BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 354|
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CONSENT
Bill No: SB 354
Author: Huff (R)
Amended: 4/6/15
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 4/27/15
AYES: Pan, Morrell, Beall, Fuller, Hall
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: California Public Employees Pension Reform Act of
2013: joint powers authority: employees
SOURCE: City of Brea
City of Fullerton
DIGEST: This bill clarifies the time period during which a
California Public Employees' Retirement System (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 cities and retain classic benefit formulas received
prior to the transfer.
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
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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
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 on December 31,
2012, from their respective employers.
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)Deletes the reference date of December 31, 2012, to identify
the formulas transferring employees will be subject to.
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2)Clarifies that transferred employees will receive the formulas
that they were receiving from Brea or Fullerton prior to the
formation and exercise of the joint, or "common" power created
by the JPA.
3)Clarifies that if any of up to three contiguous cities join
the JPA and their employees transfer to the JPA with no more
than a six-month break in service between employment with the
city and employment in the JPA, those employees shall also be
allowed to retain the retirement benefit plans they were
entitled to from their employers prior to the transfer of the
exercise of common powers to the JPA.
Background
PEPRA allows classic employees who move between public employers
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 six-month 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.
In 2014, SB 1251 (Huff, Chapter 757) allowed 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. In doing so, the
bill used the standard December 31, 2012 date as the reference
for retirement benefits that transferred employees would retain.
At the time, consideration was not given to classic employees
who would come to work at Brea or Fullerton in the interim and
then be transferred to the JPA. Any classic employees hired
between January 1, 2013, and the date of transfer to the JPA
would not be grandfathered under the statute as written, even
though the intent was to allow all transferring classic
employees to retain their classic formulas.
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SB 354 thus makes clear the intent of SB 1251 that any classic
employee who transfers to the newly formed JPA will be allowed
to retain his or her classic formula following the transfer.
Prior/Related Legislation
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.:YesLocal: No
SUPPORT: (Verified5/12/15)
City of Brea (co-source)
City of Fullerton (co-source)
OPPOSITION: (Verified5/12/15)
None received
ARGUMENTS IN SUPPORT:
According to the author:
While it was understood that SB 1251 would enable the
cities of Brea and Fullerton to form a JPA and retain
employees previously enrolled in CalPERS under their
formulas available prior to January 1, 2013, according to a
technicality, classic employees who have been hired into
the joint fire department are falling out of their original
pension formulas.
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Because the JPA is still in process, CalPERS cannot
recognize the original pensions of Fullerton/Brea fire
department classic hires. SB 354 aligns and clarifies
recent pension reforms with JPA laws, until the JPA can
exercise authority for the cities of Brea and Fullerton.
As stated by the sponsors:
SB 1251(2014) paved the way for the Cities of Brea and
Fullerton to form a Joint Powers Authority (JPA) that will
permit both agencies to completely share fire services and
allow classic employees with no break in service, hired
before December 31, 2012, to transfer over to the forming
JPA and retain their classic pension formulas. As we are
working toward formation of the JPA, both Brea and
Fullerton have hired classic public safety employees after
December 31, 2012 to replace retiring personnel.
Unfortunately, CalPERS has told us that these employees
would be classified as new members under the Public
Employees' Pension Reform Act of 2013 once they are moved
over to the new JPA.
To address this issue, SB 354 would revise the period
during which the authorization granted to a JPA formed by
the Cities of Brea and Fullerton to provide specified
retirement benefits, as described above, may be applied.
Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519
5/13/15 16:56:00
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