BILL NUMBER: SB 13 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Negrete McLeod
DECEMBER 3, 2012
An act to amend Sections 7522.02, 7522.25, 7522.30, 7522.43,
20281.5, and 21400 of, and to repeal Section 7522.66 of, the
Government Code, relating to public employees' retirement, and
declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 13, as introduced, Negrete McLeod. Public employees' retirement
benefits.
(1) The Public Employees' Retirement Law (PERL) establishes the
Public Employees' Retirement System (PERS) and the Teachers'
Retirement Law establishes the State Teachers' Retirement System for
the purpose of providing pension benefits to specified public
employees. Existing law also establishes the Judges' Retirement
System II which provides pension benefits to elected judges and the
Legislators' Retirement System which provides pension benefits to
elective officers of the state other than judges and to legislative
statutory officers. The County Employees Retirement Law of 1937
authorizes counties to establish retirement systems pursuant to its
provisions in order to provide pension benefits to county, city, and
district employees.
The California Public Employees' Pension Reform Act of 2013
(PEPRA), on and after January 1, 2013, requires a public retirement
system, as defined, to modify its plan or plans to comply with the
act and, among other provisions, establishes new retirement formulas
that may not be exceeded by a public employer offering a defined
benefit pension plan, setting the maximum benefit allowable for
employees first hired on or after January 1, 2013, as a formula
commonly known as 2.5% at age 67 for nonsafety members, one of 3
formulas for safety members, 2% at age 57, 2.5% at age 57, or 2.7% at
age 57, and 1.25% at age 67 for new state miscellaneous or
industrial members who elect to be in Tier 2. Under PEPRA, the Judges'
Retirement System I and the Judges' Retirement System II are not
required to adopt the defined benefit formula contained in certain
other provisions.
This bill would correct an erroneous cross-reference in the above
provision and would instead specify that the Judges' Retirement
System I and the Judges' Retirement System II are not required to
adopt the defined benefit formula contained in other provisions for
nonsafety and safety members.
(2) PEPRA authorizes a public employer offering a retirement
benefit plan consisting solely of a defined contribution plan prior
to January 1, 2013, to continue to offer that plan instead of the
defined benefit plan required pursuant to PEPRA. However, PEPRA
requires an employer that adopts a new defined benefit pension plan
or defined benefit formula on or after January 1, 2013, to conform
the plan or formula to the requirements of PEPRA or be determined and
certified by the retirement system's chief actuary and the system's
board to have no greater risk and no greater cost to the employer
than the defined benefit formula and to be approved by the
Legislature. Under that law, new members of the employer's plan may
only participate in the defined contribution plan that was in place
before January 1, 2013, or a defined contribution plan or defined
benefit formula that conforms to the requirements of PEPRA.
This bill would specify that the above provisions are not to be
construed to prohibit an employer from offering a defined
contribution plan on or after January 1, 2013, either with or without
a defined benefit plan, if the employer did not offer a defined
contribution plan prior to that date.
(3) On and after January 1, 2013, PEPRA requires each retirement
system that offers a defined benefit plan for safety members of the
system to use one or more of specified defined benefit formulas and
requires an employer to offer one or more of those formulas to new
employees who are safety employees eligible for membership in the
program.
This bill would instead require an employer to offer one or more
of those formulas to new members who are safety employees.
(4) On and after January 1, 2013, PEPRA requires new employees of
specified public employers, the California State University, and the
judicial branch who participate in a defined benefit plan to have an
initial contribution rate of at least 50% of the normal cost rate for
that defined benefit plan, rounded to the nearest 1/4 of 1%, or the
current contribution rate of similarly situated employees, whichever
is greater.
This bill would make that provision applicable to new members
employed by those entities and new members employed by the
Legislature. The bill would also specify that this contribution rate
for new members shall be the greater of the above 2 rates, if the
greater, current contribution rate has been agreed to through the
collective bargaining process.
(5) On and after January 1, 2013, PEPRA prohibits a public
employer from offering a plan of replacement benefits for members and
any survivors or beneficiaries whose retirement benefits are limited
by specified federal law. On and after January 1, 2013, PEPRA makes
that prohibition and certain other provisions related to replacement
benefits applicable to new employees.
This bill would instead make those provisions applicable to new
members.
(6) PEPRA, until January 1, 2018, authorizes a safety member of a
public retirement system who retires for industrial disability to
receive a disability retirement equal to the greater of specified
benefit amounts.
This bill would repeal the above provision.
(7) Under PERL, a person who becomes a state miscellaneous member
or state industrial member of PERS after August 11, 2004, does not
immediately make contributions or receive service credit for his or
her service until after the first 24 months of employment, except in
specified circumstances. This provision, as modified by PEPRA, does
not apply to a person who first becomes a state miscellaneous member
or state industrial member on or after July 1, 2013.
This bill would instead specify that this provision does not apply
to a person who first becomes a state miscellaneous member or state
industrial member on or after January 1, 2013.
(8) Under PEPRA, a state safety member of PERS who retires on or
after January 1, 2013, for industrial disability receives a
disability retirement benefit equal to the greater of certain
benefits, including, among others, 50% of his or her final
compensation, plus an annuity purchased with his or her accumulated
contributions, if any.
This bill would clarify that the portion of the industrial
disability retirement benefit described above refers to an annuity
purchased with the member's accumulated additional contributions.
(9) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7522.02 of the Government Code is amended to
read:
7522.02. (a) (1) Notwithstanding any other law, except as
provided in this article, on and after January 1, 2013, this article
shall apply to all state and local public retirement systems and to
their participating employers, including the Public Employees'
Retirement System, the State Teachers' Retirement System, the
Legislators' Retirement System, the Judges' Retirement System I, the
Judges' Retirement System II, county and district retirement systems
created pursuant to the County Employees Retirement Law of 1937,
independent public retirement systems, and to individual retirement
plans offered by public employers. However, this article shall be
subject to the Internal Revenue Code and Section 17 of Article XVI of
the California Constitution. The administration of the requirements
of this article shall comply with applicable provisions of the
Internal Revenue Code and the Revenue and Taxation Code.
(2) Notwithstanding paragraph (1), this article shall not apply to
the entities described in Section 9 of Article IX of, and Sections 4
and 5 of Article XI of, the California Constitution, except to the
extent that these entities continue to be participating employers in
any retirement system governed by state statute. Accordingly, any
retirement plan approved before January 1, 2013, by the voters of any
entity excluded from coverage by this section shall not be affected
by this article.
(b) The benefit plan required by this article shall apply to
public employees who are new members as defined in Section 7522.04.
(c) Individuals who were employed by any public employer before
January 1, 2013, and who became employed by a subsequent public
employer for the first time on or after January 1, 2013, shall be
subject to the retirement plan that would have been available to
employees of the subsequent employer who were first employed by the
subsequent employer on or before December 31, 2012, if the individual
was subject to reciprocity established under any of the following
provisions:
(1) Article 5 (commencing with Section 20350) of Chapter 3 of Part
3 of Division 5 of Title 2.
(2) Chapter 3 (commencing with Section 31450) of Part 3 of
Division 4 of Title 3.
(3) Any agreement between public retirement systems to provide
reciprocity to members of the systems.
(d) If a public employer, before January 1, 2013, offers a defined
benefit pension plan that provides a defined benefit formula with a
lower benefit factor at normal retirement age and results in a lower
normal cost than the defined benefit formula required by this
article, that employer may continue to offer that defined benefit
formula instead of the defined benefit formula required by this
article, and shall not be subject to the requirements of Section
7522.10 for pensionable compensation subject to that formula.
However, if the employer adopts a new defined benefit formula on or
after January 1, 2013, that formula must conform to the requirements
of this article or must be determined and certified by the retirement
system's chief actuary and the retirement board to have no greater
risk and no greater cost to the employer than the defined benefit
formula required by this article and must be approved by the
Legislature. New members of the defined benefit plan may only
participate in the lower cost defined benefit formula that was in
place before January 1, 2013, or a defined benefit formula that
conforms to the requirements of this article or is approved by the
Legislature as provided in this subdivision.
(e) If a public employer, before January 1, 2013, offers a
retirement benefit plan that consists solely of a defined
contribution plan, that employer may continue to offer that plan
instead of the defined benefit pension plan required by this article.
However, if the employer adopts a new defined benefit pension plan
or defined benefit formula on or after January 1, 2013, that plan or
formula must conform to the requirements of this article or must be
determined and certified by the retirement system's chief actuary and
the system's board to have no greater risk and no greater cost to
the employer than the defined benefit formula required by this
article and must be approved by the Legislature. New members of the
employer's plan may only participate in the defined contribution plan
that was in place before January 1, 2013, or a defined contribution
plan or defined benefit formula that conforms to the requirements of
this article. This subdivision shall not be construed to
prohibit an employer from offering a defined contribution plan on or
after January 1, 2013, either with or without a defined benefit plan,
if the employer did not offer a defined contribution plan prior to
that date.
(f) The Judges' Retirement System I and the Judges' Retirement
System II shall not be required to adopt the defined benefit formula
required by Section 7522.25 or 7522.30
7522.20 or 7522.25 or the compensation limitations defined in
Section 7522.10.
(g) This article shall not be construed to provide membership in
any public retirement system for an individual who would not
otherwise be eligible for membership under that system's applicable
rules or laws.
SEC. 2. Section 7522.25 of the Government Code is amended to read:
7522.25. (a) Each retirement system that offers a defined benefit
plan for safety members of the system shall use one or more of the
defined benefit formulas prescribed by this section. A member may
retire for service under any of the formulas in this section after
five years of service and upon reaching 50 years of age.
(b) The Basic Safety Plan shall provide a pension at retirement
for service equal to the percentage of the member's final
compensation set forth opposite the member's age at retirement, taken
to the preceding quarter year, in the following table, multiplied by
the number of years of service in the system as a safety member.
Age at Retirement Fraction
50 ............................. 1.426
50 1/4.......................... 1.447
50 1/2.......................... 1.467
50 3/4.......................... 1.488
51 ............................. 1.508
51 1/4.......................... 1.529
51 1/2.......................... 1.549
51 3/4.......................... 1.570
52 ............................. 1.590
52 1/4.......................... 1.611
52 1/2.......................... 1.631
52 3/4.......................... 1.652
53 ............................. 1.672
53 1/4.......................... 1.693
53 1/2.......................... 1.713
53 3/4.......................... 1.734
54 ............................. 1.754
54 1/4.......................... 1.775
54 1/2.......................... 1.795
54 3/4.......................... 1.816
55 ............................. 1.836
55 1/4.......................... 1.857
55 1/2.......................... 1.877
55 3/4.......................... 1.898
56 ............................. 1.918
56 1/4.......................... 1.939
56 1/2.......................... 1.959
56 3/4.......................... 1.980
57 and over .................... 2.000
(c) The Safety Option Plan One shall provide a pension at
retirement for service equal to the percentage of the member's final
compensation set forth opposite the member's age at retirement, taken
to the preceding quarter year, in the following table, multiplied by
the number of years of service in the system as a safety member.
Age at Retirement Fraction
50 ............................... 2.000
50 1/4............................ 2.018
50 1/2............................ 2.036
50 3/4............................ 2.054
51 ............................... 2.071
51 1/4............................ 2.089
51 1/2............................ 2.107
51 3/4............................ 2.125
52 ............................... 2.143
52 1/4............................ 2.161
52 1/2............................ 2.179
52 3/4............................ 2.196
53 ............................... 2.214
53 1/4............................ 2.232
53 1/2............................ 2.250
53 3/4............................ 2.268
54 ............................... 2.286
54 1/4............................ 2.304
54 1/2............................ 2.321
54 3/4............................ 2.339
55................................ 2.357
55 1/4............................ 2.375
55 1/2............................ 2.393
55 3/4............................ 2.411
56................................ 2.429
56 1/4............................ 2.446
56 1/2............................ 2.464
56 3/4............................ 2.482
57 and over....................... 2.500
(d) The Safety Option Plan Two shall provide a pension at
retirement for service equal to the percentage of the member's final
compensation set forth opposite the member's age at retirement, taken
to the preceding quarter year, in the following table, multiplied by
the number of years of service in the system as a safety member.
Age at Retirement Fraction
50 ............................. 2.000
50 1/4.......................... 2.025
50 1/2.......................... 2.050
50 3/4.......................... 2.075
51 ............................. 2.100
51 1/4.......................... 2.125
51 1/2.......................... 2.150
51 3/4.......................... 2.175
52 ............................. 2.200
52 1/4.......................... 2.225
52 1/2.......................... 2.250
52 3/4.......................... 2.275
53 ............................. 2.300
53 1/4.......................... 2.325
53 1/2.......................... 2.350
53 3/4.......................... 2.375
54 ............................. 2.400
54 1/4.......................... 2.425
54 1/2.......................... 2.450
54 3/4.......................... 2.475
55 ............................. 2.500
55 1/4.......................... 2.525
55 1/2.......................... 2.550
55 3/4.......................... 2.575
56 ............................. 2.600
56 1/4.......................... 2.625
56 1/2.......................... 2.650
56 3/4.......................... 2.675
57 and over .................... 2.700
(e) On and after January 1, 2013, an employer shall offer one or
more of the safety formulas prescribed by this section to new
employees members who are safety
employees eligible for membership in the system .
The formula offered shall be the formula that is closest to, and
provides a lower benefit at 55 years of age than, the formula
provided to members in the same retirement classification offered by
the employer on December 31, 2012.
(f) On and after January 1, 2013, an employer and its employees
subject to Safety Option Plan One or Safety Option Plan Two may agree
in a memorandum of understanding to be subject to Safety Option Plan
One or the Basic Safety Plan, subject to the following:
(1) The lower plan shall apply to members first employed on or
after the effective date of the lower plan, and shall be agreed to in
a memorandum of understanding that has been collectively bargained
in accordance with applicable laws.
(2) A retirement plan contract amendment with a public retirement
system to alter a retirement formula pursuant to this subdivision
shall not be implemented by the employer in the absence of a
memorandum of understanding that has been collectively bargained in
accordance with applicable laws.
(3) An employer shall not use impasse procedures to impose the
lower plan.
(4) An employer shall not provide a different defined benefit for
nonrepresented, managerial, or supervisory employees than the
employer provides for other public employees, including represented
employees, of the same employer who are in the same membership
classifications.
(g) Pensionable compensation used to calculate the defined benefit
shall be limited as described in Section 7522.10.
SEC. 3. Section 7522.30 of the Government Code is amended to read:
7522.30. (a) This section shall apply to all public employers and
to all new members. Equal sharing of normal costs between public
employers and public employees shall be the standard. The standard
shall be that employees pay at least 50 percent of normal costs and
that employers not pay any of the required employee contribution.
(b) The "normal cost rate" shall mean the annual actuarially
determined normal cost for the defined benefit plan of an employer
expressed as a percentage of payroll.
(c) New employees employed on and after January 1, 2013,
members employed by those public employers
defined in paragraphs (2) and (3) of subdivision (i) of Section
7522.04, the Legislature, the California State University,
and the judicial branch who participate in a defined benefit plan
shall have an initial contribution rate of at least 50 percent of the
normal cost rate for that defined benefit plan, rounded to the
nearest quarter of 1 percent, or the current contribution rate of
similarly situated employees, whichever is greater , if the
greater current contribution rate has been agreed to pursuant to the
requirements in subdivision (e) . This contribution shall not
be paid by the employer on the employee's behalf.
(d) Notwithstanding subdivision (c), once established, the
employee contribution rate described in subdivision (c) shall not be
adjusted on account of a change to the normal cost rate unless the
normal cost rate increases or decreases by more than 1 percent of
payroll above or below the normal cost rate in effect at the time the
employee contribution rate is first established or, if later, the
normal cost rate in effect at the time of the last adjustment to the
employee contribution rate under this section.
(e) Notwithstanding subdivision (c), employee contributions may be
more than one-half of the normal cost rate if the increase has been
agreed to through the collective bargaining process, subject to the
following conditions:
(1) The employer shall not contribute at a greater rate to the
plan for nonrepresented, managerial, or supervisory employees than
the employer contributes for other public employees, including
represented employees, of the same employer who are in related
retirement membership classifications.
(2) The employer shall not increase an employee contribution rate
in the absence of a memorandum of understanding that has been
collectively bargained in accordance with applicable laws.
(3) The employer shall not use impasse procedures to increase an
employee contribution rate above the rate required by this section.
(f) If the terms of a contract, including a memorandum of
understanding, between a public employer and its public employees,
that is in effect on January 1, 2013, would be impaired by any
provision of this section, that provision shall not apply to the
public employer and public employees subject to that contract until
the expiration of that contract. A renewal, amendment, or any other
extension of that contract shall be subject to the requirements of
this section.
SEC. 4. Section 7522.43 of the Government Code is amended to read:
7522.43. (a) A public employer shall not offer a plan of
replacement benefits for members and any survivors or beneficiaries
whose retirement benefits are limited by Section 415 of Title 26 of
the United States Code. This section shall apply to new
employees members .
(b) A public retirement system may continue to administer a plan
of replacement benefits for employees first hired prior to January 1,
2013.
(c) A public employer that does not offer a plan of replacement
benefits prior to January 1, 2013, shall not offer such a plan for
any employee on or after January 1, 2013.
(d) A public employer that offers a plan of replacement benefits
prior to January 1, 2013, shall not offer such a plan to any
additional employee group to which the plan was not provided prior to
January 1, 2013.
SEC. 5. Section 7522.66 of the Government Code is repealed.
7522.66. (a) A safety member of a public retirement system who
retires for industrial disability shall receive an industrial
disability retirement benefit equal to the greater of the following:
(1) Fifty percent of his or her final compensation attributable to
the defined benefit plan, plus an annuity purchased with his or her
accumulated contributions, if any.
(2) A service retirement allowance, if he or she is qualified for
service retirement.
(3) An actuarially reduced factor, as determined by the actuary,
for each quarter year that his or her service age is less than 50
years of age, multiplied by the number of years of safety service
subject to the applicable formula, if he or she is not qualified for
service retirement.
(b) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
SEC. 6. Section 20281.5 of the Government Code is amended to read:
20281.5. (a) Notwithstanding Section 20281, a person who becomes
a state miscellaneous member or state industrial member of the system
on or after the effective date of this section because the person is
first employed by the state and qualifies for membership shall be
subject to the provisions of this section.
(b) Members subject to this section shall not accrue credit for
service in the system and shall not make employee contributions to
the system, including the contributions set forth in Section 20677.4,
for employment with the state until the first day of the first pay
period commencing 24 months after becoming a member of the system.
(c) Notwithstanding subdivision (a), this section shall not apply
to any of the following:
(1) Persons who are already members or annuitants of the system at
the time they are first employed by the state.
(2) Employees of the California State University, or the
legislative or judicial branch of state government.
(3) Members of the Judges' Retirement System, the Judges'
Retirement System II, the Legislators' Retirement System, the State
Teachers' Retirement System, or the University of California
Retirement Plan.
(4) Persons who are members of a reciprocal retirement system and
whose employment was subject to a reciprocal retirement system within
the six months prior to membership in this system.
(5) Persons whose service is not included in the federal system.
(6) Persons who are employed by the Department of the California
Highway Patrol as students at the department's training school
established pursuant to Section 2262 of the Vehicle Code.
(7) Persons who had ceased to be members pursuant to Section 20340
or 21075.
(8) Persons who are National Guard members pursuant to Section
20380.5.
(d) A separation of employment does not alter the 24-month period
described by subdivision (b). A member who separates from state
employment shall remain subject to this section if he or she returns
to state employment as a state miscellaneous or state industrial
member within that 24-month period.
(e) Any regulations adopted by the board to implement the
requirements of this section shall not be subject to the review and
approval of the Office of Administrative Law, pursuant to Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3. The
regulations shall become effective immediately upon filing with the
Secretary of State.
(f) This section shall not apply to any person who first becomes a
state miscellaneous member or a state industrial member on or after
July January 1, 2013.
SEC. 7. Section 21400 of the Government Code is amended to read:
21400. (a) A safety member who retires on or after January 1,
2013, for industrial disability shall receive a disability retirement
benefit equal to the greater of the following:
(1) Fifty percent of his or her final compensation, plus an
annuity purchased with his or her accumulated additional
contributions, if any.
(2) A service retirement allowance, if he or she is qualified for
service retirement.
(3) An actuarially reduced factor, as determined by the actuary,
for each quarter year that his or her service age is less than 50
years, multiplied by the number of years of safety service subject to
the applicable formula, if he or she is not qualified for service
retirement.
(4) Nothing in this section shall require a member to receive a
lower benefit than he or she would have received prior to January 1,
2013, as the law provided prior to that date.
(b) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
SEC. 8. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to address technical problems and avoid costly and
unnecessary changes to retirement systems in implementing the
California Public Employees' Pension Reform Act of 2013 (Chapter 296
of the Statutes of 2012), it is necessary for this act to take effect
immediately.