BILL ANALYSIS Ó
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: AB 1853 Hearing Date: 6/27/16
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|Author: |Cooper |
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|Version: |6/20/16 As amended |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Pamela Schneider |
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Subject: 1937 Act County employees' retirement: districts:
retirement system independent governance
SOURCE: State Association of County Retirement Systems
ASSEMBLY VOTES:
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|Assembly Floor: |45 - 21 |
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|Assembly Public Employees, |4 - 0 |
|Retirement/Soc Sec Committee: | |
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DIGEST: This bill authorizes the retirement boards that
govern the retirement systems operating under the County
Employees' Retirement Law of 1937 ('37 Act) to elect to be
independent districts separate from the counties they are
operating in.
ANALYSIS:
Existing law:
1)Establishes the '37 Act which governs 20 independent county
retirement associations.
AB 1853 (Cooper) Page 2 of ?
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)In general, allows the retirement systems to hire and fire
their employees but identifies employees of the retirement
systems as county employees who are subject to the same
benefits as county employees and who are compensated by the
county.
4)Gives Orange, San Bernardino, Contra Costa, and Ventura county
retirement systems authority to be independent districts
within their respective retirement associations and the
statutory employers for purposes of determining specified
employees' compensation and benefits, as specified.
5)Provides in Orange, San Bernardino, and Ventura county
retirement systems that certain of the retirement systems'
employees are retirement system district employees and that
the rest of the retirement system employees are county
employees. In San Bernardino's case, almost all employees are
district employees.
6)Provides in Contra Costa County that all of the retirement
system employees are retirement system district employees and
makes represented employees subject to the Myers Milias Brown
Act, which governs collective bargaining for local public
employees.
7)Establishes the Public Employees' Pension Reform Act (PEPRA),
which requires, as of January 1, 2013, comprehensive and
statewide reform for the state's public pension systems and
plans and public employers and employees. PEPRA created new
benefit formulas and requirements for new public employees
hired on or after January 1, 2013.
8)Provides, under the provisions of PEPRA, '37 Act retirement
AB 1853 (Cooper) Page 3 of ?
boards with more independence to perform audits and assess
penalties relating to pension spiking.
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 system 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)Allows employees to determine if they want to be retirement
system district employees (instead of county employees). If
they so determine, they or their official representative may
advise the retirement system in writing of their choices and
become district employees.
4)Specifies that a choice to become a retirement system district
employee is irrevocable and that thereafter the employee and
future employees in his or her position shall be district
employees.
5)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.
6)Prescribes requirements regarding labor negotiations and the
continuity of labor agreements for these employees.
7)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.
AB 1853 (Cooper) Page 4 of ?
8)Requires that former county employees that become retirement
system district employees shall be allowed to continue to
participate in county health plans' life insurance, workers
compensation, and deferred compensation programs under the
same terms and conditions applicable to county employees, and
that the retirement system employer shall provide the employer
costs and reasonable administrative expenses for that
participation. Such participation shall not create a
collective bargaining obligation between the county and the
retirement system district employees.
9)Requires that the county cooperate fully and act in a timely
manner to implement and accomplish the objectives of these
provisions when a retirement system resolves to become an
independent district.
10)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.
Background
Currently, 4 of the 20 1937 Act county retirement systems have
established independence by becoming independent districts
within their retirement associations. In each case, the
retirement systems and counties jointly sponsored legislation to
separate the retirement systems from their respective counties.
Each has a somewhat different administrative arrangement with
either all or most of the employees being retirement system
district employees (Contra Costa with all and San Bernardino
with most), or with only specified personnel being district
employees and the remainder continuing to be county employees
(Orange and Ventura).
In general, each retirement system is governed by a board of
retirement consisting of 9 members: the county treasurer, 4
members appointed by the county board of supervisors, and 4
members elected from the membership. In addition, there are
alternates for the elected members that may serve in case of
AB 1853 (Cooper) Page 5 of ?
their absence.
Related/Prior 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
Costa County Retirement System an independent district of the
Contra Costa County Employees' 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 Employees' 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 Employees' 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
There has been no fiscal analysis of this bill.
SUPPORT:
State Association of County Retirement Systems (source)
Peace Officers Research Association of California
OPPOSITION:
California State Association of Counties
AB 1853 (Cooper) Page 6 of ?
Los Angeles County Board of Supervisors
Rural County Representatives of California
Sacramento County Board of Supervisors
San Joaquin County Board of Supervisors
Urban Counties of California
ARGUMENTS IN SUPPORT:
According to the sponsor:
AB 1853 would give the 1937 Act retirement boards the
optional authority to vote to be the direct employer of
personnel working for the system based on one of three
existing statutory frameworks already approved for use by
the Legislature. The three model frameworks exist for
Orange County Employee Retirement System (OCERS), San
Bernardino County Employee Retirement Association (SBCERA),
and the Contra Costa County Employee Retirement Association
(CCCERA).
County retirement systems are much larger and more complex
than when they were established in the years following
passage of the 1937 Act. Unfortunately, the legacy
operating authority structure under the 1937 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.
Given this situation, individual 1937 Act systems began
efforts to gain a more modernized operating authority
structure via individual legislative bills to allow their
systems to be the direct employer of their employees.
AB 1853 removes the need for pursuing ongoing piecemeal
AB 1853 (Cooper) Page 7 of ?
modernization of operating authority by putting in place a
standing mechanism for systems to adopt. The bill would
continue to protect the rights of the retirement personnel
that would shift from county employment to system
employment and the governing structure of the boards would
not change. This bill will bring a needed level of system
autonomy while maintaining all transparency, budgeting
accountability, and fiduciary responsibility.
ARGUMENTS IN OPPOSITION:
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."
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. They note
that "many health plans either do not offer or must approve
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
AB 1853 (Cooper) Page 8 of ?
other benefits; this could pose major administrative problems
for both counties and the employees."