BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1640|
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THIRD READING
Bill No: AB 1640
Author: Mark Stone (D)
Amended: 6/20/16 in Senate
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 3-0, 6/27/16
AYES: Pan, Beall, Hall
NO VOTE RECORDED: Morrell, Moorlach
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/1/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 53-26, 4/28/16 - See last page for vote
SUBJECT: Retirement: public employees
SOURCE: Santa Clara Valley Transportation Authority
DIGEST: This bill permanently exempts a specific group of
public transit workers from being subject to the California
Public Employees' Pension Reform Act of 2013 (PEPRA). These
employees were previously temporarily exempted pending a ruling
from the federal district court with regard to whether or not
the implementation of PEPRA and its perceived impact on
collective bargaining rights precluded certification of certain
transit projects and related federal funding.
ANALYSIS:
Existing federal law:
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1)Protects the collective bargaining rights of specified transit
workers employed in certain transit agencies and districts
that were, mostly in the 1960s through the 1970s, converted
from private to public agencies. Many such agencies are now
included in the California Public Employees' Retirement System
(CalPERS) or the Orange County Employees' Retirement System
(OCERS), a 1937 Act retirement system.
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 (US
DOL) and in place before federal transit funds can be released
to a mass transit employer subject to the Federal Transit Law.
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.
3)Allows the US DOL 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.
4)Allows an employer to appeal the US DOL decision to the
federal court of appeals. The federal court of appeals may
then determine whether or not the US DOL erred in its
decision.
Existing state law:
1)Implements comprehensive public employee pension reform
through enactment of PEPRA (and related statutory changes)
that apply to all public employers (including public transit
agencies) 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)Changes, under PEPRA, the retirement benefit plans that may be
offered to new public employees, including:
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a) Establishing uniform retirement formulas, including a 2%
at age 62 formula for non-safety workers;
b) Requiring a three-year final compensation period for
determining a pension;
c) Requiring employee member contributions equal to 50% of
the normal cost of the employee's benefit plan;
d) Capping the amount of compensation that can count toward
a pension ($118,500 in 2016); and
e) Restricting the pay items that may be included in
pensionable compensation.
3)Protects the vested benefits of workers employed prior to the
implementation of PEPRA. These employees are subject to
benefit plans in place prior to the implementation of PEPRA.
4)Specifies, with some exceptions, that the PEPRA requirements
(including those listed above) are applicable to new
retirement plan members who first become members on and after
January 1, 2013.
5)Makes an exemption to PEPRA for employees who are covered by
federal 13(c) arrangements until either of the following
occur:
a) 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
b) January 1, 2016, whichever is sooner.
6)Requires that, following either of the above conditions,
whichever occurring sooner, the retirement systems discontinue
exempting transit workers who would otherwise have been
subject to PEPRA.
7)States that if the federal district court upholds the US DOL
determination, then affected transit employees shall be
permanently exempted from PEPRA.
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8)Ensures the rights of all represented public employees,
including transit workers, to collectively bargain over issues
impacting the wages and working conditions of the employees.
These rights apply regardless of whether or not the employee
is subject to PEPRA.
This bill reinstates and extends 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.)
Background
In 2012, the state adopted PEPRA, which became effective on
January 1, 2013. In 2013, labor unions representing public
transit employees began asserting to the US 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.
In response, in 2013 the US 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 US
DOL determination. That case was decided in December of 2014.
The federal court of appeals ruled that the US 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 US DOL, the statute requires the transit workers to
be permanently excluded from PEPRA. If the court ruled that US
DOL erred in its determination, the statute requires that the
workers become subject to PEPRA.
Accordingly, when the court determined that US DOL had erred in
its determination, CalPERS made formerly exempt transit
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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, US DOL has appealed the findings of the
district court and the case is ongoing.
Finally, according to the Assembly Public Employees Retirement
and Social Security Committee, the only 1937 Act County
Retirement System that has transit worker members is OCERS.
According to the information provided, approximately 170 public
transit workers were hired during the exemption period (i.e.,
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.
Related/Prior 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. Vetoed by the Governor who stated, "The employee
share-of-cost is a crucial standard that must be retained. I am
unwilling to chip
away at this reform."
AB 1783 (Jones Sawyer, Chapter 724, Statutes of 2014) extended
the January 1, 2015, date established in AB 1222 (Bloom, 2013)
until January 1, 2016.
AB 837 (Wieckowski, 2014) would have created an exemption to
PEPRA for seven judges who were elected prior to implementation
of PEPRA but who assumed office after PEPRA became effective.
Vetoed by the Governor who stated, "This measure creates an
exemption to the California Public Employees' Pension Reform Act
of 2013. I am unwilling to begin chipping away at these
reforms."
AB 1222 (Bloom, Chapter 527, Statutes of 2013) created the
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exemption for transit workers subject to Section 13(c)
protections. The bill made the exemption effective until the
sooner of either the federal court decision or January 1, 2015.
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, this bill
results in one-time administrative costs of approximately
$65,000 to CalPERS to implement system changes and data
corrections.
SUPPORT: (Verified8/2/16)
Santa Clara Valley Transportation Authority (source)
California Conference Board of the Amalgamated Transit Union
California Teamsters Public Affairs Council
California Transit Association
Monterey-Salinas Transit
Peninsula Corridor Joint Powers Board
San Mateo County Transit District
San Mateo County Transportation Authority
OPPOSITION: (Verified8/2/16)
None received
ARGUMENTS IN SUPPORT: The sponsor states that the current
statute is being interpreted inconsistently. CalPERS has
converted affected transit workers to PEPRA membership as of
December 30, 2014, while OCERS members and employees in
independent transit agency retirement systems are being treated
as permanently exempt from PEPRA so long as they were hired
during the January 1, 2013, to December 30, 2014 timeframe.
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Furthermore, the sponsor believes that the statute is unclear
and that some transit workers hired during the exemption period
may have believed that their PEPRA exemption would be permanent.
"Thus we have a situation where public transit workers hired
while the AB 1222 exemption was in place are being treated
differently depending on which agency employs them, which raises
a question of fairness." "AB 1640 would end the ambiguity and
confusion regarding application of PEPRA to these employees. It
would ensure that all employees hired by public transit agencies
while the AB 1222 exemption was in place are being treated
fairly and in the same manner, regardless of which agency they
work for and which retirement system their agency uses."
ASSEMBLY FLOOR: 53-26, 4/28/16
AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,
Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper,
Dababneh, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo
Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger
Hernández, Holden, Irwin, Jones-Sawyer, Lackey, Linder, Lopez,
Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Waldron, Weber, Williams, Wood, Rendon
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,
Jones, Kim, Levine, Maienschein, Mathis, Mayes, Melendez,
Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Daly
Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519
8/3/16 18:49:53
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