BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 216| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 216 Author: Pan (D) Amended: 6/3/15 Vote: 21 SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 4/13/15 AYES: Pan, Morrell, Beall, Fuller, Hall SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 SENATE FLOOR: 34-0, 4/30/15 AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Hall, Hancock, Hertzberg, Hill, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Nguyen, Nielsen, Pan, Pavley, Roth, Stone, Wieckowski, Wolk NO VOTE RECORDED: Hernandez, Hueso, Morrell, Runner, Vidak ASSEMBLY FLOOR: 79-0, 7/16/15 - See last page for vote SUBJECT: The Public Employees Retirement System SOURCE: California Public Employees Retirement System DIGEST: This bill is the California Public Employees Retirement Systems (CalPERS) annual housekeeping bill and makes technical and non-controversial changes to CalPERS-administered portions of the Government Code. Assembly Amendments (1) clarify that CalPERS may, during the course of an audit as authorized by existing law to determine the correctness of retirement benefits, require public employers to provide information deemed necessary by CalPERS to determine eligibility for retirement benefits; and (2) make minor SB 216 Page 2 technical amendments to clarify that a member may purchase service credit for a period of uncompensated absence of an employer-approved leave of absence, as specified. ANALYSIS: Existing law: 1)Grants CalPERS, under the California Constitution, plenary 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 uncompensated absence, as specified. 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 may, during the course of an audit as authorized by existing law, require public employers to SB 216 Page 3 provide information deemed necessary by CalPERS to determine eligibility for retirement 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 who wishes to purchase service credit for uncompensated absence of an approved medical leave or parental leave must do so after returning to active public employment and prior to retirement. Background CalPERS annually sponsors "housekeeping" legislation to provide technical and non-controversial amendments to portions of the Government Code that CalPERS administers. 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. Under existing law CalPERS has audit authority to require a public employer to provide any information CalPERS deems SB 216 Page 4 necessary to determine the correctness of retirement benefits. Some CalPERS contracting employers, however, have argued that CalPERS authority is limited to determining the "correctness" of the benefit but not the "eligibility" for the benefit and that they do not have to provide relevant records to CalPERS auditing staff. Eventually, the employers comply but the misreading of the law causes unnecessary costs and delays. Finally, CalPERS' general rules regarding service credit 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. Prior/Related Legislation AB 2472 (Assembly Public Employees, Retirement and Social Security Committee, Chapter 237, Statutes of 2014), CalPERS annual housekeeping bill, made technical and non-controversial changes to CalPERS - administered portions of the Government Code. SB 215 (Beall, Chapter 778, Statutes of 2013), CalPERS annual housekeeping bill, made technical and non-controversial changes to CalPERS - administered portions of the Government Code. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Assembly Appropriations Committee this bill results in negligible costs to implement administrative and system changes and estimated annual savings of approximately $50,000 as a result of modifying and eliminating certain obsolete reports. SUPPORT: (Verified8/3/15) SB 216 Page 5 California Public Employees' Retirement System (source) OPPOSITION: (Verified8/3/15) None received ARGUMENTS IN SUPPORT: According to the sponsor, "These changes are clarifying technical or minor policy changes necessary for administrative purposes, identified through the performance of normal business processes." ASSEMBLY FLOOR: 79-0, 7/16/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Gordon Prepared by:Glenn Miles / P.E. & R. / (916) 651-1519 8/13/15 14:31:36 **** END **** SB 216 Page 6