BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1640 (Mark Stone) - Retirement: public employees
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|Version: June 20, 2016 |Policy Vote: P.E. & R. 3 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Robert Ingenito |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: AB 1640 would permanently exempt specified public
transit workers represented in collective bargaining (who first
became members of a public retirement system between January 1,
2013 and December 29, 2014), from the provisions of the Public
Employees Pension Reform Act of 2013 (PEPRA).
Fiscal
Impact:
One-time administrative costs of approximately $65,000
to CalPERS to implement system changes and data
corrections.
Background: In 2012, the state adopted PEPRA, which reduced retirement
AB 1640 (Mark Stone) Page 1 of
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benefits for public employees who first became retirement system
members on or after January 1, 2013. In 2013, labor unions
representing public transit employees began asserting to the
U.S. Department of Labor (DOL) that PEPRA impairs pension
benefits contained in existing collective bargaining agreements
and restricts collective bargaining rights, in violation of the
protections in Section 13(c) of the Federal Transit Act. Under
federal transit law, DOL can prevent the U.S. Department of
Transportation from distributing grants until it certifies that
labor agreements preserve collective bargaining rights.
In 2013, DOL withheld certification of a federal grant to the
Sacramento Regional Transit District, which in turn brought an
action in federal court to challenge the DOL determination.
That case was decided in December of 2014. The federal court of
appeals ruled that DOL had erred in its determination that PEPRA
precludes certification of transit funds.
While the case was ongoing, transit workers were exempted from
PEPRA until either the federal court issued a decision or
January 1, 2016, whichever occurred sooner. If the court had
sided with DOL, the statute requires the transit workers to be
permanently excluded from PEPRA. If the court ruled that DOL
erred in its determination, the statute requires that the
workers become subject to PEPRA.
Thus, when the court determined that DOL had erred in its
determination, CalPERS made formerly exempt transit employees
subject to PEPRA. These employees (1,431 employees from 36
CalPERS employers, according to CalPERS) were reclassified as
PEPRA members following the federal ruling on December 30, 2014.
Therefore, the affected employees will receive "classic"
benefits for the period of time from January 1, 2013 until
December 30, 2014, and PEPRA benefits from that time period
forward.
At the present time, DOL has appealed the findings of the
district court and the case is ongoing.
AB 1640 (Mark Stone) Page 2 of
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Proposed Law:
This bill would reinstate and extend indefinitely the former
exemption from PEPRA for certain public transit workers whose
collective bargaining rights are protected under Section 13(c)
of the Federal Transit Law and who became members of a state or
local public retirement system prior to December 30, 2014.
(These are the newly hired transit workers who would otherwise
have been subject to PEPRA, exempted from January 1, 2013 to
December 30, 2014, pending the federal district court ruling.)
Related
Legislation: SB 292 (Pan, 2015) sought to exempt public workers
in specified cities from the PEPRA requirement that employees
pay one-half of the normal cost of their benefit plans in member
contributions, based on dedicated tax revenues in those
districts for pension costs. The bill was vetoed by the
Governor.
Staff
Comments: The Assembly Public Employees Retirement and Social
Security Committee indicates that the only 1937 Act County
Retirement System that has transit worker members is the Orange
County Employees Retirement System (OCERS). According to the
information provided, approximately 170 public transit workers
were hired during the exemption period (January 1, 2013 to
December 30, 2014), and in August of 2015, OCERS determined,
based on its reading of the exemption, that those members would
be permanently exempted from PEPRA.
The bill, while having a minimal fiscal impact to the State,
could result in an unknown but potentially significant erosion
of projected PEPRA savings at the local level.
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