BILL ANALYSIS Ó
SB 354
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Date of Hearing: June 24, 2015
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
SB
354 (Huff) - As Amended April 6, 2015
SENATE VOTE: 36-0
SUBJECT: California Public Employees' Pension Reform Act of
2013: joint powers authority: employees.
SUMMARY: Clarifies the time period during which a "classic"
member of the California Public Employees' Retirement System
(CalPERS) 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. Specifically, this bill:
1)Deletes the reference date of December 31, 2012, and instead
specifies that transferred employees will receive the defined
benefit plan or formula they were receiving from Brea or
Fullerton prior to the exercise of a common power by the JPA.
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2)Clarifies that if any of up to three contiguous cities join
the JPA formed by Brea and Fullerton and their employees
transfer to the JPA with no more than a 6-month break in
service between employment with the city and employment in the
JPA, those employees will also be allowed to retain the
defined benefit plan or formula they were entitled to from
their employers prior to the exercise of common power by the
JPA.
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
JPA is then a new contracting employer in the retirement
system.
3)Establishes, under 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.
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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)Specifies that the formation of the JPA on or after January 1,
2013, may not act in a manner so as to exempt a member from
PEPRA who would otherwise be subject to PEPRA.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS: Last year, SB 1251 (Huff), Chapter 757, Statutes of
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2014 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 of 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.
SB 354 makes clear the intent of SB 1251 so that any classic
employee who transfers to the newly formed JPA will be allowed
to retain his or her classic formula following the transfer.
According to supporters, "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,
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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."
REGISTERED SUPPORT / OPPOSITION:
SB 354
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Support
City of Brea (Sponsor)
City of Fullerton (Sponsor)
Opposition
None on file
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957