BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2582
                                                                  Page  1

          Date of Hearing:   April 23, 2014

            ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL  
                                      SECURITY
                                  Rob Bonta, Chair
                    AB 2582 (Bonta) - As Amended:  April 21, 2104
           
          SUBJECT  :   Public Employees' Medical and Hospital Care Act:  
          postemployment health benefits: the San Francisco Bay Area Rapid  
          Transit District.

           SUMMARY  :   Provides the San Francisco Bay Area Rapid Transit  
          District (BART) with the ability to establish a vesting  
          requirement for post-retirement health benefits coverage that is  
          different than what is allowed under current law for contracting  
          agencies.  Specifically,  this bill  :  

          1)Allows BART to make contributions for postretirement health  
            benefits for members of the district board of directors, the  
            districts' unrepresented employees, and for any unit of  
            employees whose terms and conditions of employment are  
            determined through collective bargaining, based on the  
            following:

             a)   Years of service worked with BART;

             b)   Agreement regarding postemployment health coverage with  
               all represented employees through collective bargaining;  
               and,

             c)   Contributions for postretirement health benefits for  
               unrepresented employees must conform to eligibility  
               criteria and schedules in approved bargaining agreements  
               for represented employees.

          2)Requires the agreement to provide an employer contribution of  
            50% after 10 years of service, increasing incrementally to  
            100% after 15 years of credited service.

          3)Requires any agreement reached from providing an employer  
            contribution for retiree healthcare to provide full employer  
            contributions for those employees who retire for disability  
            with at least 5 years of service.

          4)Specifies that these provisions only apply to BART employees  








                                                                  AB 2582
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            first hired on or after January 1, 2014, and to directors who  
            first serve as director on or after January 1, 2014.

          5)Specifies that these provisions only apply to represented  
            employees if the agreement is expressly incorporated into a  
            memorandum of understanding, as specified.

          6)Specifies that these provisions do not apply to employees who  
            retire prior to the effective date of the bargaining  
            agreement, and, in the event the bargaining agreement  
            establishes a retroactive effective date, these provisions  
            will only apply to prospective retirements.

          7)Requires BART to provide the California Public Employees  
            Retirement System (CalPERS) with notification of each  
            agreement or personnel action applying these new requirements,  
            and any additional information necessary to implement the  
            proposed change.


           EXISTING LAW  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:

          1)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.

          2)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.









                                                                  AB 2582
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          3)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.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :     According to the author, this bill will authorize  
          implementation of new labor contract provisions related to  
          vesting of healthcare benefits for BART retirees.  This  
          Collective Bargaining Agreement (CBA) was reached by BART labor  
          and management representatives in the fall of 2013 and has since  
          been ratified by all parties.

          Under the prior CBA, BART provided a 100% employer contribution  
          to retiree healthcare costs after 5 years of service.  Under the  
          CBA signed in 2013, the new vesting schedule provides for an  
          employer contribution of 50% after 10 years of service,  
          increasing incrementally to 100% after 15 years of credited  
          service.  The CBA covers employees first hired after January 1,  
          2014.

          According to the author, this modification to the vesting  
          schedule for retiree healthcare benefits is estimated to save  
          BART $13.8 million over the next 30 years.

          This bill is similar to AB 2053 (Allen) of 2012, which would  
          have provided BART with the ability to establish a vesting  
          requirement for post-retirement health benefits coverage that is  
          different than what is allowed under current law for contracting  
          agencies.  In his veto message, the Governor stated, in part,  
          "The labor contracts for BART's five bargaining units expire  
          next year, so negotiations for new contracts will start soon if  
          not already. The vesting period for health benefits is a matter  
          that should be negotiated in the new contracts. This bill  
          removes the vesting period from negotiations."

          AB 1144 (Hall), Chapter 244, Statutes of 2013, established, for  
          the City of Carson, a specific vesting schedule and employer  
          contribution amount for annuitant health care premiums under  
          PEMHCA.









                                                                  AB 2582
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          AB 2510 (Fletcher), Chapter 600, Statutes of 2010, provided the  
          City of San Diego with the ability to establish a vesting  
          requirement for post-retirement health benefits coverage that is  
          different than what is allowed under current law for contracting  
          agencies.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Bay Area Rapid Transit District (Sponsor)

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)  
          319-3957