Amended in Senate April 15, 2013

Senate Bill No. 775

Introduced by Senator Walters

February 22, 2013

An act begin delete to add Article 7.5 (commencing with Section 22889.1) to Chapter 1 of Part 5 of Division 5 of Title 2 of the Government Code, end delete relating to retirement.

LEGISLATIVE COUNSEL’S DIGEST

SB 775, as amended, Walters. State employees: postemployment benefits.

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Existing law requires all state and local retirement systems to secure, not less than triennially, the services of an enrolled actuary, who is to perform a valuation of the system. Existing law requires all state and local public retirement systems to secure the services of a qualified person to perform an attest audit of the system’s financial statements and to provide reports in this regard to the Controller. Existing law requires the Controller to review these reports and requires the Controller to publish an annual report on the financial condition of all state and local public retirement systems, as specified.

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This bill would require the Controller to include in its 2015 report a section that uses the data collected for that report to evaluate the actuarial feasibility and associated costs of a statewide buyout of current state employees’ defined postemployment health care benefits.

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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 to approve other specified plans.

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This bill would require the Board of Administration of the Public Employees’ Retirement System to develop a comprehensive plan, pursuant to specified criteria, to provide current state employees, with or without vested health care benefits, certain options to receive a buyout or transfer of promised postemployment health care benefits. Specified requirements for the plan to be developed by the board include the creation and administration of retiree health care savings accounts, determination of the potential costs of the program, and development of actuarial methods to determine the present value of postretirement health care benefits.

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

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

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begin insert SECTION 1. end insert   

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begin insert The Controller shall include in the 2015 report
published pursuant to Section 7504 of the Government Code a
section that uses the data collected for that report to evaluate the
actuarial feasibility and associated costs of a statewide buyout of
current state employees’ defined postemployment health care
benefits. end insert

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SECTION 1.  

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

 

Article 7.5.  PostEmployment Health Care Benefits

 

22889.1.  

The Legislature finds and declares:

(a) The purpose of this article is to reduce the unfunded liability
of the State of California’s postemployment health care benefits.

(b)  According to the Controller’s most recent valuation report,
the state’s unfunded liability for postemployment health care
benefits stands at $62.1 billion.

(c) The Legislature intends to enact legislation that would enable
the state to offer current state employees options of a buyout or
transfer of their future health care benefits, and to enact legislation
to administer and fund such a program.

(d) The Legislature intends to enact legislation to create a special
fund to receive any state taxes generated from state employees
who elect to accept a buyout of future health care benefits; the
proceeds of this fund would be used to pay down any remaining
debt or unfunded liability arising from postemployment health
care benefits.

22889.2.  

(a)   The Board of Administration of the Public
Employees’ Retirement System (board) shall develop a
comprehensive plan to provide current state employees with an
option to accept a buyout of their health and other postretirement
benefits, exclusive of pension benefits, that incorporates the
following concepts:

(1) The state shall offer for a limited period, not to exceed four
consecutive months, a one-time buyout option for current state
employees.

(2) The state shall permit a vested, current employee to release
his or her promised retiree health benefits in exchange for one of
the following options:

(A) A lump-sum cash payout of up to 80 percent of the current
value of the employee’s future health benefits, as determined by
an actuary, of which amount a minimum of 20 percent would be
placed into a retiree health savings account that would be available
to the employee when he or she retires.

(B) An incremental deferred compensation payout of up to 80
percent of the current value of the employee’s future health
benefits, as determined by an actuary, of which amount a minimum
of 20 percent would be placed into a retiree health savings account
that would be available to the employee when he or she retires.

(C) A transfer of 100 percent of the current value of the
employee’s future health benefits, as determined by an actuary, to
a retiree health savings account.

(D) Any combination of the above options as long as a minimum
of 20 percent of any payout or transfer is placed into a retiree health
savings account.

(3) The state shall permit a nonvested, current employee to
release his or her promised retiree health benefits in exchange for
one of the following options:

(A) A lump-sum cash payout of up to 80 percent of the current
value of the employee’s future health benefits, as determined by
an actuary, five years from the date the employee agrees to take
the buyout option, of which amount a minimum of 20 percent
would be placed into a retiree health savings account immediately.

(B) An incremental deferred compensation payout of up to 80
percent of the current value of the employee’s future health
benefits, as determined by an actuary, beginning five years from
the date the employee agreed to take the buyout option, of which
amount a minimum of 20 percent would be placed into a retiree
health savings account immediately.

(C) A transfer of 100 percent of the current value of the
employee’s future health benefits, as determined by an actuary, to
a retiree health savings account.

(D) Any combination of the above options as long as a minimum
of 20 percent of any payout or transfer is placed into a retiree health
savings account.

(b) The employee shall not be relieved of any tax liability
resulting from the lump-sum or deferred compensation options.

(c) The state shall create and the board shall administer retiree
health savings accounts for current state employees who exercise
one or more of the options under the plan.

(d) The board shall determine the potential costs of
implementing this program.

(e) 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.

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