BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 400|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 400
Author: Ortiz (D)
Amended: 4/22/99
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 4-0, 3/22/99
AYES: Ortiz, Baca, Karnette, Lewis
NOT VOTING: Haynes
SENATE APPROPRIATIONS COMMITTEE : 11-0, 4/19/99
AYES: Johnston, Alpert, Bowen, Burton, Karnette, Kelley,
Leslie, McPherson, Mountjoy, Perata, Vasconcellos
NOT VOTING: Escutia, Johnson
SUBJECT : Public Employees' Retirement System: benefits
SOURCE : California Public Employees' Retirement System
California State Employees' Association
California Department of Forestry Retirees
California School Employees' Association
DIGEST : This bill establishes a new level of survivor
benefits for state and school employee participants in the
1959 Survivor Benefit Program, effective January 1, 2000
until January 1, 2010, increasing the benefit level to more
closely achieve comparability with Social Security.
ANALYSIS : 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
CONTINUED
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program pay $2 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that the program was originally enacted to mimic Social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.
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.
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 fifth 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.
This bill:
1.Creates a new "5th" Level '59 Survivor Benefit and
requires all state members not participating in Social
Security to be covered, effective January 1, 2000.
2.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.
3. Requires the member and the employer, if necessary, to
each pay $2 per month for the increased benefit. (Should
the needed total contribution ever exceed $4 per month,
the employee and employer would evenly share the cost.)
4.Requires that all surplus assets in both the state and
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school accounts be absorbed before any employer
contribution is required.
5.Sunsets January 1, 2010.
Comments
According to the Senate Public Employees and Retirement
Committee analysis, 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 will
not contain any COLA.
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 requiring 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 accumulate
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."
AB 2437 passed the Senate Floor 24-9 on 8/13/98.
NOES: Brulte, Haynes, Hurt, Kelley, Knight, Kopp, Lewis,
Mountjoy, Wright
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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Fiscal Impact (in thousands)
Major Provisions 1999-2000 2000-01 2001-02 Fund
Death benefit ----------no net state costs-----PERS
According to the Senate Appropriations Committee analysis,
the benefit increase proposed in this bill will be paid by
surpluses in the 1959 Survivor Benefit Account. There are
sufficient surplus funds in the account to pay the state's
costs for approximately 10 years, while members continue to
pay $2 per month. Although SB 400 contains a sunset after
the ten year period, staff notes the state costs of the
program if it were continued could range between $1 million
and $2.5 million annually, since the 1959 SBP surplus would
no longer be available to fund the state employer's share
of this benefit.
The 1959 SBP was designed to provide pre-retirement death
benefits to PERS members not covered by the federal OASI
program. There are 4 benefit levels within the SBP.
However, the benefits are fixed without any increases for
cost of living adjustments. The new proposed level 5 will
bring the benefits closer to current OASI benefits. SB 400
increases the benefit to $750 per month for a single
recipient, $1,500 for two recipients and $1,800 for two or
more.
SUPPORT : (Verified 4/21/99)
California Public Employees' Retirement System (co-sponsor)
California State Employees' Association (co-sponsor)
California Department of Forestry Retirees (co-sponsor)
California School Employees Association (co-sponsor)
California Professional Firefighters
American Federation of State, County & Municipal Employees
California Federation of Teachers
California Union of Safety Employees
California Association of Highway Patrolmen
California Department of Forestry Firefighters
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Retired Public Employees Association
San Bernardino County Sheriff
TSM:kb 4/22/99 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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