BILL ANALYSIS                                                                                                                                                                                                    

                                                                      AB 1031

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          1031 (Thurmond)

          As Introduced  February 26, 2015

          Majority vote

          |Committee       |Votes |Ayes                 |Noes                  |
          |Public          |7-0   |Bonta, Waldron,      |                      |
          |Employees       |      |Cooley,              |                      |
          |                |      |Jones-Sawyer,        |                      |
          |                |      |O'Donnell, Rendon,   |                      |
          |                |      |Wagner               |                      |

          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  

          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  

          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  

          Analysis Prepared by:                                               
                          Karon Green / P.E.,R., & S.S. / (916) 319-3957   
          FN: 0000291