Amended in Senate March 30, 2016

Senate Bill No. 1162

Introduced by Senator Berryhill

February 18, 2016

begin delete An act to amend Section 20816 of the Government Code, relating to retirement. end delete begin insert An act to add Section 20817 to the Government Code, relating to public retirement. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 1162, as amended, Berryhill. begin delete Public employees’ retirement. end delete begin insert Public employees’ retirement: Mammoth Lakes Fire District. end insert

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Existing law, the Public Employees’ Retirement Law, creates the Public Employees’ Retirement System (PERS), which provides a defined benefit to its members based on age at retirement, service credit, and final compensation. Existing law vests the Board of Administration of PERS with management and control of the system. Existing law authorizes any public agency to participate in and make all or part of its employees members of PERS, as specified.

end insert begin insert

This bill would authorize the Mammoth Lakes Fire District (MLFD) to request that the board transfer, and upon that request would require the board to transfer, available excess assets credited to the miscellaneous member category from the MLFD’s employer account to satisfy the MLFD’s unfunded accrued actuarial obligations for its safety plan if specified conditions are met.

end insert begin insert

This bill would make legislative findings and declarations as to the necessity of a special statute for the Mammoth Lakes Fire District.

end insert begin delete

The Public Employees’ Retirement Law governs the rate of employer contributions to the Public Employees’ Retirement System. The law requires, among other things, that all assets of an employer be used in determining the employer contribution rate for the membership comprising the basis of the computation, and that those assets held be recognized over the same funding period used to amortize unfunded accrued actuarial obligations, as specified.

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This bill would make nonsubstantive changes to that provision.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert Section 20817 is added to the end insert begin insert Government Code end insert begin insert ,
to read: end insert

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begin insert 20817. end insert   

(a) The Mammoth Lakes Fire District (MLFD) may
request that the board transfer available excess assets credited to
the miscellaneous member category from the MLFD’s employer
account to satisfy the MLFD’s unfunded accrued actuarial
obligations for its safety plan if both of the following are true of
the miscellaneous plan from which the assets will be transferred,
as of the most recently completed valuation:

(1) The actuarial value of assets attributable to the MLFD’s
miscellaneous plan exceeds 200 percent of the accrued actuarial
liability, as determined by the chief actuary in accordance with
Section 20816.

(2) The market value of assets attributable to the MLFD’s
miscellaneous plan exceeds 150 percent of the amount which is
the actuarial equivalent, including contingencies for mortality
fluctuations, of the amount this system would be obligated to pay
after the effective date of contract termination to, or on account
of, persons who are or have been employed by, and on account of
service rendered by them to, the MLFD, as determined by the chief
actuary in accordance with subdivision (a) of Section 20576.

(b) Upon request, the board shall transfer the assets, in which
case the transferred assets shall be used solely to satisfy the
MLFD’s current unfunded accrued actuarial obligations in its
safety plan. The transferred assets shall remain in the trust fund
and shall be for the exclusive use of the MLFD’s safety plan.

(c) The amount that may be transferred pursuant to this section
shall not exceed either of the following:

(1) The difference between the actuarial value of assets
attributable to the MLFD’s miscellaneous plan and the amount
described in paragraph (1) of subdivision (a).

(2) The difference between the market value of assets
attributable to the MLFD’s miscellaneous plan and the amount
described in paragraph (2) of subdivision (a).

(d) Before requesting the board to transfer available excess
assets in its miscellaneous plan to satisfy the MLFD’s unfunded
accrued actuarial obligations for its safety plan, the MLFD shall
notify its employees of the intended request. The notice to the
employees shall be in writing. The notice to the employees shall
be issued at least two weeks prior to requesting the transfer of
assets between the plans.

(e) The MLFD shall submit a statement in writing to the board
that the MLFD has notified its employees as described in
subdivision (d) in order for the board to make the transfer.

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begin insert

begin insert SEC. 2. end insert   

end insert begin insert

The Legislature finds and declares that a special law
is necessary and that a general law cannot be made applicable
within the meaning of Section 16 of Article IV of the California
Constitution because of the unique circumstances faced by the
Mammoth Lakes Fire District in funding its pension obligations.

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begin delete

SECTION 1.  

Section 20816 of the Government Code is
amended to read:

20816.  

(a) Notwithstanding any other provision of this part,
all assets of an employer shall be used in the determination of the
employer contribution rate for the membership comprising the
basis of the computation. Assets held shall be recognized over the
same funding period used to amortize unfunded accrued actuarial
obligations, regardless of whether those assets are in excess of the
accrued actuarial obligation, using the entry age normal funding
method.

(b) On and after January 1, 1999, contracting agencies for which
the actuarial value of assets exceeds the present value of benefits
as of the most recently completed valuation, as determined by the
chief actuary, may request that the board transfer employer assets
to member-accumulated contribution accounts to satisfy all or a
portion of the member contributions required by this part. That
transfer shall be over a 12-month period provided the actuarial
value of assets exceeds the present value of benefits. In determining
the present value of benefits and the actuarial value of assets for
purposes of this part, liabilities and assets attributed to the 1959
survivor allowance may not be included. On and after January 1,
2003, a transfer of assets may not be made pursuant to this
subdivision unless all or the same portion of the member
contributions of each member in a membership classification are
satisfied through the transfer. An employer electing a transfer of
assets pursuant to this subdivision shall satisfy the members’
contributions for a period of not less than one month and not more
than one year.

(c) On and after January 1, 2002, any contracting agency for
which the actuarial value of assets exceeds the present value of
benefits as of the most recently completed valuation, as determined
by the chief actuary, may request that the board transfer from the
contracting agency’s employer account excess assets, as determined
by the board subject to the requirements and limitations of Section
420 of the Internal Revenue Code (26 U.S.C. Sec. 420), to a retiree
health account established by the board, in its discretion, in the
contracting agency’s employer account pursuant to Section 401(h)
of the Internal Revenue Code (26 U.S.C. 401(h)) for the purpose
of providing health benefits to the contracting agency’s retirees
and their covered dependents. The board may, in its discretion,
transfer excess assets from the contracting agency’s employer
account to that contracting agency’s retiree health account within
that agency’s employer account, if the transfer meets the conditions
of a qualified transfer pursuant to Section 420 of the Internal
Revenue Code (26 U.S.C. Sec. 420). The transferred assets shall
be used solely for the payment of current retiree health liabilities.
That qualified transfer shall be made only once each year. The
board may adopt regulations necessary to implement this
subdivision. Notwithstanding any other provision of law, the
regulations may provide for the nonforfeiture of accrued pension
benefits of participants and beneficiaries of a plan from which
excess assets are transferred to the extent necessary for the transfer
to meet the conditions of a qualified transfer pursuant to Section
420 of the Internal Revenue Code (26 U.S.C. Sec. 420), and may
include any other provision necessary under Section 420 of the
Internal Revenue Code (26 U.S.C. Sec. 420) or Section 401(h) of
the Internal Revenue Code (26 U.S.C. Sec. 401(h)) to accomplish
the purposes of this subdivision.

(d) For the purpose of this section, “employer” means any
contracting agency, the state, or a school employer.

(e) The actuarial report in the annual financial report shall also
express the effect upon employer contribution rates of this section
and of the recognition of net unrealized gains and losses.

end delete