BILL ANALYSIS Ó
AB 2468
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 2468
(Hadley) - As Introduced April 12, 2016
SUBJECT: Public Employees' Retirement System: contracting
agencies: benefit formulas
SUMMARY: Allows local contracting agencies of the California
Public Employees' Retirement System (CalPERS) to offer an
alternative retirement formula (2% at age 65) from that required
by the Public Employees' Pension Reform Act (PEPRA) of 2013 (2%
at age 62) to their miscellaneous employees first hired after
January 1, 2017, if, among other things, it is agreed to in a
memorandum of understanding, as specified.
EXISTING LAW:
1)Creates comprehensive public employee pension reform through
enactment of PEPRA, and related statutory changes, that apply
to all public employers and public pension plans on and after
January 1, 2013, excluding the University of California and
charter cities and counties that do not participate in a
retirement system governed by state statute.
2)Under PEPRA, changed the retirement benefit plans that may be
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offered to new public employees, including, among other
things:
a) Establishing uniform retirement formulas, including a 2%
at age 62 formula for non-safety workers and three formulas
for safety employees - 2% at age 57; 2.5% at age 57; and,
2.7% at age 57.
b) Requiring a three-year final compensation period for
determining a pension;
c) Requiring employee member contributions equal to 50% of
the normal cost of the employee's benefit plan;
d) Capping the amount of compensation that can be used to
calculate a retirement benefit on for all new members of a
public retirement system (currently $117,020 for employees
who participate in Social Security or $140,424 for
employees who do not participate in Social Security). This
amount is adjusted annually based on changes in the
Consumer Price Index (CPI) for all Urban Consumers.
FISCAL EFFECT: Unknown.
COMMENTS: According to the author, "Currently, non-safety
miscellaneous employees of a CalPERS contracting agency can
retire as early as 52 years old earning 1% of their highest
salary per year served, and 2% at 62 years old, maxing out at
2.5% at 67.
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"To attract talent, many municipalities began offering
increasingly competitive retirement benefits to their new
employees. Unfortunately this has result in significant unfunded
pension liabilities for those cities and agencies. Many agencies
now recognize the need to extend their menu of options when
choosing retirement benefits for their new employees to offer
more flexible benefits and to ensure their financial viability."
"Assembly Bill 2468 will allow contracting agencies, on a
permissive basis, to opt into increasing the base retirement age
of newly hired employees to 55, allowing new members to retire
with full benefits of 2% at 65 years old. New employees will be
able to qualify for early retirement of 1% at age 55, earning an
additional quarter of a percent increase with the maximum
compensation calculation of 2.5% at 70 years old."
The author concludes, "AB 2468 is permissive, and allows cities,
counties and agencies that contract with CalPERS for their
employees' retirement benefits, once approved through the
collective bargaining process, to choose which retirement plans
to offer."
The opposition states, "While the new formula would have to be
agreed to through collective bargaining, one of the benefits
that we believed was being provided by PEPRA was uniformity in
the benefits provided to new non-safety employees.
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"PEPRA enacted many pension changes including: increasing
retirement age, modifying pension formulas, and curbing abusive
practices, in an effort to improve the future stability of
public pension funds. These various reforms should be given time
to be implemented before we make new changes to these benefits.
This bill would run counter to the reforms already made in
PEPRA.
"This is an inferior formula that will not provide adequate
benefits and provides no offsetting benefit to employees. No
union has requested this option. It benefits only management."
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
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California School Employees Association (CSEA), AFL-CIO
LIUNA Locals 777 & 792
Los Angeles County Professional Peace Officers Association
Organization of SMUD Employees
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Service Employees International Union (SEIU)
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957