BILL ANALYSIS Ó
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
SB
1162 (Berryhill) - As Amended June 15, 2016
SENATE VOTE: 39-0
SUBJECT: Public employees' retirement: Mammoth Lakes Fire
District
SUMMARY: Allows the Mammoth Lake Fire District (MLFD) to
request that the Board of the California Public Employees'
Retirement System (CalPERS) transfer all or a portion of
available excess assets from MLFD's miscellaneous employee plan
to its safety employee plan in order to pay unfunded accrued
actuarial obligations in the safety plan. Specifically, this
bill:
1)Allows MLFD to request that the CalPERS board transfer all or
a portion of available excess assets credited to MLFD's
miscellaneous plan in order to satisfy MLFD's unfunded accrued
actuarial obligations in its safety plan if the market value
of assets attributed to the miscellaneous plan exceeds 150% of
the amount that is the actuarial equivalent, including
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contingencies for mortality fluctuations, of the amount
CalPERS would be required to pay for benefits for service
attributed to the miscellaneous plan if MLFD were to terminate
its contract with CalPERS for the miscellaneous plan.
2)Requires, upon request, the CalPERS board to transfer the
assets, which may only be used to pay for MLFD's unfunded
accrued actuarial obligations in its safety plan.
3)Specifies that the amount that may be transferred cannot
exceed the difference between the market value of assets
attributed to the MLFD's miscellaneous plan as of the most
recent valuation and 150% of the amount of which is the
actuarial equivalent of the amount the system would be
obligated to pay for benefits for service attributed to the
miscellaneous plan if MLFD were to terminate its contract with
CalPERS for the miscellaneous plan as described in 1) above.
4)Requires before requesting the CalPERS board to make the
transfer permitted by this bill that MDLF notify its employees
of the intended request in writing at least two weeks prior to
requesting the transfer of assets between the plans.
5)Requires that MLFD submit a statement in writing to the
CalPERS board that MLFD has notified its employees as
required.
6)Is an urgency statute in order to allow MLFD to redistribute
excess employer assets to address unfunded liability in the
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safety plan to prevent layoffs, arrearage, and other
consequences of financial hardship.
EXISTING LAW:
1)Requires that the contributions made by the employer to
CalPERS to fund benefits be determined by actuarial
calculation, which may include both the normal cost of the
benefits and the cost of any unfunded accrued liability
relative to those benefits.
2)Defines "normal cost" to be the portion of the present value
of projected benefits that is attributable to the current year
of service, as determined by the retirement system actuary.
In general, normal cost is the actual cost to fund employees'
benefits in that year and does not include any additional
costs for unfunded accrued liability.
3)Creates separate classes of membership in CalPERS, including
local safety members (such as police officers and
firefighters) and local miscellaneous members (i.e.,
non-safety personnel) and defines different benefits for
safety vs. non-safety personnel. Therefore, the employer
contribution rates and retirement plans are different for each
member classification.
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4)Requires, in the Public Employees' Pension Reform Act of 2013
(PEPRA), that the public employer's contributions, combined
with the employee's contributions, must annually pay the
normal cost of the pension benefits provided. This
requirement may not be waived unless all of the following
occur:
a) The employer's benefit plan becomes funded by more than
120%.
b) The retirement system actuary determines that continuing
to accrue excess earnings could result in disqualification
of the plan's tax-exempt status under provisions of the
Internal Revenue Code.
c) The CalPERS board determines that continuing to accept
additional contributions would conflict with its fiduciary
duty as set forth in the California Constitution.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS: For the past several years, MLFD has been
communicating with CalPERS, seeking the ability to transfer
employer assets from their overfunded miscellaneous plan to
their underfunded safety plan to help pay for the current
unfunded actuarial obligations of the safety plan. In general,
CalPERS law does not permit such transfers.
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The 2014 actuarial valuation of MLFD reported that the
miscellaneous plan was 302% funded at that time. The amount has
been increasing year over year. MLFD has only one miscellaneous
employee. In order to free employer monies in the miscellaneous
plan, MLFD's only current option is to terminate the
miscellaneous plan and terminate the employment of the
miscellaneous employee. This action would require CalPERS to
reserve enough money in the terminated agency fund to cover the
service of the terminated employee and revert excess monies back
to the employer. However, MLFD states that the miscellaneous
employee is critically needed, and terminating the employment of
its miscellaneous employee is not a good option for MLFD.
According to the author, "The Mammoth Lakes Fire District is a
fire protection district originating in 1948 to serve the
Mammoth Lakes community. The District boundaries encompass
approximately 24 square miles with 9 full-time positions. The
area will continue to grow in complexity and population as the
resort town grows to include more hotels, condos, and related
businesses; all built on an active volcano and MLFD will
continue to rise to the challenge with improved apparatus and
equipment. Permitting the transfer of excess assets for rate
plans meeting the severely overfunded plan requirements will
allow agencies to redistribute excess assets to portions of
their contract that are under the most financial stress. Such
funding may help prevent layoffs, arrearage, and other
consequences of financial hardships. The overfunded plan is one
that would remain in extremely favorable conditions following
the transfer of assets, protecting the Miscellaneous plan from
market fluctuations, catastrophic occurrences and other
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unforeseen events."
REGISTERED SUPPORT / OPPOSITION:
Support
Mammoth Lakes Fire Protection District
Opposition
None on file
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957