BILL ANALYSIS                                                                                                                                                                                                    Ó






          SENATE PUBLIC EMPLOYMENT & RETIREMENT   BILL NO:  AB 2582
          Norma Torres, Chair           HEARING DATE:  June 9, 2014
          AB 2582 (Bonta)    as amended   6/02/14      FISCAL:  YES

           RETIREMENT HEALTH BENEFITS:  BART VESTING SCHEDULE  
           
          HISTORY  :

            Sponsor:  Bay Area Rapid Transit District (BART)

            Other legislation:AB 1144 (Hall),
                          Chapter 244, Statutes of 2013
                         AB 2053 (Allen) of 2012,
                          Vetoed by the Governor
                         AB 2510 (Fletcher),
                          Chapter 600, Statutes of 2010

           ASSEMBLY VOTES  :

            PER & SS                 6-0       4/23/14
            Appropriations           17-0      4/30/14
            Assembly Floor           73-0      5/08/14
           
          SUMMARY  :

          AB 2582 authorizes the Bay Area Rapid Transit District (BART)  
          to establish a vesting requirement for post-retirement health  
          benefits coverage that is different than what is allowed  
          under current law for contracting agencies and which has been  
          bargained with BART's employee representatives.

          BART's health insurance employer contribution for annuitants  
          with 10 years of credited service would be 50% of that  
          provided to active employees.  The employer contribution  
          would increase incrementally by 10% for each credited year of  
          service, reaching 100% if the annuitant attained 15 years of  
          credited service.  Annuitants who retire for disability and  
          have at least 5 years of BART service would receive 100% of  
          BART's employer contribution for active employees.

           BACKGROUND AND ANALYSIS  :
          
           1)Existing law  :
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          Date:  June 3, 2014                                     Page  
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            a)  establishes the Public Employees' Medical and Hospital  
              Care Act (PEMHCA), administered by the California Public  
              Employees' Retirement System (CalPERS), to provide health  
              coverage for employees and annuitants of the State and  
              the California State University.

            b)  allows a school or local agency employer to contract  
              with CalPERS for PEMHCA and requires the employee or  
              annuitant contribution, when added to the employer  
              contribution, to cover the total cost of the PEMHCA  
              coverage premium.

            c)  defines an annuitant as one who, among other  
              requirements, retires from the system within 120 days of  
              separation from public employment.

            d)  does not allow contracting employers to provide PEMHCA  
              coverage to active employees without  also  covering  
              retired annuitants.  However, with respect to the  
              employer contribution for annuitants, provides specified  
              options available to the contracting agency, including:

               i)     an equal employer contribution amount 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; or
               ii)       for a contracting agency that joins PEMHCA on  
                 or after January 1, 1986, 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 as  
                 specified; or
               iii)      a pre-set "vesting schedule" based on an  
                 employee's credited years of service to determine a  
                 set percentage of the employer contribution amount for  
                 annuitants.  Under this option, an annuitant must have  
                 at least 10 years of CalPERS credited service to  
                 qualify for 50% of the employer contribution and would  
                 receive an additional 5% for each additional year of  
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                 credited service for a total of 100% with 20 years of  
                 credited service.  At least 5 years must be with the  
                 employer providing PEMHCA.
               iv)    allows under the 10-20 year vesting schedule, an  
                 employer contribution of 100% if the annuitant retired  
                 for disability or if the annuitant had 20 years of  
                 service, regardless of the length of separation from  
                 service prior to retirement.

            e)  provides specified and individual variations to the  
              above options and requirements under separate statutes  
              specific to the City of Carson, the City of San Diego,  
              school employers, Alameda County Transportation  
              Improvement Authority, and Mariposa County.  These  
              statutes are subject to collective bargaining agreements.

           2)This bill  :  
           
             a)   authorizes BART to make contributions for  
               postretirement health benefits for the districts'  
               unrepresented employees, including members of the  
               district board of directors to the extent that they are  
               eligible under existing law, and for any unit of  
               employees whose terms and conditions of employment are  
               determined through collective bargaining.  The employer  
               contributions will be based on the following:

               i)     credited years of service worked with BART;
               ii)       a collectively bargained agreement with all  
                 represented employees regarding post-employment health  
                 coverage; and,
               iii)      for unrepresented employees, including  
                 directors if eligible, criteria and schedules as  
                 provided to the represented employees through a  
                 collectively bargained agreement.

             b)   requires the agreement to provide an employer  
               contribution of 50% after 10 years of credited service,  
               increasing incrementally to 100% after 15 years of  
               credited service. All service must be with BART.

             c)   requires any agreement for providing an employer  
               contribution for retiree healthcare to also provide full  
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               employer contributions for those employees who retire  
               for disability with at least 5 years of service with  
               BART.

             d)   specifies that these provisions only apply to BART  
               employees first hired on or after January 1, 2014, and  
               to directors who first serve as director on or after  
               January 1, 2014.

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

             f)   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.

             g)   requires BART to provide CalPERS with notification of  
               each agreement or personnel action applying these new  
               requirements, and any additional information necessary  
               to implement the proposed change.

           FISCAL  :

          According to the Assembly Appropriations committee, this bill  
          would result in costs that are "minor and absorbable for the  
          California Public Employees' Retirement System (CalPERS)."

           COMMENTS  :

           1)Suggested Amendments  :

          The bill attempts to make clear that the new health benefit  
          vesting schedule and terms will apply only to employees who  
          retire after the effective date of the MOU or, if the  
          effective date is made retroactive to a period before the MOU  
          was signed, then only prospectively to an employee who  
          retirees after the signing of the MOU.  However, the  
          provision causes confusion with respect to an employee who  
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          may retire after the MOU effective date, or after the MOU  
          signing date, but before the effective date of this bill, if  
          enacted (i.e., January 1, 2015).

          In order to clarify that the provisions of the bill apply  
          only to retirements that occur on or after the effective date  
          of the bill, staff recommends that the bill be amended to  
          state that the new plan applies to those retiring on or after  
          the bill's effective date.
           2)Arguments in Support  :  
           
          According to the sponsor, AB 2582 would "authorize a new  
          vesting schedule for retiree lifetime healthcare benefits  
          that was negotiated between BART and our employee  
          organizations last fall?The new schedule will provide cost  
          savings to BART of over $13.8 million over the next 30  
          years."

           3)SUPPORT  :

            Bay Area Rapid Transit District (BART), Sponsor

           4)OPPOSITION  :

            None.




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          Date:  June 3, 2014                                     Page  
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