BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1203 (Hertzberg) - Retirement systems: joint powers
authorities: benefit formulas
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|Version: April 13, 2016 |Policy Vote: P.E. & R. 3 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: April 25, 2016 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill Summary: With respect to a joint powers authority (JPA)
formed on or after January 1, 2013 that contracts with the
California Public Employees' Retirement System (CalPERS), this
bill would authorize 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.
Fiscal Impact: CalPERS estimates that it would incur one-time
SB 1203 (Hertzberg) Page 1 of
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costs of $200,000 (special fund) to implement the provisions of
the bill.
Background: Current law authorizes 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 (a Joint Powers Authority, or JPA) that is
separate from the parties to the agreement and is responsible
for the administration of the agreement. The JPA can then
contract with CalPERS to offer retirement benefits if it meets
certain requirements, and becomes a contracting employer in the
retirement system.
Current law, the Public Employees' Pension Reform Act of 2013
(PEPRA), establishes 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. Pre-PEPRA members (also known as "classic" members) who
were first hired into public service prior to January 1, 2013,
and who move between public employers within a 180-day time
period, are grandfathered under pre-PEPRA retirement formulas
and consequently are 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).
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 180-day 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.
Bill Summary: This bill would authorize that when public
agencies form a JPA on or after January 1, 2013, and contract
with CalPERS for benefit coverage for its employees, employers
that form the JPA, 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, as specified.
The formation of a JPA on or after January 1, 2013, may not act
in a manner to exempt someone from PEPRA who would otherwise
have been subject to it. Employees who became new members of
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CalPERS after January 1, 2013, must be subject to PEPRA.
Related Legislation:
SB 24 (Hill, 2016), currently in the 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 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.
SB 1251 (Huff, Chapter 757, Statutes of 2014) created
the current 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.
Staff Comments: CalPERS estimates that the bill would result in
a one-time cost of about $200,000 for information technology
changes in order to provide each JPA employee the same benefit
formula as that employee had with one of the cities forming the
JPA.
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