BILL ANALYSIS Ó
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: SB 1203 Hearing Date: 4/11/16
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|Author: |Hertzberg |
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|Version: |3/28/16 As amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Pamela Schneider |
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Subject: Retirement systems: joint powers authorities: benefit
formulas
SOURCE: California Professional Firefighters
DIGEST: In the case of a joint powers authority (JPA) formed
on or after January 1, 2013 that contracts with the California
Public Employees' Retirement System (CalPERS), this bill
requires that any employees moving from employment with a public
agency forming the JPA to employment with the JPA be provided
the same defined benefit plan or formula that they had as an
employee of the public agency on or before December 31, 2012.
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
administration of the agreement.
2)Allows local public employers forming a JPA to contract with
the California Public Employees' Retirement System (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.
SB 1203 (Hertzberg) Page 2 of ?
3)Establishes, under the Public Employees' Pension Reform Act
(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)Allows 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)Clarifies that the formation of the JPA by Brea and Fullerton
shall not act in a manner so as to exempt a member from PEPRA
who would otherwise be subject to PEPRA.
This bill:
Requires the following when public agencies form a JPA on or
after January 1, 2013, and contract with CalPERS for benefit
coverage for employees of the JPA:
1)Employers that form the joint powers authority, if they
provided employee benefits on or before December 31, 2012,
must provide classic employees who transfer to the JPA with
continuance of the same benefit plans or formulas that those
employees received from their respective employers on or
before December 31, 2012.
2)In order to receive continuance of the classic member
benefits, the classic employees must transfer between the
member agency and the JPA within 180 days of the member agency
providing for the exercise of the common power.
3)The formation of a JPA on or after January 1, 2013, may not
act in a manner to exempt someone from PEPRA who would
SB 1203 (Hertzberg) Page 3 of ?
otherwise have been subject to PEPRA. Employees who became
new members of CalPERS after January 1, 2013, must be subject
to PEPRA.
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 6 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.
Related/Prior Legislation
SB 24 (Hill, 2016), currently in Assembly Rules Committee,
authorizes a JPA formed by the Cities of Belmont, Foster City,
and San Mateo to provide the JPA employees a defined benefit
plan or formula that those employees received as classic CalPERS
members from their employment with the cities. The language of
SB 24 is substantially the same as statutory language enacted
for the Cities of Fullerton and Brea (SB 1251, 2014).
SB 354 (Huff, Chapter 158, Statutes of 2015) clarified the time
period during which a CalPERS classic member employed in the
cities of Brea and Fullerton may transfer to a Joint Powers
Authority (JPA) formed by those two cites and retain classic
benefit formulas received prior to the transfer.
SB 1251 (Huff, Chapter 757, Statutes of 2014) created an
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.
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA,
effective January 1, 2013, which implemented statewide reform of
pension plans and related public employment benefits.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SB 1203 (Hertzberg) Page 4 of ?
SUPPORT:
California Professional Firefighters (source)
California State Firefighters' Association
Laborers' International Union of North America, Local 777
Laborers' International Union of North America, Local 792
Orange County Professional Firefighters Association, Local 3631
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
From a letter from California Professional Firefighters:
The Great Recession forced local public agencies up and
down our state to implement hard-dollar cuts in core public
services, including fire protection, as a result of
severely squeezed budgets. Over the last few years in many
of our communities, fire stations have been closed, or
rolling "brown-outs" have been implemented, in an effort to
save money. Firefighters have been laid off, and a whole
host of other safety-net services have been eliminated or
severely pared back.
For some communities, the most efficient, cost-effective
model for providing fire protection and emergency medical
services in the wake of the Great Recession is to form a
JPA so that local agencies can integrate their respective
services in those jurisdictions and in doing so, achieve
economies of scale and cost savings. However, one barrier
to these consolidations has arisen and created a
significant obstacle to full integration of fire protection
and EMS services in this regard because of the inability to
transfer existing, classic employees to a newly formed JPA
without an interruption or loss of those employees' classic
retirement formulas or benefit plans.
Therefore, legislation applicable statewide, which remedies
the aforementioned unintended consequence, is needed so as
SB 1203 (Hertzberg) Page 5 of ?
to alleviate not only the existing burden that falls on
individual agencies to introduce authorizing bills specific
to their respective, proposed JPA agreements, but also to
eliminate the cost incurred by taxpayers and time delays
for implementation each time an agency-specific bill is
introduced.
Furthermore, SB 1203 aids local public agencies in their
efforts to effectively recruit and retain the most
experienced, qualified public safety professionals.
Indeed, by providing equity for all seasoned and veteran
firefighters and other public workers who wish to continue
to serve in their communities without being forced to
consider transferring to another public agency, SB 1203
advances the public's interest. And, when lives are on the
line, every second counts. SB 1203 ultimately also allows
local public agencies to achieve economies of scale for the
taxpayers, which in turn translates into better response
times.