BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1203|
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THIRD READING
Bill No: SB 1203
Author: Hertzberg (D)
Amended: 4/13/16
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 3-0, 4/11/16
AYES: Pan, Beall, Hall
NO VOTE RECORDED: Morrell, Moorlach
SENATE APPROPRIATIONS COMMITTEE: 5-0, 5/27/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NO VOTE RECORDED: Bates, Nielsen
SUBJECT: Retirement systems: joint powers authorities:
benefit formulas
SOURCE: California Professional Firefighters
DIGEST: This bill requires that, 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), any employee 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
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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 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 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
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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
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 the Assembly Public Employment
and Social Security 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, Huff, Chapter 757, Statutes of 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 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
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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.:YesLocal: No
According to the Senate Appropriations Committee, CalPERS
estimates that it would incur one-time costs of $200,000
(special fund) to implement the provisions of the bill.
Specifically, the cost would apply to "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."
SUPPORT: (Verified5/27/16)
California Professional Firefighters (source)
California State Firefighters' Association
California Statewide Law Enforcement 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: (Verified5/27/16)
None received
ARGUMENTS IN SUPPORT: From a letter from the California
Professional Firefighters:
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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 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.
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Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519
5/28/16 16:46:02
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