BILL ANALYSIS Ó SENATE COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT Dr. Richard Pan, Chair 2015 - 2016 Regular Bill No: AB 868 Hearing Date: 6/08/15 ----------------------------------------------------------------- |Author: |Obernolte | |-----------+-----------------------------------------------------| |Version: |2/26/15 As introduced | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Glenn Miles | | | | ----------------------------------------------------------------- Subject: Public Employees' Retirement System: contracting agencies: transfer of membership SOURCE: Big Bear Fire Authority ASSEMBLY VOTES: ----------------------------------------------------------------- |Assembly Floor: |77 - 0 | |--------------------------------+--------------------------------| |Assembly Appropriations |17 - 0 | |Committee: | | |--------------------------------+--------------------------------| |Assembly Public Employees, |7 - 0 | |Retirement/Soc Sec Committee: | | ----------------------------------------------------------------- DIGEST: This bill authorizes the California Public Employees' Retirement System (CalPERS) and the San Bernardino County Employees Retirement System (SBCERS) to agree to transfer the service credit and employee and employer assets from CalPERS to SBCERS on behalf of local public agency and state employees who are transferred to SBCERS covered employment. ANALYSIS: Existing law: AB 868 (Obernolte) Page 2 of ? 1)Authorizes CalPERS and a county retirement system established under the County Employees Retirement Law of 1937 ('37 Act) for the counties of Los Angeles, Kern, or Orange to make an agreement to transfer assets and service credit to the '37 Act system from CalPERS for CalPERS members whose public agency or state employer transfers their firefighting or law enforcement functions and positions to the county and terminates its contract with CalPERS governing the transferred members. 2)Provides that the agreement between CalPERS and the '37 Act system shall contain provisions necessary to protect CalPERS, including provisions for determination of the amount, time, and manner of transfer of cash or securities, or both, to be transferred to the county system representing the actuarial value of the interests in the retirement fund of the public agency or the state and the transferred employees by reason of accumulated contributions credited to that public agency or the state and the transferred employees. 3)Requires that all liability of CalPERS with respect to the transferred members under the agreement shall cease and shall become the liability of the respective '37 Act system as of the date of transfer specified in the agreement. Liability of the '37 Act system shall be for payment of benefits to transferred employees in accordance with '37 Act requirements. 4)Provides that the transferred members shall become members of the '37 Act system upon entering county service and shall be entitled to service credit in the county retirement system for the service for which the person was entitled to credit in CalPERS at the time of cessation of employment by the public agency or the state, without necessity of payment of any additional contributions in respect to that service, as specified. This bill: 1)Authorizes CalPERS to enter into an agreement with the Board of Retirement for the San Bernardino County Employees' Retirement Association (SBCERA) for the transfer of service credit and associated assets and liabilities for specified safety employees. The decision to enter into the agreement must be agreed to by both CalPERS and SBCERA. 2)Permits such an agreement for safety employees of a public AB 868 (Obernolte) Page 3 of ? agency or the state who have ceased to be employed by that public agency or the state as a result of the transfer of firefighting or law enforcement functions to a local agency that participates in SBCERA. 3)Specifies that the agreement must provide for the termination of participation in CalPERS for the public agency's transferring employees. 4)Specifies that public agencies must have contracted with CalPERS for at least five years to be eligible. 5)Empowers CalPERS to require provisions it finds necessary in the agreement related to the transfer of assets and accumulated contributions and benefits subject to an outstanding domestic relations order or benefits subject to a lien. 6)Specifies that the agreement applies only to employees of the public agency on the effective date of the agreement. 7)Specifies that once transferred from CalPERS to the county system, SBCERA would assume all the liability for the payment of benefits for the transferred members. 8)Specifies that the transferred members would have the same rights and limitations as if they had been members of the county retirement system during their membership in CalPERS. Background According to the bill's sponsor, In June of 2012, the boards of the Big Bear City Community Services District (City) and the Big Bear Lake Fire Protection District (Lake) acted to establish a Joint Powers Authority creating the Big Bear Fire Authority (Fire Authority). Since that time, the fire department administration has been consolidated, jurisdictional boundaries have been removed, and standard operational policies and procedures have been implemented. The Fire Authority is now set to manage its own financial responsibilities and is now functioning in almost every aspect as one department. AB 868 (Obernolte) Page 4 of ? Currently, all employees remain employed by their respective agencies. Under those employment arrangements, employees of the City are enrolled in a CalPERS retirement plan and employees of the Lake are enrolled in a SBCERA retirement plan. Under current law, however, if the Fire Authority chooses to contract with SBCERA, the City safety employees (currently in CalPERS) cannot transfer their service credit to SBCERA without legislative approval. Current law allows for a CalPERS safety employee's service credit to be transferred to a county retirement system in cases where firefighting or law enforcement functions are transferred from an agency participating in CalPERS to an agency participating in a county retirement system. Currently, however, this is only applicable to the counties of Los Angeles, Kern, and Orange. AB 868 would add San Bernardino County to this group. Prior/Related Legislation AB 1683 (Assembly PER&SS Committee, Chapter 11, Statutes of 2001) added Kern County to the list of counties eligible to transfer safety/firefighter members from CalPERS to their '37 Act county system. AB 355 (Morrissey, Chapter 832, Statutes of 1997) provided for the transfer of assets and liabilities from CalPERS to the '37 Act system in Orange County related to the 1980 shift of firefighting services previously provided by the State (CDF) to Orange County. AB 2819 (Epple, Chapter 419, Statutes of 1990) authorized the transfer, from CalPERS to the '37 Act system in Los Angeles, of assets and liabilities associated with employees of numerous cities that had previously contracted with CalPERS but then transferred their fire services to LA County. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No SUPPORT: AB 868 (Obernolte) Page 5 of ? Big Bear Fire Authority (source) Big Bear City Community Services District Big Bear Lake Fire Protection District OPPOSITION: None received ARGUMENTS IN SUPPORT: According to the sponsor, the joint powers agency created by City and Lake would consolidate City employees who are covered in CalPERS with Lake employees who are covered in SBCERA. "The Fire Authority is now set to manage its own financial responsibilities and is now functioning in almost every aspect as one department." However, "under current law, City safety employees cannot transfer their CalPERS service credit to the new system without legislative approval." AB 868 would authorize such a transfer and enable the Big Bear City and Lake fire agencies to complete their consolidation into the Fire Authority.