BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1878 (Jones-Sawyer) - Public Employees' Retirement System: state or school members: postretirement death benefit ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 31, 2016 |Policy Vote: P.E. & R. 3 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1878 would authorize 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. Fiscal Impact: CalPERS would incur a one-time administrative cost of $50,000 to modify existing information technology systems and benefit publications. Additionally, because the cost of the death benefit is factored into the CalPERS' contribution rate structure, it could potentially lead to higher state department contribution rates in future years AB 1878 (Jones-Sawyer) Page 1 of ? 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. 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. Proposed Law: This bill would authorize 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. AB 1878 (Jones-Sawyer) Page 2 of ? Related 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 under submission on the Suspense File of 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 under submission on the Suspense File of the Assembly Appropriations Committee. Staff Comments: . CalPERS has yet to complete its actuarial analysis of the current version of the bill, but costs to state departments via higher contribution rates could be significant. -- END --