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: | |
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|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:
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 2 of ?
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
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 3 of ?
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
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 4 of ?
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.
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 5 of ?
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
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 6 of ?
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.
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 7 of ?
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
AB 2375 (Committee on Public Employees, Retirement, and Social
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."
AB 2375 (Committee on Public Employees, Retirement, and Social
Security) Page 9 of ?