BILL ANALYSIS Ó
SB 1203
Page 1
SENATE THIRD READING
SB
1203 (Hertzberg)
As Amended April 13, 2016
Majority vote
SENATE VOTE: 29-4
------------------------------------------------------------------
|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Public |6-0 |Waldron, Cooley, | |
|Employees | |Cooper, Cristina | |
| | |Garcia, O'Donnell, | |
| | |Wagner | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |18-1 |Gonzalez, Bigelow, |Gallagher |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Daly, Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood, | |
| | |McCarty | |
| | | | |
| | | | |
SB 1203
Page 2
------------------------------------------------------------------
SUMMARY: Authorizes a joint powers authority (JPA) formed on or
after January 1, 2013, as specified, to provide employees who
transfer to the JPA the same defined benefit plan or formula
that they received from their respective employer prior to the
JPAs formation rather than the benefit required under the
California Public Employees' Pension Reform Act of 2013 (PEPRA).
Specifically, this bill:
1)Allows a JPA formed on or after January 1, 2013, as specified,
to provide employees the defined benefit plan or formula that
the employees received from their respective employers prior
to the employers forming the JPA.
2)Provides that the employee must not be a new member with that
employer and must be employed by the JPA within 180 days of
the formation of the JPA.
3)Prohibits the formation of a JPA on or after January 1, 2013,
in a manner that exempts a new member from the requirements of
PEPRA. New members may only participate in a plan that
conforms to the requirements of PEPRA.
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.
SB 1203
Page 3
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.
3)Establishes, under 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 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)Authorizes 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 from their
respective employers within 180 days of the cities providing
for the exercise of the common power, to which the employee
was associated, by the JPA.
6)Specifies that on or before January 1, 2017, up to three
cities in Orange County that are contiguous with Brea or
Fullerton may join the JPA and extend the same protections,
with regard to classic retirement formulas, to their
transferred employees and prohibits the formation of the JPA
in a manner that would exempt a new employee or member from
the requirements of PEPRA. New members may only participate
SB 1203
Page 4
in a plan that conforms to the requirements of PEPRA.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, one-time special fund costs to CalPERS of
approximately $200,000 for implementation and systems changes.
COMMENTS: According to the sponsor of the bill, the California
Professional Firefighters, "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 [emergency management system] 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.
"PEPRA allows classic employees (employees hired on or before
January 1, 2013) who move between public employers within a
180-day window to be grandfathered under pre-PEPRA retirement
formulas. Understanding this, 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. Because PEPRA took
effect on January 1, 2013, a JPA formed after that date is
considered a new employer and therefore, has no classic
retirement formula or benefit to offer its classic employees.
"Realizing the aforementioned unintended consequence of PEPRA, a
handful of local agency employers and their respective employee
organizations collectively seeking to form JPAs in recent years,
have since pursued special legislation authorizing PEPRA
SB 1203
Page 5
exceptions specific to their agencies. Therefore, authorizing
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."
Related/Prior Legislation
SB 24 (Hill) of the current legislative session, currently in
the Assembly Public Employees, Retirement, 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
SB 1203
Page 6
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
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.
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
FN:
0004000