BILL ANALYSIS Ó
SB 13
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Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 13 (Beall) - As Amended: February 6, 2013
Policy Committee: PERSS Vote:6-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes technical corrections to the Public Employees'
Pension Reform Act of 2013 (PEPRA), as enacted by AB 340
(Furutani), Chapter 296, Statutes of 2012.
FISCAL EFFECT
1)Unknown costs in the hundreds of thousands of dollars from
moving up the closing of the alternate retirement plan (ARP)
to January 1, 2013. The costs result because ARP is a defined
contribution plan that new employees must join. After two
years of state employment, state employees can begin earning
CalPERS service credit and after two additional years may
convert the time spent in ARP to CalPERS service credit. If
the program is ended earlier the state has increased pension
obligations. In addition, the state loses pension savings for
those employees who would not have paid the employee share and
converted their time to CalPERS retirement.
2)Minor and absorbable administrative costs for CalPERS and
CalSTRS.
3)Increased administrative costs to state agencies for changing
retirement plans for employees who joined the ARP between
January 1 and June 30, 2013.
4)Other provisions of the bill should allow the state and local
governments to realize savings resulting from the enactment of
PEPRA in 2012.
COMMENTS
SB 13
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1)Purpose . The author states a number of provisions need
clarification in order to be implemented as intended. The
intent of SB 13 is to provide employers and retirement system
administrators with better guidelines for fully implementing
the requirements of AB 340.
2)Support. The Department of Finance supports SB 13, citing the
need to correct technical errors and to clarify the intent of
existing law. The department notes this bill corrects a
drafting error that could lead to increased pension disability
payments in certain circumstances.
3)Background. The Public Employee's Pension Reform Act of 2013,
enacted by AB 340 (Furutani, Chapter 296, Statutes of 2012),
implemented significant changes to the public pension systems
including the following:
a) Allows legacy members (i.e., employees in retirement
plan membership prior to 1/1/2013) 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.
In 2012, CalPERS estimated that the changes to PEPRA would
result in estimated savings for the state and participating
state and school employers of $42 billion to $55 billion over
the next 30 years. CalSTRS estimated about $22 billion in
savings to the state and schools over the same time period.
Savings for counties in the 1937 Act and independent
retirement plans have not been estimated but will add
substantially to these numbers.
SB 13
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4)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081