BILL ANALYSIS Ó SB 354 Page 1 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. SB 354 Page 2 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. SB 354 Page 3 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 SB 354 Page 4 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, SB 354 Page 5 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 Page 6 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