BILL ANALYSIS Ó AB 1878 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY Rob Bonta, Chair AB 1878 (Jones-Sawyer) - As Amended March 28, 2016 SUBJECT: Public Employees' Retirement System: school members: postretirement death benefit SUMMARY: Increases the postretirement death benefit paid to the beneficiary of a school member of the California Public Employees' Retirement System (CalPERS) from $2,000 to not less than $5,000 and authorizes the CalPERS Board of Administration to adjust the death benefit after each actuarial valuation based on changes in the All Urban California Consumer Price Index. EXISTING LAW: The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired. AB 1878 Page 2 Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree burial benefit, while members of LRS receive $600. The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index. FISCAL EFFECT: Unknown. COMMENTS: According to the author, "Classified school employees perform duties that are critical to fostering a positive learning environment for students, including security, janitorial, clerical, transportation, and food service. Despite their vital importance, these workers are amongst the lowest paid school employees during and after their career. AB 1878 Page 3 "Furthermore, when district dismissals take place, it is classified employees who are the first to lose their jobs. It is estimated that 10% of classified employees lost their jobs during the Recession, which does not include the classified employees who took pay cuts. "In 1945, a $300 death benefit was established for CalPERS members to cover funeral and burial expenses. In 2000, the death benefit was raised to $2,000. Since then funeral costs have increased significantly while the death benefit for CalPERS school employees has remained stagnant. In 2015, according to the National Funeral Directors Association, the average funeral cost is $7,181; and this does not include costs associated with the cemetery, grave space, or monument, which increases the cost of funerals significantly more. To cover funeral expenses, surviving family members and loved ones report having to secure high-interest loans, embarrassingly ask community members for assistance, and spend down limited savings." According to supporters, "The death benefit amount provided to different public employee groups varies considerably. The survivors of members of California State Teachers' Retirement System (CalSTRS) and the University of California Retirement System receive $6,163 and $7,500 respectively. The current death benefit amount for classified school employees is far below the actual cost of funerals, putting their survivors in difficult positions upon the death of a loved once. Classified employees are low-wage workers whose families often do not have the means to pay for funerals. AB 1878 would better align the death benefit of classified school employees with the actual costs of funerals and with the death benefit received by other AB 1878 Page 4 educators." Prior legislation: AB 507 (Garcia) of 2013 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee. AB 2606 (Mendoza) of 2012 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee. AB 617 (Davis) of 2011 would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. This bill was not heard in the Assembly PER&SS Committee at the request of the author. AB 1878 Page 5 SB 1209 (Romero) of 2010 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments (COLA) annually thereafter. This bill failed passage in the Senate Public Employment and Retirement Committee. AB 1477 (Krekorian) of 2009, would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. This bill was held in the Assembly Appropriations Committee. AB 844 (Negrete McLeod) of 2005 would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. This bill was held in the Assembly Appropriations Committee. AB 2688 (Alquist) of 2002, would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. This bill was held in the Assembly Appropriations Committee. AB 1162 (Alquist) of 2001, would have increased from $2,000 to AB 1878 Page 6 $5,000 the lump sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. This bill was held in the Assembly Appropriations Committee. AB 50 (Migden), Chapter 947, Statutes of 2000, raised the death benefit for retired school members from $600 to $2,000. AB 1829 (Correa) of 2000, would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. This bill was held in the Assembly Appropriations Committee. AB 1640 (Migden), Chapter 296, Statutes of 1998, authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump sum retired member death benefit. REGISTERED SUPPORT / OPPOSITION: AB 1878 Page 7 Support California Federation of Teachers (Sponsor) California Labor Federation California School Employees Association California Teachers Association Service Employees International Union Opposition None on file Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916) 319-3957 AB 1878 Page 8