement from the county, he or she contributes what he or
she would have paid to the fund based on his or her compensation
earnable pursuant to Section 31461 at the time he or she resigned or
received the leave of absence, together with regular interest
thereon, and if, when he or she contributes, the military service is
not a basis for present or future military retirement pay.
(b) This section shall not be operative in any county until the
board of supervisors so orders.
SEC. 8. Section 31656 of the Government Code is amended to read:
31656. Nothing in this chapter shall be construed to prohibit any
district established pursuant to Part 4 (commencing with Section
40000) of Division 10 of the Public Utilities Code, from extending
retirement service credit pursuant to Section 40127 of the Public
Utilities Code to any employee of the district who is on an
authorized leave of absence to serve as an official of a recognized
employee bargaining unit, under all of the following conditions:
(a) The employee or the recognized employee organization,
or both, as determined pursuant agrees to
applicable provisions of this part, agree to pay
the total contributions which that
would otherwise be paid if the employee were not on leave, as well as
any additional costs which may accrue to the system as a result of
this extension of coverage.
(b) The maximum service credit accumulated under this section
shall not exceed 12 years.
(c) Employees covered under this section shall not be eligible for
disability benefits under any public employees' retirement system in
this state while on such leave of absence.
This section shall not be operative in any county until such time
as the board of supervisors shall, by resolution adopted by majority
vote, make the provisions of this section applicable in the county.
SEC. 9. Section 31671 of the Government Code is amended to read:
31671. (a) The amount of compensation that is taken into account
in computing benefits payable to any person who first becomes a
member of the retirement system on or after July 1, 1996, or
January 1, 1996, f or systems operating on a calendar
basis, shall not exceed the limitations in Section 401(a)(17)
of Title 26 of the United States Code upon public retirement systems,
as that section may be amended from time to time and as that limit
may be adjusted by the Commissioner of Internal Revenue for increases
in cost of living. The determination of compensation for each
12-month period shall be subject to the annual compensation limit in
effect for the calendar year in which the 12-month period begins. In
a determination of average annual compensation over more than one
12-month period, the amount of compensation taken into account for
each 12-month period shall be subject to the applicable annual
compensation limit.
(b) The compensation limitations specified in Section 7522.10
shall also apply to a member who is subject to the provisions of the
California Public Employees' Pension Reform Act of 2013 for all or
any portion of his or her membership in the county retirement system.
SEC. 10. Section 31691 of the Government Code is amended to read:
31691. (a) The board of supervisors of any county by ordinance,
or the governing body of any district under the County Employees
Retirement Law, by ordinance or resolution, may provide for the
contribution by the county or district from its funds and not from
the retirement fund, toward the payment of all or a portion of the
premiums on a policy or certificate of life insurance or disability
insurance issued by an admitted insurer, or toward the payment of all
or part of the consideration for any hospital service or medical
service corporation, including any corporation lawfully operating
under Section 9201 of the Corporations Code, contract, or for any
combination thereof, for the benefit of any member heretofore or
hereafter retired or his or her dependents. At least one of these
plans shall include free choice of physician and surgeon.
(b) The benefits provided by this section are in addition to any
other benefits provided by this chapter.
(c) The board of retirement may provide on behalf of a member who
has retired, or an eligible surviving spouse who was married to the
member for one year prior to the date of retirement of the member,
or, if there is no such spouse, the surviving unmarried children of
the member who are under 18 years of age, or under 22 years of age
and full-time students, for the hospital and medical
benefits enumerated herein in subdivision (a)
from the earnings of the retirement fund that are in excess of
the total interest credited to contributions and reserves plus 1
percent of the total assets of the retirement fund. The board may
provide for the benefits enumerated from like sources when the board
of supervisors or the governing body of a district has elected to
provide these benefits to its active employees, even though the
benefits are not provided to those who have retired from the service
of the county or district. Hospital and medical benefits
provided under this section shall be provided in compliance with
Section 401(h) of Title 26 of the United States Code. They may also
be provided in compliance with Section 31592.2.
(d) Except in a county of the first class, upon adoption by any
county providing benefits pursuant to this section, the
board of retirement shall, instead, pay those benefits from the
that has adopted Article 5.5 (commencing with Section
31610), the Supplemental Retiree Benefits Reserve established
pursuant to Section 31618. 31618 shall be
substituted for the excess earnings described in subdivision (c).
SEC. 11. Section 31691.1 of the Government Code is amended to
read:
31691.1. (a) In lieu of the benefits prescribed by
subdivision (d) of Section 31691, the board of retirement
may provide on behalf of a member who has retired, or an eligible
surviving spouse who was married to the member prior to the date of
retirement of the member, or, if there is no such spouse, the
surviving unmarried children of the member who are under 18 years of
age, or under 22 years of age and full-time students, for an
equivalent increase in allowance from the earnings of the retirement
fund that are in excess of the total interest credited to
contributions and reserves plus 1 percent of the total assets of the
retirement fund. Any benefit provided by this section shall be
subject to Section 31692.
(b) Except in a county of the first class, upon adoption by any
county providing benefits pursuant to this section, the board of
retirement shall, instead, pay those benefits from the Supplemental
Retiree Benefits Reserve established pursuant to Section 31618.
SEC. 12. Section 31694.6 is added to the Government Code, to read:
31694.6. (a) Notwithstanding any provision to the contrary in
this article, if the Post-Employment Benefits Trust Account
established under Section 31694 is established as a part of the
retirement fund, then that account shall be established for the sole
purpose of providing health benefits for retired members, their
spouses, and dependents, and shall comply with all requirements,
including the limitations on contributions, of Section 401(h) of
Title 26 of the United States Code, as applicable.
(b) The board of supervisors or the board of retirement shall take
any actions necessary or appropriate to ensure that the program
provided by this section complies with all applicable federal and
state income tax laws, including, but not limited to, establishing
rules and procedures for establishing and maintaining an account
under Section 401(h) of Title 26 of the United States Code.
(c) If the Post-Employment Benefits Trust Account is established
under Section 31694, assets shall not be transferred or otherwise
paid from the funds held by the retirement system for retirement
benefits to a medical benefits account. Assets shall not be
transferred or otherwise paid from a medical benefits account to the
funds held by the retirement system for retirement benefits.
SEC. 13. Section 31696.3 of the Government Code is amended to
read:
31696.3. (a) The board shall establish a trust fund designated as
the Long-Term Care Fund for the purpose of the payment of the costs
and administration of the long-term care plan. The Long-Term Care
Fund shall be held for the exclusive benefit of enrollees and the
payment of the costs and administration of the program.
(b) The board shall have exclusive control of the administration
and investment of the Long-Term Care Fund, except that in a county
having a board of investments, the board of investments shall have
exclusive control of the investment of the fund. Funds in the
Long-Term Care Fund shall be invested pursuant to the law governing
the investment of the retirement fund.
(c) Income, of whatever nature, earned on the Long-Term Care Fund
shall be credited to the fund.
(d) If the Long-Term Care Fund is intended to be a part of the
retirement system trust fund, then the operation of the Long-Term
Care Fund, including, but not limited to, its funding, governance,
investment of assets, allocation of income, and payment of benefits,
shall comply with the requirements of Section 401(h) of Title 26 of
the United States Code, to the extent required by that title and
related federal regulations. If the Long-Term Care Fund is intended
to be separate from and not a part of the retirement system, then the
assets shall not be commingled for investment with the assets of the
retirement system and shall constitute a separate fund with a trust
that is separate from the funds and trust of the retirement system.
The board shall indicate, as a part of establishment of the Long-Term
Care Fund, whether the separate fund is intended to be a part of, or
separate from, the retirement system.
SEC. 14. Section 31698.5 is added to the Government Code, to read:
31698.5. If the vision care program is intended to be part of the
retirement system trust fund, the operation of the vision care
program, including, but not limited to, its funding, governance,
investment of assets, allocation of income, and payment of benefits,
shall comply with the requirements of Section 401(h) of Title 26 of
the United States Code, to the extent required by that title, and
related federal regulations. If the vision care program is intended
to be separate from and not a part of the retirement system, then no
assets attributable to that program shall be commingled for
investment with the assets of the retirement system and the program
shall be separate from the funds and trust of the retirement system.
The sponsor of the vision care program shall indicate as part of the
establishment of the program whether that separate fund is intended
to be a part of, or separate from, the retirement system.