BILL ANALYSIS Ó
AB 1031
Page 1
ASSEMBLY THIRD READING
AB
1031 (Thurmond)
As Introduced February 26, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
|----------------+------+---------------------+----------------------|
|Public |7-0 |Bonta, Waldron, | |
|Employees | |Cooley, | |
| | |Jones-Sawyer, | |
| | |O'Donnell, Rendon, | |
| | |Wagner | |
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SUMMARY: Specifies that an employer who contracts with the
California Public Employees' Retirement System (CalPERS) for
health care coverage pursuant to the Public Employees' Medical and
Hospital Care Act (PEMHCA) is required to meet its obligation to
provide any collectively bargained, statutorily required or vested
retiree health care contribution, including reimbursement for
Medicare Part B premiums, as specified.
EXISTING LAW:
1)Establishes PEMHCA under the administration of CalPERS.
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2)Requires a public agency that elects to participate in PEMHCA to
adopt a resolution and forward it to CalPERS. CalPERS does not
currently collect, nor does it maintain records of bargaining
agreements between the employer and its employees' exclusive
representatives as they relate to health benefits.
3)Provides the following three vesting options for contracting
agencies under PEMHCA:
a) A contracting agency could opt to make the employer
contribution amount equal for both active employees and
annuitants. Under this option, an employee who retires and
meets the definition of annuitant becomes 100% vested and
receives an employer contribution amount equal to what the
active employees receive.
b) A contracting agency that joins PEMHCA on or after January
1, 1986, has the option to temporarily pay a lesser employer
contribution amount for annuitants than for active employees
provided the agency increases its contribution for annuitants
each year, over a 20-year period, until it equals the
agency's contributions for active employees.
c) A contracting agency has the option to establish a pre-set
"vesting schedule" which establishes specific percentages of
employer contributions based on an employee's credited years
of service. Under this option, an employee must have 10
years of CalPERS service, with at least five of those years
performed with the contracting agency to qualify for a 50%
employer contribution toward annuitant health care,
increasing 5% for each year of service, until the employee is
100% vested at 20 years of service.
4)Provides for eligible annuitants to receive health care coverage
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in any of the CalPERS basic health plans available to active
employees until they are eligible for Medicare, whereupon they
are able to enroll in Medicare and elect one of the CalPERS
coordinated Medicare health plans.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: Medicare is a federal health insurance program that
covers individuals age 65 and older. Medicare also covers some
individuals under age 65 with Social Security-qualified
disabilities and with End-Stage Renal Disease. The Social
Security Administration (SSA) is the federal agency responsible
for Medicare eligibility determination, enrollment and premiums.
Medicare Part A is hospital insurance that helps pay for inpatient
hospital stays, skilled nursing facilities, hospice care and some
home health care. Retirees and their dependents may become
eligible for premium-free Part A at age 65 with a work history of
10 years (40 quarters) with Social Security/Medicare-covered
employment, or through the work history of a current, former or
deceased spouse. Individuals that entered public employment prior
to April 1, 1986, and were not subject to Social Security, were
not initially subject to the Medicare tax, and are therefore not
eligible for Medicare Part A and B benefits without additional
payments.
Medicare Part B is medical insurance that helps pay for outpatient
health care expenses, including doctor visits. Individuals are
responsible for paying the Part B premiums to the SSA. If an
individual is receiving SSA benefits, the premiums will be
deducted from his or her Social Security benefits.
CalPERS annuitants must have Medicare Part B in order to
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participate in a CalPERS Medicare health plan. Existing statute
requires CalPERS to reimburse State of California and CSU retirees
enrolled in a CalPERS Medicare plan for all or a portion of the
Medicare Part B premiums they pay on behalf of themselves and
their spouses. This reimbursement appears as a credit on the
annuitant's benefit warrant.
According to the author, "If a firefighter, or any employee, who
is NOT in Social Security or Medicare and is covered by a statute
or agreement providing an employer paid post-employment health
care contribution, then the employer would directly pay to the
health plan the full premium cost or proportion thereof as
obligated by that statute or agreement.
"However, if a firefighter is Medicare eligible and enrolled in a
Medicare Part A and B plan (as required by PEMHCA), the Medicare
Part B premium must be taken directly out of the firefighter's
Social Security warrant. Additionally, in cases where the
firefighter is in Medicare only then the retired firefighter is
directly billed for the Part B premium. In these cases, the
firefighter should be reimbursed by the employer for the amount of
the Part B premium, or whatever amount is consistent with the
employer contribution obligation."
"Because some firefighters participate in Medicare and others do
not, a disparity exists in the way that post-employment healthcare
premiums are paid. In instances where a retiree is promised a
post-employment healthcare contribution from his or her employer
that would cover some or all of their Part B premium, the retiree
is entitled to reimbursement for that obligated amount. However,
a problem arises when the employer fails to provide that
reimbursement."
The author concludes, "AB 1031 ensures equal treatment of all
firefighter retirees under the Public Employees' Medical and
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Hospital Care Act (PEMHCA) with respect to an employer's
participation in the payment of an annuitant's post-retirement
health care contribution."
In the Fiscal Year 2015-16 State budget, the Administration is
proposing trailer bill language (RN 15 09900), to prohibit all
state officers who are eligible to receive benefits who are first
appointed or elected on or after January 1, 2016, and to prohibit
all employees and annuitants first hired on or after January 1,
2016, by the state or a state entity, including, but not limited
to the Legislature, the judicial branch, and the California State
University, from being reimbursed for the cost of Medicare Part B
premiums for themselves or their enrolled family members, as
specified.
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
FN: 0000291