BILL NUMBER: SB 774	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Walters

                        FEBRUARY 22, 2013

   An act to add Article 7.5 (commencing with Section 22889.1) to
Chapter 2 of Part 5 of Division 5 of Title 2 of the Government Code,
relating to retirement.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 774, as introduced, Walters. State employees: postemployment
benefits.
   The Public Employees' Medical and Hospital Care Act authorizes the
Board of Administration of the Public Employees' Retirement System
to contract with carriers for health benefit plans and major medical
plans for employees and annuitants, as defined, and approve other
specified plans.
   This bill would require the Board of Administration of the Public
Employees' Retirement System to develop a comprehensive plan,
pursuant to specified criteria, to restructure health and other
postretirement benefits, exclusive of pension benefits, for new state
employees hired on or after January 1, 2015. Specified elements of
the plan to be developed by the board include prefunding methods and
contribution requirements, new employee vesting requirements, and
employee benefit and participation options.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Article 7.5 (commencing with Section 22889.1) is added
to Chapter 2 of Part 5 of Division 5 of Title 2 of the Government
Code, to read:

      Article 7.5.  Other Postemployment Benefits


   22889.1.  The Legislature finds and declares:
   (a) The purpose of this article is to reform the way the State of
California funds and offers other postemployment benefits, including
retiree health care, to new state employees hired on or after January
1, 2015.
   (b) If the state wants to offer lifetime retiree health benefits
to new employees, it will be necessary to prefund those benefits
actuarially, similar to how pensions are funded.
   (c) State employees should have options for the use of the
contributions made by the employer and employee for postemployment
health benefits.
   22889.2.  (a) The Board of Administration of the Public Employees'
Retirement System (board) shall develop a comprehensive plan to
restructure health and other postretirement benefits, exclusive of
pension benefits, for new state employees hired on or after January
1, 2015, that incorporates the following concepts:
   (1) A method for the state to prefund, as that term is defined in
Section 22781, postemployment benefits for new state employees.
   (2) A method for determining, using actuarial methods, the value
of a new state employee's health care benefits at any given point
during the employee's working years.
   (3) The state shall be required to contribute 50 percent of the
normal cost rate for these benefits during the new state employee's
working years.
   (4) A new state employee shall be required to have 20 years of
credited state service to be eligible for lifetime health care
benefits.
   (5) A new state employee who does not have 20 years of state
service credit prior to retiring shall have the total of all
contributions made by the employer and the employee, together with
interest accrued, placed in a retiree health care savings account
upon the employee's retirement, for the benefit of the employee.
   (6) The state shall create and the board shall administer, a
system of retiree health care savings accounts for those new state
employees subject to this article that do not receive lifetime health
benefits.
   (7) A new state employee shall have the following options:
   (A) Receive lifetime retiree health benefits, upon 20 years of
state service credit, if they contribute 50 percent of the normal
cost rate during their working years.
   (B) Not to contribute to a state-sponsored health care benefits
plan and to elect instead to be placed in a defined contribution plan
under which the state contributes a percentage of the employee's
compensation into a retiree health savings account during the
employee's working years, which will be available for the employee
when he or she retires and the use of which is regulated by federal
law.
   (C) Opt out of contributing to or receiving postemployment health
care benefits entirely in exchange for slightly higher compensation,
as is allowed in current law.
   (b) The board shall submit to the Legislature, by September 1,
2014, a report containing the comprehensive plan required by this
section. This report shall not be subject to the requirements of
Section 9795.