BILL ANALYSIS Ó
AB 1853
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Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 1853
(Cooper) - As Amended March 29, 2016
SUBJECT: County employees' retirement: districts: retirement
system governance
SUMMARY: Authorizes the retirement boards that govern the
retirement systems operating under the County Employees'
Retirement Law of 1937 ('37 Act) to elect to be an independent
district separate from the county. Specifically, this bill:
1)Includes in the definition of "district" any '37 Act
retirement system whose board elects, by resolution, to be an
independent district under the law.
2)Authorizes a retirement board to adopt specified
administrative provisions that would classify various
personnel of the retirement system as employees of the
retirement system and not employees of the county.
3)Prescribes requirements related to compensation, employment
classifications and status, and retirement and health
benefits, for employees who would move from being county
employees to being retirement system employees.
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4)Prescribes requirements regarding labor negotiations and the
continuity of labor agreements for these employees.
5)Specifies that county employees who were not subject to the
California Public Employees' Pension Reform Act of 2103
(PEPRA) prior to becoming a retirement system employee will
maintain their non-PEPRA status.
6)Provides that the compensation for retirement system employees
adopting these provisions will be treated as an expense of
administration of the retirement system, as specified.
EXISTING LAW:
1)Establishes the '37 Act which governs 20 independent county
retirement associations.
2)Defines specified districts formed under the law of the state,
located wholly or partially within a county and states that
these districts are public employers whose employees are
eligible to participate in their respective '37 Act county
retirement associations.
3)Provides Orange, San Bernardino, Contra Costa, and Ventura
county retirement systems authority to be independent
districts within their respective retirement associations and
the statutory employer for purposes of determining their
employees' compensation and benefits, as specified.
4)Establishes PEPRA, which requires, as of January 1, 2013,
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comprehensive and statewide reform for the state's public
pension systems and plans and public employers and employees.
5)Provides, under the provisions of PEPRA, '37 Act retirement
boards with more independence to perform audits and assess
penalties relating to pension spiking.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: According to the author, "County retirement systems
are much larger and more complex than when they were established
in the years following passage of the '37 Act. Unfortunately,
the legacy operating authority structure under the '37 Act has
largely failed to keep up with these developments. Over time,
key personnel at the retirement system were designated as
employees of the system, with the retirement board setting the
terms and conditions of employment, but the implementation of
those decisions continues to require action by the Board of
Supervisors. Similarly, broader decisions regarding staffing
levels, staff structure, job descriptions and duties, and
compensation made in the first instance by the retirement board
continue to require implementation by the Board of Supervisors.
In some cases, this has resulted in the fiduciary decisions of
the retirement board not being implemented, complicating the
ability of the retirement system to carry out its duties."
The author concludes, AB 1853 allows '37 Act retirement boards,
"?to modernize the operating authority structure for their
system so that they can continue to fulfill their mission and
meet the fiduciary responsibilities they owe to their
stakeholders."
Supporters state, "AB 1853 will allow the '37 Act retirement
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systems to establish the staff structure and staffing levels
necessary to successfully carry out their responsibilities. It
will also enable the retirement system to attract and retain the
skilled professionals necessary to successfully execute those
responsibilities. The ability to operate a more sophisticated
investment program will benefit participating employers (and the
taxpayers) through better investment returns and lower risk,
resulting in lower employer cost. A stronger investment program
will also benefit active members and retirees, by helping to
maintain the funded status of the plan, thereby protecting their
retirement security."
Kern County is opposed to the bill unless amended, stating, "To
date, retirement districts formed in '37 Act counties have been
formed by separate legislation with the mutual consent of the
retirement board and the board of supervisors in each county.
However, AB 1853 would authorize any '37 Act county employee
retirement board to unilaterally form a district without the
consent of the board of supervisors.
"Unless a board of supervisors elects by adopted resolution to
do so, Kern County cannot support unilaterally removing the
authority to manage employees from a county while a county
retains most of the financial responsibility for pay and
benefits."
Opponents are concerned that the current bill lacks a
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fundamental protection for workers of those retirement systems
by not requiring the consent or agreement of the affected
workers or their representatives prior to becoming a district
independent of the county.
Additionally, opponents have raised concerns around the removal
of local control by not requiring each retirement system to
individually pursue legislation to establish the different
structure where a thorough analysis of the effects of the change
can take place.
Opponents also state that, "?while administrative costs for the
retirement systems are capped in statute, nonetheless, a lack of
review or oversight by the county Board of Supervisors regarding
the hiring, pay and benefits of employees and the increase in
system administrative costs that would be incurred by the county
is problematic."
Finally, opponents raise issues around the provision of health
care benefits for employees of the retirement systems stating,
"Many counties contract with health care plans to provide health
care benefits to their county personnel. AB 1853 contains a
provision which would afford retirement system employees that
were employees of the county the opportunity to participate in
those county plans 'under the same terms and conditions as those
programs were available to county employees?' It should be
noted that many health plans either do not offer or must approve
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coverage to those who are not actual employees of the
contracting entity. The language of AB 1853 seems to imply that
employees transferred to the county retirement systems must be
offered coverage under the county plans for health care and
other benefits; this could pose major administrative problems
for both counties and the employees."
The Committee is informed that the author will be offering
amendments in Committee to limit the operating authority options
authorized under the bill to just the "Orange County" model
which would make only specified high level positions employees
of the retirement system.
Prior/Related Legislation:
AB 1291 (Williams), Chapter 223, Statutes of 2015, made the
Ventura County Retirement System an independent, public employer
district within the Ventura County Employees' Retirement
Association and authorized the System to appoint specified
positions as "at will" employees, exempt from the county civil
service system, as specified.
SB 673 (DeSaulnier), Chapter 244, Statutes of 2013, made Contra
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Costa County Retirement System an independent district of the
Contra Costa County Retirement Association and made all
personnel employees of the retirement system.
SB 777 (Soto), Chapter 369, Statutes of 2006, made San
Bernardino County Retirement System an independent district of
the San Bernardino County Retirement Association and made
certain specified personnel employees of the retirement system.
AB 1992 (Correa), Chapter 74, Statutes of 2002, made Orange
County Retirement System an independent district of the Orange
County Retirement Association and made certain specified
personnel employees of the retirement system. These positions
include an administrator, an assistant administrator, a chief
investment officer, senior management employees next in line of
authority to the chief investment officer, subordinate
administrators, senior management employees next in line to
subordinate administrators, and legal counsel.
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REGISTERED SUPPORT / OPPOSITION:
Support
State Association of County Retirement Systems (Sponsor)
Opposition
California State Association of Counties
Kern County (unless amended)
LIUNA Locals 777 & 792 (unless amended)
Rural County Representatives of California
SEIU California (unless amended)
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Urban Counties of California
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957