BILL ANALYSIS
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|SENATE PUBLIC EMPLOYMENT & RETIREMENT | BILL NO: SB 400 |
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|Deborah V. Ortiz, | Hearing date: March 22, 1999|
|Chair | |
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|SB 400 (Ortiz) as introduced2/12/99 | FISCAL: Yes|
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|David Felderstein | SB 400 |
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|Date: March 17, 1999 | Page 1|
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PERS: 1959 Survivor Benefit Program: New 5th Level of
Benefits Proposed
HISTORY :
Sponsor: California Public Employees' Retirement
System (PERS, co-sponsor)
California State Employee's Association
(CSEA, co-sponsor)
California Department of Forestry Retirees
(CDF, co-sponsor)
California School Employees Association
(co-sponsor)
Prior legislation: AB 2437 (Ortiz), 1998 Vetoed
SUMMARY :
Would establish a new level of survivor benefits for state
and school employee participants in the 1959 Survivor
Benefit Program, effective January 1, 1999, increasing the
benefit level to more closely achieve comparability with
Social Security.
BACKGROUND :
1) Existing PERS law contains the '59 Survivor Benefit
which was designed to provide pre-retirement death benefits
to PERS members not covered by Social Security. Employees
who participate in the '59 Survivor Benefit program pay
$2.00 per month for coverage. It is understood that the
program was originally enacted to mimic Social Security.
Over the years four distinct benefit levels have been
enacted in the '59 Survivor Benefit.
2) Generally, state and school employees are covered by
the existing Level 3 , which provides survivors $350 per
month for a single recipient, $700 per month for two
recipients, or $840 per month for three or more recipients.
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|David Felderstein | SB 400 |
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|Date: March 17, 1999 | Page 2|
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3) '59 SURVIVOR BENEFITS:
The '59 Survivor Benefits are fixed dollar amounts (not
related to salary at the time of death), with no COLA
(post-death Consumer Price Index increases). Social
Security death benefits are calculated based on the
individual's earnings, and a CPI-indexed COLA.
According to PERS, the lack of a COLA is a chronic design
flaw in the '59 Survivor Benefit. Since the program is
intended to replace Social Security, PERS views the
proposed 5th level as an appropriate solution to the
inadequacy of the current benefit.
Significant surpluses have built up in both the state and
school '59 Survivor Benefit accounts that cannot be used
for other purposes.
ANALYSIS :
This bill :
a) creates a new "5th Level" '59 Survivor Benefit and
requires all state members not participating in Social
Security to be covered,
b) specifies that "5th Level" survivors of deceased state
employees and school members would receive $750 per month
for a single recipient, $1,500 per month for two
recipients, or $1,800 per month for three or more
recipients,
c) requires the member, and the employer if necessary ,
to each pay $2.00 per month for the increased benefit
(should the needed total contribution ever exceed $4.00
per month, the employee and employer would evenly share
the cost), and
d) requires that all surplus assets in both the state
and school accounts be absorbed before any employer
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|David Felderstein | SB 400 |
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|Date: March 17, 1999 | Page 3|
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contribution is required.
COMMENTS :
1) The committee is advised that this bill , developed by
PERS in consultation with a task force comprised of
employee organizations and employers, addresses the current
low level of benefit payments. This 5th level of benefits
would not contain any COLA.
2) AB 2437 (Ortiz) 1998, an identical bill, was vetoed by
Governor Wilson. His veto message states:
"Under current law, state and local agencies may elect to
provide a pre-retirement death benefit enhancement
through the collective bargaining process. This measure
eliminates that discretion by requring state and local
governments to provide this benefit. The issue here is
not whether the enhancement is warranted. It is the
impropriety of circumventing the collective bargaining
process.
"Despite the present existence of an accumulated surplus
of employee assets, retirement benefits are more
appropriately increased only by negotiation required by
the collective bargaining process. As long as state law
requires that state and local governments engage in
collective bargaining as public employers, it is improper
to circumvent the required negotiation by legislation."
3) SUPPORT :
California Professional Firefighters (CPF)
American Federation of State, County & Municipal Employees
(AFSCME)
California Federation of Teachers (CFT)
4) OPPOSITION : None to date
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|David Felderstein | SB 400 |
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|Date: March 17, 1999 | Page 4|
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