BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 284|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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CONSENT
Bill No: AB 284
Author: Brough (R), et al.
Amended: 6/3/15 in Senate
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 4-0, 6/8/15
AYES: Pan, Morrell, Beall, Hall
NO VOTE RECORDED: Fuller
ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for
vote
SUBJECT: City of San Juan Capistrano: public employee pension
benefits
SOURCE: City of San Juan Capistrano
DIGEST: This bill approves a specified optional defined
benefit formula (Plan W) for the employees of the City of San
Juan Capistrano (SJC) in lieu of the formula required to be
provided for new employees under the Public Employees' Pension
Reform Act of 2013 (PEPRA). Plan W has been certified as having
no greater risk and no greater cost to the employer than the
PEPRA formula.
ANALYSIS:
Existing law:
1)Creates comprehensive public employee pension reform through
enactment of PEPRA (and related statutory changes) that apply
to all public employers and public pension plans on and after
January 1, 2013, excluding the University of California and
charter cities and counties that do not participate in a
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retirement system governed by state statute.
2)Changes, under PEPRA, the retirement benefit plans that may be
offered to new public employees, including:
a) Establishing uniform retirement formulas, including a 2%
at age 62 formula for non-safety workers, which caps out at
2.5% at age 67;
b) Requiring a three-year final compensation period for
determining a pension;
c) Requiring employee member contributions equal to 50% of
the normal cost of the employee's benefit plan;
d) Capping the amount of compensation that can count toward
a pension; and
e) Restricting the pay items that may be included in
pensionable compensation.
1)Specifies, with some exceptions, that the PEPRA requirements
are applicable to new retirement plan members who first become
members on and after January 1, 2013.
2)Authorizes an employer, upon approval of the Legislature, to
adopt a new, different retirement benefit plan or formula on
or after January 1, 2013, if that formula or plan is
determined and certified by the retirement system's chief
actuary and the retirement board to have no greater risk and
no greater cost to the employer than the PEPRA formula or
plan.
This bill is uncodified. It provides legislative approval for
SJC's Plan W. This bill makes findings and declarations in
regard to the following:
1)States the PEPRA requirement that alternative defined benefit
plans must be approved by the Legislature and meet specified
requirements.
2)States that SJC has negotiated memoranda of understanding with
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the SJC Management and Professional Employees Association and
the SJC Classified Employees Association pursuant to which new
employees may elect, instead of the plan required by PEPRA, a
hybrid retirement plan (i.e., Plan W) which provides a lesser
defined benefit plan than the plan required by PEPRA.
3)States that the hybrid plan has been certified and determined
by the chief actuary of the Orange County Employees Retirement
System as having no greater risk and no greater cost to the
employer than the relevant defined benefit formula required by
PEPRA.
4)States that the Legislature therefore approves the defined
benefit formula described in Plan W.
Background
According to the author:
In 2014, the City of San Juan Capistrano negotiated a
hybrid pension plan with the San Juan Capistrano Management
and Professional Employees Association and the San Juan
Capistrano Classified Employees Association for employees
new to public service, hired on or after January 1, 2015.
This plan provides new, nonsafety hires the option to elect
coverage under a PEPRA alternative defined benefit formula,
"Plan W." This option consists of a 1.62% at Age 65
benefit formula combined with a City match of up to a
maximum of 1% to a defined contribution plan. New
employees may choose the hybrid pension plan or the City's
existing "Plan U" 2.5% at Age 67 benefit pension plan that
satisfies PEPRA.
The hybrid plan has been certified and determined by the
chief actuary of the retirement system and the Board of
Retirement of the Orange County Employees Retirement System
(OCERS) as representing "no greater risk"
and "no greater cost" to the City than the benefit formula
otherwise required by PEPRA.
Comments
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According to OCERS:
The OCERS Board of Retirement met on December 15, 2014, and
accepted a report from Segal Consulting, the OCERS Board's
chief actuary, dated December 5, 2014 indicating that the
proposed alternative benefit formula of 1.62% at age 65 as
proposed for new employees of the City of San Juan
Capistrano did not provide for any greater risk, or any
greater cost than the 2.5% at age 67 formula benefit
formula established under PEPRA.
Prior/Related Legislation
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA,
which became effective on January 1, 2013.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/9/15)
City of San Juan Capistrano (source)
Classified Employees Association of the City of San Juan
Capistrano
Management and Professional Employees Association of the City
of San Juan Capistrano
OPPOSITION: (Verified6/9/15)
None received
ARGUMENTS IN SUPPORT: According to the sponsor and supporters,
Plan W provides employees new to public service the option of a
PEPRA specified defined benefit formula or a hybrid pension plan
with a lower cost defined benefit component and a defined
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contribution component. Plan W is consistent with the PEPRA
principle of reducing agency pension costs and is permissible as
long as certain conditions are met.
ASSEMBLY FLOOR: 78-0, 5/14/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Linder, Medina
Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519
6/10/15 12:41:31
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