Senate BillNo. 24


Introduced by Senator Walters

December 3, 2012


An act to amend Sections 7522.02, 7522.15, 7522.20, and 7522.25 of, and to add Section 7522.03 to, the Government Code, relating to public employees’ retirement.

LEGISLATIVE COUNSEL’S DIGEST

SB 24, as introduced, Walters. Public employees’ retirement: benefit plans.

Existing law regulates state and local public retirement systems and generally requires public employees who are new members, as defined, of those systems, on and after January 1, 2013, to participate in specified benefit plans. Existing law permits a public employer that, 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 for new employees on and after January 1, 2012, to continue to offer that defined benefit formula and excepts the employer from specified requirements regarding pensionable compensation. Existing law requires, in the case of these plans, if a new defined benefit formula is adopted on or after January 1, 2013, that the formula meet certain requirements and, among other things, be approved by the Legislature. Existing law prescribes the same requirements for a retirement benefit plan that consists solely of a defined contribution plan if the employer, on or after January 1, 2013, adopts a new defined benefit pension plan or defined benefit formula, as specified.

This bill would eliminate the requirement that the Legislature approve the changes in the instances described above. This bill would also authorize a local agency public employer or public retirement system that offers a defined benefit pension plan to offer a benefit formula with a lower benefit factor at normal retirement age and that results in a lower normal cost than the benefit formulas that are currently required, for purposes of addressing a fiscal necessity.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 7522.02 of the Government Code is
2amended to read:

3

7522.02.  

(a) (1) Notwithstanding any other law, except as
4provided in this article, on and after January 1, 2013, this article
5shall apply to all state and local public retirement systems and to
6their participating employers, including the Public Employees’
7Retirement System, the State Teachers’ Retirement System, the
8Legislators’ Retirement System, the Judges’ Retirement System
9I, the Judges’ Retirement System II, county and district retirement
10systems created pursuant to the County Employees Retirement
11Law of 1937, independent public retirement systems, and to
12individual retirement plans offered by public employers. However,
13this article shall be subject to the Internal Revenue Code and
14Section 17 of Article XVI of the California Constitution. The
15administration of the requirements of this article shall comply with
16applicable provisions of the Internal Revenue Code and the
17Revenue and Taxation Code.

18(2) Notwithstanding paragraph (1), this article shall not apply
19to the entities described in Section 9 of Article IX of, and Sections
204 and 5 of Article XI of, the California Constitution, except to the
21extent that these entities continue to be participating employers in
22any retirement system governed by state statute. Accordingly, any
23retirement plan approved before January 1, 2013, by the voters of
24any entity excluded from coverage by this section shall not be
25affected by this article.

26(b) The benefit plan required by this article shall apply to public
27employees who are new members as defined in Section 7522.04.

28(c) Individuals who were employed by any public employer
29before January 1, 2013, and who became employed by a subsequent
30public employer for the first time on or after January 1, 2013, shall
31be subject to the retirement plan that would have been available
P3    1to employees of the subsequent employer who were first employed
2by the subsequent employer on or before December 31, 2012, if
3the individual was subject to reciprocity established under any of
4the following provisions:

5(1) Article 5 (commencing with Section 20350) of Chapter 3
6of Part 3 of Division 5 of Title 2.

7(2) Chapter 3 (commencing with Section 31450) of Part 3 of
8Division 4 of Title 3.

9(3) Any agreement between public retirement systems to provide
10reciprocity to members of the systems.

11(d) If a public employer, before January 1, 2013, offers a defined
12benefit pension plan that provides a defined benefit formula with
13a lower benefit factor at normal retirement age and results in a
14lower normal cost than the defined benefit formula required by
15this article, that employer may continue to offer that defined benefit
16formula instead of the defined benefit formula required by this
17article, and shall not be subject to the requirements of Section
187522.10 for pensionable compensation subject to that formula.
19However, if the employer adopts a new defined benefit formula
20on or after January 1, 2013, that formula must conform to the
21requirements of this article or must be determined and certified by
22the retirement system’s chief actuary and the retirement board to
23have no greater risk and no greater cost to the employer than the
24defined benefit formula required by this articlebegin delete and must be end delete
25begin deleteapproved by the Legislatureend delete. New members of the defined benefit
26plan may only participate in the lower cost defined benefit formula
27that was in place before January 1, 2013, or a defined benefit
28formula that conforms to the requirements of this article or is
29approved by the Legislature as provided in this subdivision.

30(e) If a public employer, before January 1, 2013, offers a
31retirement benefit plan that consists solely of a defined contribution
32plan, that employer may continue to offer that plan instead of the
33defined benefit pension plan required by this article. However, if
34the employer adopts a new defined benefit pension plan or defined
35benefit formula on or after January 1, 2013, that plan or formula
36must conform to the requirements of this article or must be
37determined and certified by the retirement system’s chief actuary
38and the system’s board to have no greater risk and no greater cost
39to the employer than the defined benefit formula required by this
40articlebegin delete and must be approved by the Legislatureend delete. New members of
P4    1the employer’s plan may only participate in the defined
2contribution plan that was in place before January 1, 2013, or a
3defined contribution plan or defined benefit formula that conforms
4to the requirements of this article.

5(f) The Judges’ Retirement System I and the Judges’ Retirement
6System II shall not be required to adopt the defined benefit formula
7required by Sectionbegin delete 7522.25 or 7522.30end deletebegin insert 7522.20 or 7522.25end insert or the
8compensation limitations defined in Section 7522.10.

9(g) This article shall not be construed to provide membership
10in any public retirement system for an individual who would not
11otherwise be eligible for membership under that system’s
12applicable rules or laws.

13

SEC. 2.  

Section 7522.03 is added to the Government Code, to
14read:

15

7522.03.  

(a) Notwithstanding Section 7522.15, a local agency
16public employer or public retirement system that offers a defined
17benefit pension plan may, for purposes of addressing a fiscal
18necessity, offer a benefit formula with a lower benefit factor at
19normal retirement age and that results in a lower normal cost than
20the benefit formula required by Section 7522.20 or 7522.25.

21(b) The authority provided by subdivision (a) shall be exercised
22upon the direction of the legislative body of the local agency, as
23manifest in a duly enacted ordinance or resolution that describes
24the fiscal necessity, or upon a vote of the people of the affected
25jurisdiction.

26(c) For purposes of this section, “local agency” means a city,
27county, or district.

28

SEC. 3.  

Section 7522.15 of the Government Code is amended
29to read:

30

7522.15.  

Except as provided in subdivisions (d) and (e) of
31Section 7522.02begin insert or in Section 7522.03end insert, each public employer and
32each public retirement system that offers a defined benefit plan
33shall offer only the defined benefit formulas established pursuant
34to Sections 7522.20 and 7522.25 to new members.

35

SEC. 4.  

Section 7522.20 of the Government Code is amended
36to read:

37

7522.20.  

(a) begin deleteEach end deletebegin insertExcept as provided in Section 7522.03, each end insert
38retirement system that offers a defined benefit plan for nonsafety
39members of the system shall use the formula prescribed by this
40section. The defined benefit plan shall provide a pension at
P5    1retirement for service equal to the percentage of the member’s
2final compensation set forth opposite the member’s age at
3retirement, taken to the preceding quarter year, in the following
4table, multiplied by the number of years of service in the system
5as a nonsafety member. A member may retire for service under
6this section after five years of service and upon reaching 52 years
7 of age.


8

 

Age of RetirementFraction

52   

1.00

5214   

1.025

5212   

1.050

5234   

1.075

53   ......

1.100

5314   

1.125

5312   

1.150

5334   

1.175

54   

1.200

5414   

1.225

5412   

1.250

5434   

1.275

55   

1.300

5514   

1.325

5512   

1.350

5534   

1.375

56   

1.400

5614   

1.425

5612   

1.450

5634   

1.475

57   

1.500

5714   

1.525

5712   

1.550

5734   

1.575

58   

1.600

5814   

1.625

5812   

1.650

5834   

1.675

59   

1.700

5914   

1.725

5912   

1.750

5934   

1.775

60   

1.800

6014   

1.825

6012   

1.850

6034   

1.875

61   

1.900

6114   

1.925

6112   

1.950

6134   

1.975

62   

2.000

6214   

2.025

6212   

2.050

6234   

2.075

63   

2.100

6314   

2.125

6312   

2.150

6334   

2.175

64   

2.200

6414   

2.225

6412   

2.250

6434   

2.275

65   

2.300

6514   

2.325

6512   

2.350

6534   

2.375

66   

2.400

6614   

2.425

6612   

2.450

6634   

2.475

67   

2.500

 

P6   32(b) Pensionable compensation used to calculate the defined
33benefit shall be limited as described in Section 7522.10.

34(c) A new member of the State Teachers’ Retirement System
35shall be subject to the formula established pursuant to Section
3624202.6 of the Education Code.

37

SEC. 5.  

Section 7522.25 of the Government Code is amended
38to read:

39

7522.25.  

(a) begin deleteEach end deletebegin insertExcept as provided in Section 7522.03 each end insert
40retirement system that offers a defined benefit plan for safety
P7    1members of the system shall use one or more of the defined benefit
2formulas prescribed by this section. A member may retire for
3service under any of the formulas in this section after five years
4of service and upon reaching 50 years of age.

5(b) The Basic Safety Plan shall provide a pension at retirement
6for service equal to the percentage of the member’s final
7compensation set forth opposite the member’s age at retirement,
8taken to the preceding quarter year, in the following table,
9multiplied by the number of years of service in the system as a
10safety member.


11

 

Age at Retirement

Fraction

50   

 1.426

5014   

 1.447

5012   

 1.467

5034   

 1.488

51   

 1.508

5114   

 1.529

5112   

 1.549

5134   

 1.570

52   

 1.590

5214   

 1.611

5212   

 1.631

5234   

 1.652

53   

 1.672

5314   

 1.693

5312   

 1.713

5334   

 1.734

54   

 1.754

5414   

 1.775

5412   

 1.795

5434   

 1.816

55   

 1.836

5514   

 1.857

5512   

 1.877

5534   

 1.898

56   

 1.918

5614   

 1.939

5612   

 1.959

5634   

 1.980

57 and over   

 2.000

97

 

P8    3(c) The Safety Option Plan One shall provide a pension at
4retirement for service equal to the percentage of the member’s
5final compensation set forth opposite the member’s age at
6retirement, taken to the preceding quarter year, in the following
7 table, multiplied by the number of years of service in the system
8as a safety member.

 

 Age at Retirement

Fraction

50   

 2.000

5014   

 2.018

5012   

 2.036

5034   

 2.054

51   

 2.071

5114   

 2.089

5112   

 2.107

5134   

 2.125

52   

 2.143

5214   

 2.161

5212   

 2.179

5234   

 2.196

53   

 2.214

5314   

 2.232

5312   

 2.250

5334   

 2.268

54   

 2.286

5414   

 2.304

5412   

 2.321

5434   

 2.339

55   

 2.357

5514   

 2.375

5512   

 2.393

5534   

 2.411

56   

 2.429

5614   

 2.446

5612   

 2.464

5634   

 2.482

57 and over   

 2.500

7

 

P9    1(d) The Safety Option Plan Two shall provide a pension at
2retirement for service equal to the percentage of the member’s
3final compensation set forth opposite the member’s age at
4retirement, taken to the preceding quarter year, in the following
5table, multiplied by the number of years of service in the system
6as a safety member.

 

Age at Retirement

Fraction

50   

 2.000

5014   

 2.025

5012   

 2.050

5034   

 2.075

51   

 2.100

5114   

 2.125

5112   

 2.150

5134   

 2.175

52   

 2.200

5214   

 2.225

5212   

 2.250

5234   

 2.275

53   

 2.300

5314   

 2.325

5312   

 2.350

5334   

 2.375

54   

 2.400

5414   

 2.425

5412   

 2.450

5434   

 2.475

55   

 2.500

5514   

 2.525

5512   

 2.550

5534   

 2.575

56   

 2.600

5614   

 2.625

5612   

 2.650

5634   

 2.675

57 and over   

 2.700

 

39(e) On and after January 1, 2013, an employer shall offer one
40or more of the safety formulas prescribed by this section to new
P10   1employees who are safety employees eligible for membership in
2the system. The formula offered shall be the formula that is closest
3to, and provides a lower benefit at 55 years of age than, the formula
4provided to members in the same retirement classification offered
5by the employer on December 31, 2012.

6(f) On and after January 1, 2013, an employer and its employees
7subject to Safety Option Plan One or Safety Option Plan Two may
8agree in a memorandum of understanding to be subject to Safety
9Option Plan One or the Basic Safety Plan, subject to the following:

10(1) The lower plan shall apply to members first employed on
11or after the effective date of the lower plan, and shall be agreed to
12in a memorandum of understanding that has been collectively
13bargained in accordance with applicable laws.

14(2) A retirement plan contract amendment with a public
15retirement system to alter a retirement formula pursuant to this
16subdivision shall not be implemented by the employer in the
17absence of a memorandum of understanding that has been
18collectively bargained in accordance with applicable laws.

19(3) An employer shall not use impasse procedures to impose
20the lower plan.

21(4) An employer shall not provide a different defined benefit
22for nonrepresented, managerial, or supervisory employees than
23the employer provides for other public employees, including
24represented employees, of the same employer who are in the same
25membership classifications.

26(g) Pensionable compensation used to calculate the defined
27benefit shall be limited as described in Section 7522.10.



O

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