BILL ANALYSIS Ó
SB 216
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Date of Hearing: June 24, 2015
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
SB
216 (Pan) - As Amended June 3, 2015
SENATE VOTE: 34-0
SUBJECT: The Public Employees' Retirement System.
SUMMARY: Makes various technical and non-controversial changes
to various sections of the Government Code governing the
California Public Employees' Retirement System (CalPERS) to
maintain and ensure effective administration of the system.
Specifically, this bill:
1)Repeals an obsolete statute dating from 1987 that required
CalPERS to give first priority to investing not less than 25%
of all funds available for new investment in a fiscal year to
investment securities and products related to specified real
property located in the state. This bill also eliminates
corresponding obsolete reporting requirements.
2)Clarifies that CalPERS' authority to audit to determine the
correctness of benefits also applies to determining the
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eligibility for benefits.
3)Changes, from quarterly to semi-annually, the period by which
CalPERS must produce its asset and performance report and
submit it to the Legislature. This bill also eliminates the
requirement that the report include the cost basis for
CalPERS' holdings and instead requires that the report include
asset performance data based on a time-weighted return and a
comparison to alternative portfolios based on policy
benchmarks approved by the CalPERS board.
4)Clarifies that a member, upon return to active state service
following an employer-approved leave due to serious illness or
injury, may elect to purchase additional service credit for
the uncompensated period of absence. This is consistent with
current business practices and processes.
5)Clarifies that a member who wishes to purchase service credit
for an approved medical leave or parental leave must do so
after returning to active public employment and prior to
retirement.
EXISTING LAW:
1)Grants CalPERS, under the California Constitution, plenary
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authority over investment decisions and specifically
authorizes CalPERS to invest in accordance with modern
portfolio theory.
2)Grants CalPERS broad authority to review the records of local
government employers that have chosen to contract with CalPERS
for retirement benefits to ensure that individuals are
receiving the benefits to which they are entitled. Employers
are required to provide any information that CalPERS requires
in the administration of the System.
3)Requires CalPERS to submit a review of its assets to the
Legislature and contracting agencies on a quarterly basis and
provides that the report include specific information,
including the cost basis and market value of investments by
asset class.
4)Provides that a CalPERS member who returns to active service
after an approved medical leave or parental leave may purchase
service credit for that period of absence, as specified.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS: CalPERS annually sponsors "housekeeping" legislation
to provide technical and non-controversial amendments to
portions of the Government Code that CalPERS administers.
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Proposition 162 granted public retirement systems plenary
authority over the systems' investment programs. Moreover,
Proposition 21 authorized public retirement systems to invest
assets in accordance with modern portfolio theory. Certain
requirements in the statutes predate these constitutional
changes and this bill repeals and updates certain of these
outdated provisions with regard to CalPERS' investment program.
Some investment program reporting requirements have also become
outdated and do not reflect current practices. According to
CalPERS, this bill will save money by allowing CalPERS to sync
legislative reporting with other investment reports CalPERS
produces, include more useful information while eliminating
requirements for information that CalPERS does not currently
provide, and allow more flexibility in reporting to keep current
with industry standards as they change in the future.
While CalPERS staff have the authority to review whether
individuals were eligible to receive the retirement benefits
they have received, some CalPERS contracting employers have
unsuccessfully argued that because existing law does not
explicitly use the word 'eligibility' then the employers do not
have to provide relevant records to CalPERS auditing staff.
This bill simply clarifies existing law on this point in order
to avoid future misunderstandings.
Finally, CalPERS' general rules regarding service credit
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purchases require that an individual must be actively employed
by a CalPERS employer or one of the reciprocal public employers
at the time of the service credit purchase election. The
election must be made prior to the retirement election. Two
individual service credit elections do not make this
specifically clear, creating confusion for individuals who wish
to purchase service credit under those options.
REGISTERED SUPPORT / OPPOSITION:
Support
California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957
SB 216
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