BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 2375|
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                                   THIRD READING 


          Bill No:  AB 2375
          Author:   Committee on Public Employees, Retirement, and Social  
                    Security   
          Amended:  6/20/16 in Senate
          Vote:     21 

           SENATE PUBLIC EMP. & RET. COMMITTEE:  5-0, 6/27/16
           AYES:  Pan, Morrell, Beall, Hall, Moorlach

           SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           ASSEMBLY FLOOR:  76-0, 5/19/16 (Consent) - See last page for  
            vote

           SUBJECT:   Public Employees' Retirement System:  omnibus bill


          SOURCE:    California Public Employees' Retirement System
          
          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:
          
          1)CalPERS University and School Member Reduced Workload Program  
            (Ed Code 87486 and GC 20900)

            Allows an academic or certificated California State University  








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            (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 system at the time of retirement.








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          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 of the delinquent amount.  In the case of  







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            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.

          10)Definition of Domestic Partner for Post-Retirement Survivor  







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            Allowance (GC 21626.5)
             
             Provides, upon the death of a retired member, 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  







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            County Retirement System the final compensation is based on  
            the member's highest annual average compensation during any  
            consecutive 12 or 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)

            Authorizes, instead of the actuarial interest rate, 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  







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            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.

          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.
             







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           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 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


          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.

          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.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified8/2/16)


          California Public Employees' Retirement System (source)
          California State Controller Betty Yee









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          OPPOSITION:   (Verified8/2/16)


          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."
          
          ASSEMBLY FLOOR:  76-0, 5/19/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mayes, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Wood, Rendon
          NO VOTE RECORDED:  Chang, Mathis, McCarty, Williams

          Prepared by:Glenn Miles / P.E. & R. / (916) 651-1519
          8/3/16 18:36:26


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