BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          PUBLIC EMPLOYMENT AND RETIREMENT
                                 Dr. Richard Pan, Chair
                                  2015 - 2016  Regular 

          Bill No:            AB 2375         Hearing Date:     6/27/16
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          |Author:    |Committee on Public Employees, Retirement, and       |
          |           |Social Security                                      |
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          |Version:   |6/20/16    As amended                                |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Glenn Miles                                          |
          |           |                                                     |
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          Subject:  Public Employees' Retirement System:  omnibus bill

            SOURCE:  California Public Employees' Retirement System
                    California State Controller

            ASSEMBLY VOTES:
          
          
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          |Assembly Floor:                 |76 - 0                          |
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          |Assembly Appropriations         |20 - 0                          |
          |Committee:                      |                                |
          |--------------------------------+--------------------------------|
          |Assembly Public Employees,      |7 - 0                           |
          |Retirement/Soc Sec Committee:   |                                |
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           DIGEST:    This bill is the annual CalPERS housekeeping bill which  
          makes various technical and non-controversial changes to statutory  
          provisions governing the California Public Employees' Retirement  
          System (CalPERS) to maintain and ensure effective administration of  
          the system.

          ANALYSIS:
          
          Existing law:
          







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          1)CalPERS University and School Member Reduced Workload Program (Ed  
            Code 87486 and GC 20900)

            Allows an academic or certificated California State University  
            (CSU), school district, or community college district member to  
            reduce workload from full-time to part-time and maintain  
            retirement benefits, as specified.  The member must not be older  
            than 70 years and is limited to a period of five years of  
            part-time status.  The program allows the member to work part-time  
            but receive service credit and have the retirement allowance  
            calculated as if the member had worked full-time provided that the  
            member and the employer both elect to contribute to the retirement  
            fund the amount that would have been contributed if the member  
            were employed on a full-time basis.

          2)Public Retirement System Actuary Qualifications (GC 7502, 7504,  
            7505, and 7507.2)
             
             Defines an enrolled actuary to mean an actuary enrolled under  
            subtitle C of Title III of the federal Employee Retirement Income  
            Security Act of 1974 (ERISA) and prescribes that certain actions,  
            as specified, require the services of an enrolled actuary or that  
            membership on certain advisory committees shall include enrolled  
            actuaries.

            Under ERISA, an enrolled actuary is an actuary who has been  
            licensed by a Joint Board of the Department of the Treasury and  
            the Department of Labor for the Enrollment of Actuaries to perform  
            a variety of actuarial tasks required of U.S. pension plans.  The  
            Joint Board administers two examinations to prospective enrolled  
            actuaries. Once the two examinations have been passed, and an  
            individual has also obtained sufficient relevant professional  
            experience, that individual becomes an enrolled actuary.

          3)Clarification of Final Compensation for Concurrent Retirement (GC  
            20034 and 20638)

            Requires CalPERS to consider a member's average monthly salary  
            during any period of service as a member of the University of  
            California retirement system or a County Employees Retirement Act  
            of 1937 ('37 Act) retirement system as compensation earnable for  
            purposes of computing final compensation for the member provided  
            the member retires concurrently under both CalPERS and the other  
            system and is credited with the period of service under the other  








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            system at the time of retirement.

          4)Elimination of Member's Ability to Designate Final Compensation  
            Period (GC 20035, 20035.5, 20037, and 20037.5 through 20037.15)

            Defines "final compensation" for the purposes of determining any  
            CalPERS pension or benefit generally to mean the highest annual  
            compensation which was earnable by the member during the  
            consecutive 12-month or 36-month period of employment immediately  
            preceding the member's effective retirement date or last  
            separation from service, if earlier, or during any other period of  
            12 or 36 consecutive months during membership in CalPERS that the  
            member designates on the application for retirement.

          5)California Actuarial Advisory Panel Report - Biennial Instead of  
            Annual Presentation (GC 20229)

            Requires the CalPERS board to provide the Legislature, the  
            Governor, and the Chair of the California Actuarial Advisory Panel  
            (CAAP) an annual report, as specified, related to state employee  
            retirement plans and requires the CAAP Chair to provide a  
            presentation regarding the report within 30 days of its receipt to  
            a publicly noticed joint hearing of the Senate Committee on Public  
            Employment and Retirement and the Assembly Committee on Public  
            Employees, Retirement, and Social Security.

          6)Interest Charges and Penalty Assessments for Non-Payment of  
            Contributions (GC 20537 and 20572)

            Authorizes CalPERS to charge interest at the actuarial interest  
            rate on the amount of any payment due and unpaid by a contracting  
            agency until payment is received.

            Permits CalPERS to terminate a contract with a contracting agency  
            if the agency fails to pay any installment of contributions  
            required by its contract 30 days after a demand by the board or  
            fails for three months to provide required information to CalPERS.

            Allows CalPERS to assess a contracting agency interest at an  
            annual rate of 10 percent and the costs of collection, including  
            reasonable legal fees, when necessary to collect the amounts due,  
            if the agency fails to remit the contributions when due.

            CalPERS may assess the contracting agency a penalty of 10 percent  








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            of the delinquent amount.  In the case of repeated delinquencies  
            the penalty may be assessed once during each 30-day period that  
            the amount remains unpaid.

          7)Terminated Agency Pool - Reduction of Member Benefits (GC 20577.5  
            and 20578)

            Authorizes CalPERS to merge a plan that has been terminated into  
            the Terminated Agency Pool (TAP) if the board has made all  
            reasonable efforts to collect the amount necessary to fully fund  
            the liabilities of the plan and the board finds that the merger of  
            the plan into TAP without benefit reduction will not impact the  
            actuarial soundness of TAP.

            Requires benefits to be reduced proportionally prior to the  
            transfer of assets to TAP if the amount of the terminating  
            agency's assets are less than the actuarial equivalent of the  
            amount CalPERS will be obligated to pay to persons who are or were  
            employed by the terminating agency and the agency fails to pay the  
            difference.

          8)Conversion of Unused Sick Leave or Educational Leave to Service  
            Credit (GC 20963, 20963.1, and 20965)

            Provides that CalPERS members, as specified, whose effective date  
            of retirement is within four months of separation from employment,  
            shall be credited at retirement with 0.004 (i.e., 8 hours) year of  
            service credit for each unused day of sick leave or educational  
            leave certified to the board by the employer.

          9)Interest on Late Payments of Death Benefits (GC 21499)

            Requires CalPERS to authorize to the Controller the initial  
            payment of a preretirement or postretirement death allowance or a  
            preretirement or postretirement lump-sum benefit of ten dollars  
            ($10) or more within 45 days of receipt of all necessary  
            information.

            Provides that if any death benefit payment is not made within the  
            allocated time, the payment shall also include interest at the  
            greater of the 6 percent compounded interest crediting rate or the  
            net earnings rate in effect at the time the payment is made for  
            the time payment was delayed.









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          10)Definition of Domestic Partner for Post-Retirement Survivor  
            Allowance (GC 21626.5)
             
             Upon the death of a retired member, provides a retirement benefit  
            allowance to the member's surviving spouse and treats a surviving  
            domestic partner in the same manner as a surviving spouse, as  
            specified.

          11)Firefighter/ Peace Officer Death Notification (GC 22820)

            Requires the employer of a deceased firefighter or peace officer  
            member to notify CalPERS within 10 business days of the member's  
            death if the member has a spouse or family member who may be  
            eligible for enrollment in a CalPERS health benefit plan.

          This bill:

          1)CalPERS University and School Member Reduced Workload Program (Ed  
            Code 87486 and GC 20900)

            Corrects an erroneous statutory reference in the Education Code to  
            the correct section of the Government Code authorizing the CalPERS  
            reduced workload program for CSU, school district, and community  
            college members and clarifies and makes consistent the eligibility  
            requirements for participation in the program.

          2)Public Retirement System Actuary Qualifications (GC 7502, 7504,  
            7505, and 7507.2)
             
             Eliminates the requirement that actuaries be enrolled by the Joint  
            Board of the U.S. Department of the Treasury and the Department of  
            Labor and instead requires that actuaries performing duties  
            required, as specified, shall have attained the designation of  
            Associate or Fellow of the Society of Actuaries and have  
            demonstrated experience with public sector clients.

          3)Clarification of Final Compensation for Concurrent Retirement (GC  
            20034 and 20638)

            Clarifies that when a CalPERS member applies for concurrent  
            retirement using the final compensation earnable under the  
            University of California Retirement System or a 1937 Act County  
            Retirement System the final compensation is based on the member's  
            highest annual average compensation during any consecutive 12 or  








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            36 month period.

          4)Elimination of Member's Ability to Designate Final Compensation  
            Period (GC 20035, 20035.5, 20037, and 20037.5 through 20037.15)

            Clarifies that final compensation means the highest annual  
            compensation which was earnable by the member during any  
            consecutive 12-month or 36-month period of employment and  
            eliminates language that allows a member to designate his or her  
            highest final compensation period because the my|CalPERS system  
            now automatically searches payroll records for a member's highest  
            final compensation period when calculating retirement benefits.

          5)California Actuarial Advisory Panel Report - Biennial Instead of  
            Annual Presentation (GC 20229)

            Eliminates the requirement that the CAAP Chair make a presentation  
            of the annual CAAP report to a publicly noticed joint hearing of  
            the Senate Committee on Public Employment and Retirement and the  
            Assembly Committee on Public Employees, Retirement, and Social  
            Security within 30 days of receiving the report from the CalPERS  
            board and instead requires the presentation be made at the  
            beginning of each legislative session.

          6)Interest Charges and Penalty Assessments for Non-Payment of  
            Contributions (GC 20537 and 20572)

            Instead of the actuarial interest rate, authorizes CalPERS to  
            charge contracting agencies that do not pay their contributions in  
            a timely manner the greater of either the annual return on the  
            system's investments for the year prior to the year in which  
            payments are not timely made or a simple annual rate of 10  
            percent.

            Clarifies that the penalty assessment on a contract agency that is  
            more than three months delinquent in paying contributions is in  
            addition to the amount of interest charged on the agency's overdue  
            outstanding contributions.

            Provides that the contracting agency may be assessed the costs of  
            collection, including reasonable legal fees and litigation costs,  
            including, without limitation, legal fees and legal costs incurred  
            in bankruptcy, when necessary to collect any amounts due.









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          7)Terminated Agency Pool - Reduction of Member Benefits (GC 20577.5  
            and 20578)
             
             Authorizes the board to elect not to impose a reduction, or to  
            impose a lesser reduction, on a plan that has been terminated if  
            the board has made all reasonable efforts to collect the amount  
            necessary to fully fund the liabilities of the plan and the board  
            finds that not reducing the benefits, or imposing a lesser  
            reduction will not impact the actuarial soundness of TAP.

            Eliminates the requirement that CalPERS reduce benefits for  
            employees of a terminating agency prior to the transfer of assets  
            to TAP if the amount of the terminating agency's assets are less  
            than the actuarial equivalent of the amount required to pay the  
            benefits and the agency fails to pay the difference.  Thus,  
            CalPERS will be authorized to reduce the employees' benefits only  
            after the plan has been placed in TAP and the employer fails to  
            remit the contributions necessary to fully fund the plan's  
            liabilities.

          8)Conversion of Unused Sick Leave or Education Leave to Service  
            Credit (GC 20963, 20963.1, and 20965)
             
             Clarifies that for purposes of converting unused sick leave or  
            educational leave to service credit, a day of unused sick leave or  
            educational leave is deemed to be the equivalent of an eight-hour  
            day.  
             
          9)Interest on Late Payments of Death Benefits (GC 21499)
             
             Changes the interest rate to be paid on delayed payments of death  
            benefits from either 6% or the net earnings rate in effect at the  
            time of payment minus expenses, whichever is greater, to a fixed  
            rate of 7% per annum simple (non-compounding) interest to ensure  
            consistency in the payment of death benefits and reduce CalPERS  
            administrative costs.
             
          10)Definition of Domestic Partner for Post-Retirement Survivor  
            Allowance (GC 21626.5)

            Authorizes the post-retirement survivor allowance to same-sex  
            married couples who never entered into a registered domestic  
            partnership and who retired before it was legally possible to  
            marry their same-sex spouse so long as they sign an affidavit that  








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          Security)                                   Page 8 of ?
          
          
            they would have met the conditions had same-sex marriage been  
            legal at the time of their retirement.

          11)Firefighter/ Peace Officer Death Notification (GC 22820)

            Requires the employer of a deceased firefighter or peace officer  
            member when notifying CalPERS of the member's death to also  
            provide any updated contact information of the surviving spouse or  
            family member if that spouse or family member may be eligible for  
            enrollment in a CalPERS health benefit plan.

          Related/Prior Legislation
          
          AB 2472 (Assembly Committee on Public Employees, Retirement, and  
          Social Security, Chapter 237, Statutes of 2014) served as CalPERS'  
          annual housekeeping bill and made technical and non-controversial  
          changes to the Government Code governing CalPERS.

          SB 216 (Pan, Chapter 244, Statutes of 2015) served as CalPERS'  
          annual housekeeping bill and made technical and non-controversial  
          changes to the Government Code governing CalPERS.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal Com.:   
          Yes                            Local:          No


          SUPPORT:

          California Public Employees' Retirement System (source)

          OPPOSITION:

          None received

          ARGUMENTS IN SUPPORT:    According to the sponsor, this bill will  
          "ensure the statutes administered by CalPERS are as clear and  
          unambiguous as possible."

          According to the State Controller, the bill distinguishes "the  
          requirements of actuaries performing professional services for state  
          or local public retirement plans from those serving in a general  
          advisory capacity, and would more appropriately define those  
          actuaries who are qualified to serve the public sector."









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