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 Page 2 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 Page 3 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 Page 4 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