Amended in Assembly August 22, 2014

Amended in Assembly June 18, 2014

Amended in Senate April 24, 2014

Amended in Senate April 21, 2014

Amended in Senate April 2, 2014

Senate BillNo. 1251


Introduced by Senator Huff

February 20, 2014


An act to amend Section 7522.02 of the Government Code, relating to public employees’ retirement.

LEGISLATIVE COUNSEL’S DIGEST

SB 1251, as amended, Huff. California Public Employees’ Pension Reform Act of 2013: joint powers authority: employees.

The California Public Employees’ Pension Reform Act of 2013 (PEPRA) requires a public retirement system, as defined, to modify its plan or plans to comply with the act and, among other provisions, establishes new retirement formulas that may not be exceeded by a public employer offering a defined benefit pension plan for employees first hired on or after January 1, 2013. PEPRA authorizes individuals who were employed by any public employer before January 1, 2013, and who became employed by a subsequent public employer for the first time on or after January 1, 2013, to be subject to the retirement plan that would have been available to employees of the subsequent employer who were first employed by the subsequent employer on or before December 31, 2012, if the individual was subject to reciprocity, as specified.

Existing law, the Joint Exercise of Powers Act, generally authorizes 2 or more public agencies, by agreement, to jointly exercise any common power, which may include hiring employees and establishing retirement systems.

This bill wouldbegin delete requireend deletebegin insert authorizeend insert a joint powers authority formed bybegin delete one or more public employers,end deletebegin insert the cities of Brea and Fullertonend insert on or after January 1, 2013, to provide employees who are not new members under PEPRA with the defined benefit plan or formula that wasbegin delete available toend deletebegin insert received by thoseend insert employeesbegin delete of the employerend deletebegin insert from their respective employersend insert on December 31, 2012, if they are employed by thebegin insert joint powersend insert authority without a break in service of more than 180 days.begin insert The bill would authorize up to 3 cities in Orange County, as specified, to join the authority.end insert This bill would prohibit the formation of a joint powers authority on or after January 1, 2013, in a manner that would exempt a new employee or a new member from the requirements of PEPRA.

begin insert

This bill would incorporate additional changes to Section 7522.02 of the Government Code proposed by AB 1783, to be operative only if AB 1783 and this bill are both chaptered and become effective on or before January 1, 2015, and this bill is chaptered last.

end insert
begin insert

The bill would make a statement of findings with regard to the need for a special law.

end insert

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,
9the Judges’ Retirement System II, county and district retirement
10systems created pursuant to the County Employees Retirement
11Law of 1937 (Chapter 3 (commencing with Section 31450) of Part
123 of Division 4 of Title 3), independent public retirement systems,
13and to individual retirement plans offered by public employers.
P3    1However, this article shall be subject to the Internal Revenue Code
2and Section 17 of Article XVI of the California Constitution. The
3administration of the requirements of this article shall comply with
4applicable provisions of the Internal Revenue Code and the
5Revenue and Taxation Code.

6(2) Notwithstanding paragraph (1), this article shall not apply
7to the entities described in Section 9 of Article IX of, and Sections
84 and 5 of Article XI of, the California Constitution, except to the
9extent that these entities continue to be participating employers in
10any retirement system governed by state statute. Accordingly, any
11retirement plan approved before January 1, 2013, by the voters of
12any entity excluded from coverage by this section shall not be
13affected by this article.

14(3) (A) Notwithstanding paragraph (1), this article shall not
15apply to a public employee whose interests are protected under
16Section 5333(b) of Title 49 of the United States Code until a federal
17district court rules that the United States Secretary of Labor, or
18his or her designee, erred in determining that the application of
19this article precludes certification under that section, or until
20January 1, 2015, whichever is sooner.

21(B) If a federal district court upholds the determination of the
22United States Secretary of Labor, or his or her designee, that
23application of this article precludes him or her from providing a
24certification under Section 5333(b) of Title 49 of the United States
25Code, this article shall not apply to a public employee specified
26in subparagraph (A).

27(4) Notwithstanding paragraph (1), this article shall not apply
28to a multiemployer plan authorized by Section 302(c)(5) of the
29federal Taft-Hartley Act (29 U.S.C. Sec. 186(c)(5)) if the public
30employer began participation in that plan prior to January 1, 2013,
31and the plan is regulated by the federal Employee Retirement
32Income Security Act of 1974begin delete (Public Law 93-406)end deletebegin insert end insertbegin insert(29 U.S.C. Sec.
331001 et seq.)end insert
.

34(b) The benefit plan required by this article shall apply to public
35employees who are new members as defined in Section 7522.04.

36(c) (1) Individuals who were employed by any public employer
37before January 1, 2013, and who became employed by a subsequent
38public employer for the first time on or after January 1, 2013, shall
39be subject to the retirement plan that would have been available
40to employees of the subsequent employer who were first employed
P4    1by the subsequent employer on or before December 31, 2012, if
2the individual was subject to concurrent membership for which
3creditable service was performed in the previous six months or
4reciprocity established under any of the following provisions:

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

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

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

11(D) Section 22115.2 of the Education Code.

12(2) An individual who was employed before January 1, 2013,
13and who, without a separation from employment, changed
14employment positions and became subject to a different defined
15benefit plan in a different public retirement system offered by his
16or her employer shall be subject to that defined benefit plan as it
17would have been available to employees who were first employed
18on or before December 31, 2012.

19(d) If a public employer, before January 1, 2013, offers a defined
20benefit pension plan that provides a defined benefit formula with
21a lower benefit factor at normal retirement age and results in a
22lower normal cost than the defined benefit formula required by
23this article, that employer may continue to offer that defined benefit
24formula instead of the defined benefit formula required by this
25article, and shall not be subject to the requirements of Section
267522.10 for pensionable compensation subject to that formula.
27However, if the employer adopts a new defined benefit formula
28on or after January 1, 2013, that formula must conform to the
29requirements of this article or must be determined and certified by
30the retirement system’s chief actuary and the retirement board to
31have no greater risk and no greater cost to the employer than the
32defined benefit formula required by this article and must be
33approved by the Legislature. New members of the defined benefit
34plan may only participate in the lower cost defined benefit formula
35that was in place before January 1, 2013, or a defined benefit
36formula that conforms to the requirements of this article or is
37approved by the Legislature as provided in this subdivision.

38(e) If a public employer, before January 1, 2013, offers a
39retirement benefit plan that consists solely of a defined contribution
40plan, that employer may continue to offer that plan instead of the
P5    1defined benefit pension plan required by this article. However, if
2the employer adopts a new defined benefit pension plan or defined
3benefit formula on or after January 1, 2013, that plan or formula
4must conform to the requirements of this article or must be
5determined and certified by the retirement system’s chief actuary
6and the system’s board to have no greater risk and no greater cost
7to the employer than the defined benefit formula required by this
8article and must be approved by the Legislature. New members of
9the employer’s plan may only participate in the defined
10contribution plan that was in place before January 1, 2013, or a
11defined contribution plan or defined benefit formula that conforms
12to the requirements of this article. This subdivision shall not be
13construed to prohibit an employer from offering a defined
14contribution plan on or after January 1, 2013, either with or without
15a defined benefit plan, whether or not the employer offered a
16defined contribution plan prior to that date.

17(f) (1) begin deleteIf one or more public employers, end deletebegin insertIf, end inserton or after January
181, 2013,begin insert the Cities of Brea and Fullertonend insert form a joint powers
19authority pursuant to the provisions of the Joint Exercise of Powers
20Act (Article 1 (commencing with Section 6500) of Chapter 5), that
21joint powers authoritybegin delete shallend deletebegin insert mayend insert providebegin insert employeesend insert the defined
22benefit plan or formula thatbegin delete would have been available to
23employees of the employerend delete
begin insert those employees received from their
24respective employersend insert
on December 31, 2012, to any employee of
25begin deletethat public employerend deletebegin insertthe City of Brea, the City of Fullerton, or a
26city described in paragraph (2)end insert
who is not a new member and
27subsequently is employed by the joint powers authority without a
28break in service of more than 180 days.

begin delete

29(2) If there was more than one retirement plan or formula in
30place on December 31, 2012, due to there being more than one
31employer, then the joint powers authority shall indicate which
32defined benefit plan or formula shall apply to employees of the
33authority who meet the conditions of paragraph (1).

end delete
begin delete

31 34(3)

end delete

35begin insert(2)end insertbegin insertOn or before January 1, 2017, a city in Orange County that
36is contiguous to the City of Brea or the City of Fullerton may join
37the joint powers authority described in paragraph (1) but not more
38than three cities shall be permitted to join.end insert
begin delete Theend delete

39begin insert(3)end insertbegin insertend insertbegin insertTheend insert formation of a joint powers authority on or after January
401, 2013, shall not act in a manner as to exempt a new employee
P6    1or a new member, as defined by Section 7522.04, from the
2requirements of this article. New members may only participate
3in a defined benefit plan or formula that conforms to the
4requirements of this article.

5(g) The Judges’ Retirement System and the Judges’ Retirement
6System II shall not be required to adopt the defined benefit formula
7required by Section 7522.20 or 7522.25 or the compensation
8limitations defined in Section 7522.10.

9(h) 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(i) On and after January 1, 2013, each public retirement system
14shall modify its plan or plans to comply with the requirements of
15this article and may adopt regulations or resolutions for this
16purpose.

17begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 7522.02 of the end insertbegin insertGovernment Codeend insertbegin insert is amended
18to read:end insert

19

7522.02.  

(a) (1) Notwithstanding any other law, except as
20provided in this article, on and after January 1, 2013, this article
21shall apply to all state and local public retirement systems and to
22their participating employers, including the Public Employees’
23Retirement System, the State Teachers’ Retirement System, the
24Legislators’ Retirement System, the Judges’ Retirement System,
25the Judges’ Retirement System II, county and district retirement
26systems created pursuant to the County Employees Retirement
27Law ofbegin delete 1937,end deletebegin insert end insertbegin insert1937 (Chapter 3 (commencing with Section 31450)
28of Part 3 of Division 4 of Title 3),end insert
independent public retirement
29systems, and to individual retirement plans offered by public
30employers. However, this article shall be subject to the Internal
31Revenue Code and Section 17 of Article XVI of the California
32Constitution. The administration of the requirements of this article
33shall comply with applicable provisions of the Internal Revenue
34Code and the Revenue and Taxation Code.

35(2) Notwithstanding paragraph (1), this article shall not apply
36to the entities described in Section 9 of Article IX of, and Sections
374 and 5 of Article XI of, the California Constitution, except to the
38extent that these entities continue to be participating employers in
39any retirement system governed by state statute. Accordingly, any
40retirement plan approved before January 1, 2013, by the voters of
P7    1any entity excluded from coverage by this section shall not be
2 affected by this article.

3(3) (A) Notwithstanding paragraph (1), this article shall not
4apply to a public employee whose interests are protected under
5Section 5333(b) of Title 49 of the United States Code until a federal
6district court rules that the United States Secretary of Labor, or
7his or her designee, erred in determining that the application of
8this article precludes certification under that section, or until
9January 1,begin delete 2015,end deletebegin insert 2016,end insert whichever is sooner.

10(B) If a federal district court upholds the determination of the
11United States Secretary of Labor, or his or her designee, that
12application of this article precludes him or her from providing a
13certification under Section 5333(b) of Title 49 of the United States
14Code, this article shall not apply to a public employee specified
15in subparagraph (A).

16(4) Notwithstanding paragraph (1), this article shall not apply
17to a multiemployer plan authorized by Section 302(c)(5) of the
18begin insert federalend insert Taft-Hartley Act (29 U.S.C. Sec. 186(c)(5)) if the public
19employer began participation in that plan prior to January 1, 2013,
20and the plan is regulated by thebegin insert federalend insert Employee Retirement
21Income Security Act of 1974begin insert end insertbegin insert(29 U.S.C. Sec. 1001 et seq.)end insert.

22(b) The benefit plan required by this article shall apply to public
23employees who are new members as defined in Section 7522.04.

24(c) (1) Individuals who were employed by any public employer
25before January 1, 2013, and who became employed by a subsequent
26public employer for the first time on or after January 1, 2013, shall
27be subject to the retirement plan that would have been available
28to employees of the subsequent employer who were first employed
29by the subsequent employer on or before December 31, 2012, if
30the individual was subject to concurrent membership for which
31creditable service was performed in the previous six months or
32reciprocity established under any of the following provisions:

33(A) Article 5 (commencing with Section 20350) of Chapter 3
34of Part 3 of Division 5 of Title 2.

35(B) Chapter 3 (commencing with Section 31450) of Part 3 of
36Division 4 of Title 3.

37(C) Any agreement between public retirement systems to provide
38reciprocity to members of the systems.

39(D) Section 22115.2 of the Education Code.

P8    1(2) An individual who was employed before January 1, 2013,
2and who, without a separation from employment, changed
3employment positions and became subject to a different defined
4benefit plan in a different public retirement system offered by his
5or her employer shall be subject to that defined benefit plan as it
6would have been available to employees who were first employed
7on or before December 31, 2012.

8(d) If a public employer, before January 1, 2013, offers a defined
9 benefit pension plan that provides a defined benefit formula with
10a lower benefit factor at normal retirement age and results in a
11lower normal cost than the defined benefit formula required by
12this article, that employer may continue to offer that defined benefit
13formula instead of the defined benefit formula required by this
14article, and shall not be subject to the requirements of Section
157522.10 for pensionable compensation subject to that formula.
16However, if the employer adopts a new defined benefit formula
17on or after January 1, 2013, that formula must conform to the
18requirements of this article or must be determined and certified by
19the retirement system’s chief actuary and the retirement board to
20have no greater risk and no greater cost to the employer than the
21defined benefit formula required by this article and must be
22approved by the Legislature. New members of the defined benefit
23plan may only participate in the lower cost defined benefit formula
24that was in place before January 1, 2013, or a defined benefit
25formula that conforms to the requirements of this article or is
26approved by the Legislature as provided in this subdivision.

27(e) If a public employer, before January 1, 2013, offers a
28retirement benefit plan that consists solely of a defined contribution
29plan, that employer may continue to offer that plan instead of the
30defined benefit pension plan required by this article. However, if
31the employer adopts a new defined benefit pension plan or defined
32benefit formula on or after January 1, 2013, that plan or formula
33must conform to the requirements of this article or must be
34determined and certified by the retirement system’s chief actuary
35and the system’s board to have no greater risk and no greater cost
36to the employer than the defined benefit formula required by this
37article and must be approved by the Legislature. New members of
38the employer’s plan may only participate in the defined
39contribution plan that was in place before January 1, 2013, or a
40defined contribution plan or defined benefit formula that conforms
P9    1to the requirements of this article. This subdivision shall not be
2construed to prohibit an employer from offering a defined
3contribution plan on or after January 1, 2013, either with or without
4a defined benefit plan, whether or not the employer offered a
5defined contribution plan prior to that date.

begin insert

6(f) (1) If, on or after January 1, 2013, the Cities of Brea and
7Fullerton form a joint powers authority pursuant to the provisions
8of the Joint Exercise of Powers Act (Article 1 (commencing with
9Section 6500) of Chapter 5), that joint powers authority may
10provide employees the defined benefit plan or formula that those
11employees received from their respective employers on December
1231, 2012, to any employee of the City of Brea, the City of Fullerton,
13or a city described in paragraph (2) who is not a new member and
14subsequently is employed by the joint powers authority without a
15break in service of more than 180 days.

end insert
begin insert

16(2) On or before January 1, 2017, a city in Orange County that
17is contiguous to the City of Brea or the City of Fullerton may join
18the joint powers authority described in paragraph (1) but not more
19than three cities shall be permitted to join.

end insert
begin insert

20(3) The formation of a joint powers authority on or after January
211, 2013, shall not act in a manner as to exempt a new employee
22or a new member, as defined by Section 7522.04, from the
23requirements of this article. New members may only participate
24in a defined benefit plan or formula that conforms to the
25requirements of this article.

end insert
begin delete

26(f)

end delete

27begin insert(g)end insert The Judges’ Retirement System and the Judges’ Retirement
28System II shall not be required to adopt the defined benefit formula
29required by Section 7522.20 or 7522.25 or the compensation
30limitations defined in Section 7522.10.

begin delete

31(g)

end delete

32begin insert(h)end insert This article shall not be construed to provide membership
33in any public retirement system for an individual who would not
34otherwise be eligible for membership under that system’s
35applicable rules or laws.

begin delete

36(h)

end delete

37begin insert(i)end insert On and after January 1, 2013, each public retirement system
38shall modify its plan or plans to comply with the requirements of
39this article and may adopt regulations or resolutions for this
40purpose.

P10   1begin insert

begin insertSEC. 3.end insert  

end insert
begin insert

The Legislature finds and declares that a special law
2is necessary and that a general law cannot be made applicable
3within the meaning of Section 16 of Article IV of the California
4Constitution because of the need to clarify the benefit eligibility
5rules under the California Public Employees’ Pension Reform Act
6of 2013 and maintain the integrity of that act and further its
7purpose.

end insert
8begin insert

begin insertSEC. 4.end insert  

end insert
begin insert

Section 2 of this bill incorporates amendments to
9Section 7522.02 of the Government Code proposed by this bill and
10AB 1783. It shall only become operative if (1) both bills are enacted
11and become effective on or before January 1, 2015, (2) each bill
12amends Section 7522.02 of the Government Code, and (3) this bill
13is enacted after AB 1783, in which case Section 7522.02 of the
14Government Code, as amended by AB 1783, shall remain operative
15only until the operative date of this bill, at which time Section 2
16of this bill shall become operative, and Section 1 of this bill shall
17not become operative.

end insert


O

    94