BILL ANALYSIS Ó SENATE COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT Dr. Richard Pan, Chair 2015 - 2016 Regular Bill No: SB 24 Hearing Date: 1/14/16 ----------------------------------------------------------------- |Author: |Hill | |-----------+-----------------------------------------------------| |Version: |1/05/16 As amended | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Glenn Miles | | | | ----------------------------------------------------------------- Subject: California Public Employees' Pension Reform Act of 2013: joint powers authority: employees. SOURCE: City of Belmont City of Foster City City of San Mateo DIGEST: This bill authorizes a Joint Powers Authority (JPA) formed by the Cities of Belmont, Foster City, and San Mateo to provide the JPA employees a defined benefit plan or formula that those employees received as "classic" CalPERS members from their employment with the cities. The language of SB 24 is substantially the same as statutory language enacted for the Cities of Fullerton and Brea. ANALYSIS: Existing law: 1)Authorizes, under the Joint Exercise of Powers Act, public agencies to enter into agreements to jointly exercise any power common to the contracting parties, including providing for the creation of an agency or entity that is separate from the parties to the agreement and is responsible for the administration of the agreement. 2)Allows local public employers forming a JPA to contract with CalPERS to offer retirement benefits to their employees if the JPA meets the federal definition of a governmental plan. The SB 24 (Hill) Page 2 of ? JPA is then a new contracting employer in the retirement system. 3)Establishes, under the Public Employees' Pension Reform Act of 2013 (PEPRA), a new retirement plan formula and requires public employers to offer the PEPRA formula to new employees first hired into public service after January 1, 2013, as defined. 4)Requires pre-PEPRA members-referred to as "classic" members by CalPERS-who were first hired into public service prior to January 1, 2013, and who move between public employers within a 180-day time period, to be grandfathered under pre-PEPRA retirement formulas and eligible to receive the benefit plans offered to employees of the public employer on December 31, 2012 (i.e., the benefit plan in place prior to PEPRA implementation). 5)Authorizes a JPA formed by the cities of Brea and Fullerton on or after January 1, 2013, to provide employees who transfer to the JPA from Brea or Fullerton with the "classic" retirement formulas that the employees were receiving from their respective employers within 180 days of the cities providing for the exercise of the common power, to which the employee was associated, by the JPA. 6)Specifies that on or before January 1, 2017, up to three cities that are contiguous with Brea or Fullerton may join the JPA and extend the same protections, with regard to classic retirement formulas, to their transferred employees. 7)Clarifies that the formation of the JPA on or after January 1, 2013, shall not act in a manner so as to exempt a member from PEPRA who would otherwise be subject to PEPRA. This bill: 1)Permits a Joint Powers Authority (JPA) formed by the Cities of Belmont, Foster City, and San Mateo on or after January 1, 2013, to provide employees the "classic" retirement formula that the employees received from their respective city employer forming the JPA prior to the JPA's formation . The language of SB 24 is substantially the same as statutory language enacted for the Cities of Fullerton and Brea. SB 24 (Hill) Page 3 of ? 2)Provides that the employee must not be a new member of the retirement system as defined by PEPRA and must be employed by the JPA without a break in service from the employee's respective city employer of more than 180 days. 3)Prohibits the formation of a JPA on or after January 1, 2013, in a manner that would exempt a new member from the requirements of PEPRA. New members may only participate in a plan that conforms to the requirements of PEPRA. 4)Makes legislative findings and declarations that a special law, rather than a general law, is needed to clarify the benefits and eligibility rules under PEPRA and to maintain the integrity of that act and further its purpose. Background PEPRA allows classic employees who move between public employers within a 180-day time period to be grandfathered under pre-PEPRA retirement formulas. Since employers, over time, could have more than one retirement formula for specific classes of employees, PEPRA further specifies that a classic employee who moves between public employers within a 180-day period will receive the benefit formula that the employer was offering on December 31, 2012 (i.e., one day prior to implementation of PEPRA). A JPA formed after that date would be a new employer in CalPERS and would therefore have no classic formula to offer classic employees. SB 1251 (Huff, Chapter 757, Statutes of 2014 ) allows the cities of Brea and Fullerton, after forming a JPA, to allow transferring employees to retain the retirement formulas they had prior to the formation and implementation of the JPA. The Cities of Belmont, Foster City, and San Mateo seek to accomplish the same objective as Brea and Fullerton. Prior/Related Legislation SB 354 (Huff, Chapter 158, Statutes of 2015) clarified the time period during which a CalPERS "classic" member who is employed in the cities of Brea and Fullerton can transfer to a Joint Powers Authority (JPA) formed by those two cites and retain classic benefit formulas received prior to the transfer. SB 24 (Hill) Page 4 of ? SB 1251 (Huff, Chapter 757, Statutes of 2014) created the current exemption in PEPRA to allow classic employees transferred to a new JPA formed by the cities of Brea and Fullerton after January 1, 2013, to retain their classic retirement benefits following transfer to and employment in the JPA. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No SUPPORT: City of Belmont (co-source) City of Foster City (co-source) City of San Mateo (co-source) OPPOSITION: None received ARGUMENTS IN SUPPORT: According to the author, SB 24 "clarifies a pension problem that's preventing the cities of San Mateo, Belmont and Foster City from completing their Joint Powers Agreement for fire service in the region. According to the sponsors, the bill "would permit a joint powers authority to be formed by the cities of Belmont, Foster City and San Mateo while providing employees, who are not new members under PEPRA, with the defined benefit plan that they received from their respective employers as of December 31, 2012." Furthermore, the sponsors state that "Fire services (consolidation), under a Joint Powers Authority, is one of the most cost effective and efficient models for providing fire and EMS (Emergency Medical Services) to our communities. The ability to seamlessly move our current fire employees to a regional JPA could prove to be essential to the success of a fully integrated fire service." SB 24 (Hill) Page 5 of ?