BILL ANALYSIS Ó AB 1640 Page 1 Date of Hearing: April 6, 2016 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY Rob Bonta, Chair AB 1640 (Mark Stone) - As Introduced January 7, 2016 SUBJECT: Retirement: public employees SUMMARY: Permanently exempts certain public transit workers, who first became members of a public retirement system between January 1, 2013 and December 29, 2014, from the requirements of the Public Employees' Pension Reform Act of 2013 (PEPRA). Specifically, this bill: 1)Extends indefinitely the current exemption from PEPRA for certain public transit workers whose collective bargaining rights are protected under Section 13(c) of the Federal Transit Law who became members of a state or local public retirement system prior to December 30, 2014. 2)Deletes provisions related to specified federal district court rulings regarding the certification of federal transit funding. AB 1640 Page 2 EXISTING STATE LAW: 1)Establishes 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 retirement system governed by state statute. 2)As enacted by AB 1222 (Bloom and Dickenson), Chapter 527, Statutes of 2013, makes an exemption to PEPRA for employees who are covered by 13(c) arrangements until either a federal district court rules that the United States Secretary of Labor (or his or her designee) erred in determining that application of PEPRA precludes certification of federal transit funding or January 1, 2015, whichever is sooner. 3)Specifies that if the federal district court upholds the determination of the United States Secretary of Labor (or his or her designee) that application of PEPRA precludes certification of federal transit funding, then PEPRA shall not apply to an employee protected under a 13(c) arrangement. EXISTING FEDERAL LAW: AB 1640 Page 3 1)Protects the collective bargaining rights of specified transit workers employed in certain transit agencies and districts that were, mostly in the 1960's through the 1970's, converted from private to public agencies. 2)Requires, under Section 13(c) of the Federal Transit Law, that these employee protections, commonly referred to as "protective arrangements" or "Section 13(c) arrangements" must be certified by the United States Department of Labor (USDOL) and in place before federal transit funds can be released to a mass transit employer subject to the Federal Transit Law. 3)Section 13(c) requires, among other things, the continuation of collective bargaining rights, and protection of transit employees' wages, working conditions, pension benefits, seniority, vacation, sick and personal leave, travel passes, and other conditions of employment. 4)Allows the USDOL to determine if the collective bargaining rights of an employee group protected under a 13(c) arrangement have been impaired, and if so determined, to stop the flow of federal transportation funding until such time as the those rights have been restored. FISCAL EFFECT: Unknown. COMMENTS: According to the author, "The recent decision in the State of California v. United States Department of Labor ended the exemption provided to transit employees by AB 1640 Page 4 AB 1222 (Bloom). As a result of this decision the California Public Employees' Retirement System (CalPERS) has circulated a letter to transit districts notifying them that employees hired after January 1, 2013 through December 29, 2014 will retain their classic retirement status for that time period, but those hired on or after December 30, 2014 would be PEPRA appointments receiving PEPRA retirement benefits." "Although transit districts are appealing the federal court decision, AB 1640 would clarify that workers hired during the exemption between January 1, 2013 and December 29, 2014 should continue to receive classic employee retirement benefits instead of PEPRA employee retirement benefits." Supporters contend that CalPERS "appears" to be the only retirement system for public transit employees that has interpreted AB 1222 to mean that those covered by the exemption are only entitled to receive their "classic" retirement benefits from their date of hire to December 30, 2014, and not for the duration of their employment. Supporters further contend that this interpretation is resulting in an inconsistent application of PEPRA across public transit agencies, and "perhaps a misapplication of the Legislature's intent for AB 1222 (Bloom)." Supporters conclude, "This bill would clarify that public transit employees, hired between January 1, 2013 and December 30, 2014, are exempt from PEPRA for the duration of their employment. In doing so, the bill would remove any ambiguity regarding the applicability of PEPRA to these public transit employees, limiting it only to employees hired after December 30, 2014; and create consistency in the manner in which public transit employees, across public transit agencies and various retirement systems, are impacted by PEPRA. This bill would also instill some fairness into this ongoing discussion by AB 1640 Page 5 ensuring that public transit employees, hired while the AB 1222 (Bloom) exemption was in place, receive the classic retirement benefits they were told they would receive upon accepting employment with a public transit agency." According to information provided to the Committee by CalPERS, 1,431 members from 36 different CalPERS covered employers were reclassified back into PEPRA membership after the December 30, 2014 ruling. The Committee was also informed that the only 1937 Act County Retirement System that has transit workers is the Orange County Employees' Retirement System (OCERS). According to the information provided, approximately 170 public transit workers were hired during the exemption period and in August of 2015, OCERS determined that those members would be permanently exempted from PEPRA. REGISTERED SUPPORT / OPPOSITION: Support Santa Clara Valley Transportation Authority (Sponsor) California Conference Board of the Amalgamated Transit Union California Conference of Machinist California Teamsters Public Affairs Council California Transit Association Monterey-Salinas Transit AB 1640 Page 6 Opposition None on file Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916) 319-3957