BILL ANALYSIS Ó
SB 13
Page 1
Date of Hearing: June 26, 2013
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Rob Bonta, Chair
SB 13 (Beall) - As Amended: February 6, 2013
SENATE VOTE : 37-0
SUBJECT : Public employees' retirement benefits.
SUMMARY : Makes technical corrections to the Public Employees'
Pension Reform Act of 2013 (PEPRA) in order to clarify the
Legislature's intent in enacting PEPRA and to assist affected
employers and retirement systems in implementation of PEPRA.
Specifically, this bill :
1)States that it contains clarifying changes to PEPRA that are
consistent with legislative intent as enacted in AB 340
(Furutani), Chapter 296, Statutes of 2012, and are therefore
intended to be applicable as of January 1, 2013.
2)Clarifies that the provision for legacy employees to move
between public employers also (in addition to moving between
reciprocal employers) applies in cases of concurrent
membership, such as moving between the California Public
Employees' Retirement System (CalPERS) employers or CalPERS
and the California State Teachers' Retirement System
(CalSTRS), consistent with the intent of AB 340 to grandfather
public employees hired prior to January 1, 2013 with regard to
moving between public employers.
3)Clarifies that the bill does not prohibit an employer that
offers a defined benefit plan prior to January 1, 2013 from
later offering only a defined contribution plan or a defined
contribution plan in addition to a defined benefit plan.
4)Provides express authority to retirement systems to promulgate
regulations or adopt resolutions to implement the requirements
of PEPRA.
5)Confirms that in determining normal cost, the actuary may use
single rate contributions or age-based contribution rates.
6)Creates a uniform requirement for all public retirement
SB 13
Page 2
systems subject to PEPRA with regard to when and how to make
annual changes to the compensation limits and when such
changes shall be effective.
7)Clarifies that the normal cost rate used to determine employee
contributions includes all benefits under the plan (such as
death and survivor benefits and cost-of-living adjustments).
8)Clarifies that new employees will initially be subject to a
higher employee contribution rate (i.e., higher than the
required 50%) if it is paid by similarly situated employees
subject to a collective bargaining agreement.
9)Clarifies that an employer is not required to change the
retiree health vesting schedule of any employee subject to a
specific health vesting schedule prior to January 1, 2013, or
with whom the employer had a contractual agreement for a
particular health vesting schedule.
10)Clarifies that judges will be subject to felony forfeiture
provisions required under the Judges' Retirement Systems I and
II (JRS I & JRS II) and PEPRA, resulting in the highest loss
of benefits possible under the various section.
11)Clarifies that legacy members in the Los Angeles County
Employees' Retirement Association are allowed to move between
retirement plans D and E, but not the PEPRA plan and plans D
or E.
12)Clarifies that new members of retirement systems established
under the County Employees' Retirement Law of 1937 ('37 Act)
subject to the PEPRA retirement formulas shall not be subject
to the traditional offsets on contributions and benefits that
apply to legacy employees.
13)Corrects typographical errors and clarifies various
requirements.
EXISTING LAW :
1)Establishes PEPRA, which requires, as of January 1, 2013,
comprehensive and statewide reform for the State's public
pension systems and plans and public employers and employees,
including the following, as specified:
SB 13
Page 3
a) Allows legacy members (i.e., employees in retirement
plan membership prior to January 1, 2013) subject to
reciprocity to move between public employers and be subject
to the new employer's retirement benefit plan as it existed
for new hires on December 31, 2012.
b) Requires new public retirement system members to have
lower retirement formulas and higher retirement ages.
c) Requires new members to have no less than a 3-year final
compensation period.
d) Prohibits retroactive benefit increases for all public
employees.
e) Requires new members to pay at least one-half of the
actuarial annual normal cost of their benefit plans as
member contributions and prohibits employers from making
those contributions on behalf of employees.
f) Limits the amount of compensation that a public employee
may have counted towards a defined benefit based on the
Social Security wage index with subsequent adjustments
based on annual changes in the Consumer Price Index for All
Urban Consumers.
g) Prohibits certain items of pay from being included in
"pensionable compensation".
h) Prohibits inequitable retiree health vesting for new
excluded and appointed employees.
i) Prohibits, for new employees, any employer benefit
contributions paid on salaries in excess of specified
federal limits, and prohibits an employer from seeking a
federal exception to the limit.
j) Prohibits, for new employees, employer contributions to
benefit replacement plans in excess of federal compensation
limits, and prohibits an employer from offering a benefit
replacement plan to any group of employees to which the
plan was not offered prior to January 1, 2013.
aa) Prohibits for all members, on and after January 1, 2013,
the purchase of non-qualified service credit (aka,
SB 13
Page 4
"Airtime") in a defined benefit plan.
bb) Requires, for persons first elected or appointed on or
after January 1, 2013, that final compensation earned as an
elected or appointed city council member or county
supervisor may not be used in the calculation of a
retirement benefit for other public employment, and
prohibits a retired appointee to a state board or
commission from receiving a full pension and a full salary
while serving on the board or commission.
cc) Prohibits pension contribution holidays for public
employers.
dd) Places additional restrictions on working after
retirement for a public employer.
ee) Creates stringent benefit forfeiture provisions for
public employees and officials who are convicted of
felonies committed in relation to the performance of
official duties.
ff) Closes the Legislators' Retirement System to new
members.
gg) Closes the Alternative Retirement Program to new state
miscellaneous employees subject to PEPRA.
hh) Requires higher employee contributions for state legacy
employees, and allows local employers to impose higher
legacy employee contributions by 2018 if they fail to
bargain such increases in the interim.
ii) Makes various other changes to public retirement systems
and plans and the duties and requirements of public
employers and employees.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "AB 340 passed at the end
of the 2012 session as a conference committee report following
over a year of meetings, hearings, and various legislative
efforts relative to comprehensive pension reform. Due to the
scope of the bill and its complexity, and the requirement that a
conference report may not be amended once in print, a number of
SB 13
Page 5
provisions need clarification in order to be implemented as
intended. SB 13 will provide employers and retirement system
administrators with better guidelines for fully implementing the
requirements of AB 340 in a timely manner."
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Employees' Retirement System
Los Angeles County Employees' Retirement Association
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957