BILL NUMBER: SB 774	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 15, 2013

INTRODUCED BY   Senator Walters

                        FEBRUARY 22, 2013

   An act to  amend Section 22890 of, and to  add 
Article 7.5 (commencing with Section 22889.1) to Chapter 2 of Part 5
of Division 5 of Title 2 of   Sections 22874.3, 22875.3,
and 22910.2 to,  the Government Code, relating to retirement.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 774, as amended, Walters. State employees: postemployment
benefits. 
   The Public Employees' Medical and Hospital Care Act (PEMHCA),
which is administered by the Board of Administration of the Public
Employees' Retirement System, establishes provisions governing
postemployment health care benefits for certain retired public
employees and their families, upon meeting vesting requirements and
subject to various limitations. Existing law provides that a
represented state employee first hired on or after January 1, 1989,
shall not be vested for the full employer contribution payable for
annuitants unless he or she has 20 years of credited state service,
as defined, at the time of retirement, as specified.  
   This bill would prohibit a state employer, as defined, for
employees first hired on or after January 1, 2015, from providing
postemployment health care benefits on behalf of its employees unless
it fully funds those benefits, as determined by an actuary. This
bill would also prohibit a public employer, for employees first hired
on or after January 1, 2015, from entering into a memorandum of
understanding or other collective bargaining agreement that provides
for defined postemployment health care benefits for which a state
employee may opt in unless each employee pays at least 50% of the
actuarially required contributions to fund those health care
benefits. This bill would additionally provide that, for state
employees who become members of the system on and after January 1,
2015, the employer share of contribution for these benefits is 50%
after 15 years of credited state service and would increase that
percentage by 5% for each year of credit state service up to 100%
after 25 years of credited state service.  
   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.    Section 22874.3 is added to the 
 Government Code  , to read:  
   22874.3.  (a) Notwithstanding any other law, for employees first
hired on or after January 1, 2015, a state employer shall not enter
into a memorandum of understanding or other collective bargaining
agreement that provides for defined postemployment health care
benefits for which a state employee may opt in unless each employee
pays at least 50 percent of the actuarially required contributions to
fund those health care benefits.
   (b) If the provisions of this section are in conflict with the
provisions of a memorandum of understanding or other collective
bargaining agreement, the memorandum of understanding or other
collective bargaining agreement shall be controlling, except upon
expiration of the memorandum of understanding or other collective
bargaining agreement, this section shall be controlling and may not
be superseded by a subsequent memorandum of understanding or other
collective bargaining agreement.
   (c) For purposes of this section, the following definitions apply:

   (1) "State employee" means an officer, including those elected or
appointed, or an employee of a state employer.
   (2) "State employer" means the state and every state entity.
"State employer" shall not include the University of California.

   SEC. 2.    Section 22875.3 is added to the  
Government Code  , to read:  
   22875.3.  (a) Notwithstanding Sections 22870, 22871, 22873, and
22874, a state employee, defined by subdivision (c) of Section 3513,
who is employed by the state for the first time, who becomes a state
member of the system on or after January 1, 2015, shall not receive
any portion of the employer contribution payable for annuitants
unless the person is credited with 15 years of state service at the
time of retirement.
   (b) The percentage of the employer contribution payable for
postretirement health benefits for an employee subject to this
section shall be based on the completed years of credited state
service at retirement as shown in the following table: 
 Credited       Percentage of 
 Years          Employer 
 of Service     Contribution 
 15             50 
 16             55 
 17             60
 18             65 
 19             70 
 20             75 
 21             80 
 22             85 
 23             90 
 24             95 
 25 or more      100 


   (c) This section shall apply only to state employees that retire
for service. For purposes of this section, "state service" means
service rendered as an employee of the state or an appointed or
elected officer of the state for compensation. Notwithstanding
Section 22826, for purposes of this section, credited state service
includes service to the state for which the employee, pursuant to
Section 20281.5, did not receive credit.
   (d) This section does not apply to employees of the California
State University, the judicial branch, or the Legislature. 
   SEC. 3.    Section 22890 of the   Government
Code   is amended to read: 
   22890.  (a) The contracting agency and each employee or annuitant
shall contribute a portion of the cost of providing the benefit
coverage afforded under the health benefit plan approved or
maintained by the board in which the employee or annuitant may be
enrolled.
   (b) An annuitant is entitled to only one employer contribution. If
more than one annuitant is receiving an allowance as the survivor of
the same employee or annuitant, there shall be only one employer
contribution with respect to all such annuitants.
   (c) The contribution of each employee and annuitant shall be the
total cost per month of the benefit coverage afforded him or her
under the health benefit plan or plans in which he or she is enrolled
less the portion thereof to be contributed by the employer. The
employer contribution for each employee and annuitant shall commence
on the effective date of enrollment. 
   (d) The formulas for contributors pursuant to this article are
subject to the prefunding requirements in Section 22874.3.  

  SEC. 4.    Section 22910.2 is added to the Government
Code, to read:
   22910.2.  (a) Notwithstanding any other law, for employees first
hired on or after January 1, 2015, a state employer shall not provide
postemployment health care benefits on behalf of its employees,
unless it fully funds these benefits, as determined by an actuary.
   (b) For purposes of this section, "state employer" means the state
and every state entity. "State employer" shall not include the
University of California.  
       
  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.