BILL ANALYSIS Ó
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: AB 1878 Hearing Date: 6/27/16
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|Author: |Jones-Sawyer |
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|Version: |5/31/16 As amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Pamela Schneider |
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Subject: Public Employees' Retirement System: school members:
postretirement lump-sum death benefit
SOURCE: California Federation of Teachers
ASSEMBLY VOTES:
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|Assembly Floor: |57 - 19 |
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|Assembly Appropriations |14 - 3 |
|Committee: | |
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|Assembly Public Employees, |5 - 0 |
|Retirement/Soc Sec Committee: | |
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DIGEST: This bill authorizes the Board of Administration of
the California Public Employees' Retirement System (CalPERS) to
annually adjust the $2,000 lump-sum death benefit for state and
school members, based on changes in the All Urban California
Consumer Price Index, after each actuarial valuation.
ANALYSIS:
Existing law:
1)Provides, through CalPERS, varying levels of postretirement
AB 1878 (Jones-Sawyer) Page 2 of ?
death benefits according to membership category and status,
generally a "lump-sum" of money at the time of the retiree's
death, paid to whomever the retiree chooses as a beneficiary.
2)Provides state and school member retirees with a lump-sum
death benefit of $2,000.
3)Allows school employers to individually contract with CalPERS
for a higher lump-sum benefit in the amount of of $3,000,
$4,000 or $5,000.
4)Provides, for retirees covered by the State Teachers'
Retirement System, a lump-sum death benefit of $6,163, which
may be adjusted by the Teachers' Retirement Board following
each actuarial valuation based on changes to the All Urban
California Consumer Price Index.
This bill:
1)Authorizes the CalPERS board to adjust the $2,000 lump-sum
death benefit for state and school member retirees, based on
changes in the All Urban California Consumer Price Index,
following each annual actuarial valuation.
Background
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.
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 death benefit, while members of LRS receive
$600.
AB 1878 (Jones-Sawyer) Page 3 of ?
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.
Related/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.
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 1878 (Jones-Sawyer) Page 4 of ?
AB 1162 (Alquist, of 2001) would have increased from $2,000 to
$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.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.: Yes Local: No
According to the Assembly Appropriations Committee:
1)Significant benefit costs over a 20-year period to CalPERS.
The first payment on the additional unfunded liability created
by this bill is projected to be in the range of $30 million in
FY 2018-2019.
2)One-time administrative costs of $50,000 for CalPERS to modify
existing procedures and publications.
SUPPORT:
California Federation of Teachers (source)
California Labor Federation
California School Employees Association, AFL-CIO
California State Retirees
California Teachers Association
Retired Public Employees Association
AB 1878 (Jones-Sawyer) Page 5 of ?
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
As stated by the sponsor:
Classified school employees perform duties that are
critical to fostering a positive learning environment for
students, including security, janitorial, clerical,
transportation, and food service. These workers are
amongst the lowest paid school employees during their
careers and post-retirement. Furthermore, most classified
staff do not have life insurance. These factors leave the
survivors of classified school employees in difficult
positions after the passing of a loved one.
The death benefit for CalPERS school employees has not kept
pace with the rising costs of funerals. 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 $7,181, and this does not include costs
associated with the cemetery, grave space, or monument,
which increases the cost of funerals significantly more.
The current death benefit for classified school employees
is far below the actual cost of funerals. AB 1878 will
ensure the death benefit keeps pace with inflation and will
help ensure the survivors of deceased classified employees
can afford to bury their deceased loved ones.