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: 8/8/16 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.
Senate Floor Amendments of 8/8/16 return the bill to existing
law by eliminating the current amendment to the statute
regarding service credit conversion of unused leave. The
amendments also make minor, technical changes to statutory
references to the State Controller.
ANALYSIS:
AB 2375
Page 2
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
(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
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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.
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
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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 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)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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9)Definition of Domestic Partner for Post-Retirement Survivor
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.
10)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
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Page 6
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 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.
AB 2375
Page 7
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.
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)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.
9)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
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Page 8
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.
10)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.:YesLocal: No
SUPPORT: (Verified8/2/16)
California Public Employees' Retirement System (source)
California State Controller
OPPOSITION: (Verified8/2/16)
None received
ARGUMENTS IN SUPPORT: According to the sponsor, this bill will
AB 2375
Page 9
"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
8/10/16 15:57:26
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