BILL ANALYSIS Ó
AB 1853
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GOVERNOR'S VETO
AB
1853 (Cooper)
As Enrolled August 31, 2016
2/3 vote
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|ASSEMBLY: |45-21 |(May 31, 2016) |SENATE: |25-11 |(August 15, |
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|ASSEMBLY: |57-20 |(August 24, | | | |
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Original Committee Reference: P.E.,R., & S.S.
SUMMARY: Authorizes the retirement boards that govern the
retirement systems operating under the County Employees'
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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)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
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California Public Employees' Pension Reform Act of 2103
(PEPRA) prior to becoming a retirement system employee will
maintain their non-PEPRA status.
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.
The Senate amendments:
1)Allow 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.
2)Specify that a choice to become a retirement system district
employee is irrevocable and that thereafter the employee and
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future employees in his or her position shall be district
employees.
3)Require 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.
4)Require 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.
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
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the statutory employer for purposes of determining their
employees' compensation and benefits, as specified.
4)Establishes 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.
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, this bill allows '37 Act retirement
boards, "?to modernize the operating authority structure for
their system so that they can continue to fulfill their mission
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and meet the fiduciary responsibilities they owe to their
stakeholders."
Supporters state, "AB 1853 will allow the '37 Act retirement
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 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.
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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
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."
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 2014, made Contra
Costa County Retirement System an independent district of the
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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.
GOVERNOR'S VETO MESSAGE:
This bill authorizes the retirement board of any county
retirement system, operating under the Retirement Law of 1937,
to unilaterally separate from the county where it operates.
This is too far-reaching. Previous bills that authorized a
county retirement system to become independent were the result
of agreement between the county and the retirement system. This
more collaborative approach better serves the public interest.
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
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