BILL ANALYSIS
AB 637
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Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Ed Hernandez, Chair
AB 637 (Hill) - As Amended: April 2, 2009
SUBJECT : Public Employees' Retirement System: contracting
agencies.
SUMMARY : Requires California Public Employees' Retirement
System (CalPERS) contracting agencies to use Electronic Funds
Transfer (EFT) for the payment of amounts due to CalPERS and
changes the method for calculating interest on late employer
payments, as specified. Specifically, this bill :
1)Authorizes the CalPERS Board to require contracting agencies
to make payments for retirement contributions and health
premiums due to CalPERS through EFT.
2)Specifies that this requirement only becomes effective upon
declaration of the CalPERS Board.
3)Allows a contracting agency that is unable to comply with the
EFT requirement to apply to the CalPERS Board for a waiver
allowing the agency to pay in an alternate manner, as
determined by the CalPERS Board, but not by credit card.
4)Defines the term "electronic funds transfer" as used in this
part.
5)Changes the method for calculating interest on late employer
payments so that interest will be charged at the actuarial
interest rate on amounts due and unpaid by a CalPERS
contracting agency.
EXISTING LAW:
1)Allows CalPERS contracting agencies may pay their employees'
retirement contributions and health premiums through EFT, or
through paper check.
2)Permits CalPERS to charge contracting agencies interest on
late payments, using a rate approximating the average rate of
return on investments.
AB 637
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FISCAL EFFECT : Unknown.
COMMENTS : According to the sponsor, CalPERS, "EFT payments
reduce manual processing and potential errors, increasing
efficiency. It is also environmentally sound, and consistent
with industry best practices. Both CalPERS and contracting
employers will be able to predict exactly when money will be
withdrawn from or deposited and plan accordingly. EFT also
permits CalPERS to provide payroll reports online, allowing
contracting agencies and employees faster access to their
accounts, with fewer errors or lags in posting information."
CalPERS also states, "The current method of calculating interest
charges limits CalPERS' ability to take advantage of the new EFT
mandate by collecting interest in a timely manner. CalPERS
captures the interest on late payments by adding it to the
employer's existing liabilities on which their contribution
rates are based. This method was adopted primarily because
CalPERS' information technology (IT) systems were unable to
support alternate means of capturing interest. The upcoming
consolidation of CalPERS' legacy IT systems into a single
database will allow the system to track employer payments and
account balances in real-time to encourage timely payments.
Unless the basis for calculating interest charges on late
payments is changed, CalPERS will be unable to fully realize the
increases in speed and efficiency made possible by the new
database. Charging a fixed interest rate will enhance CalPERS'
administrative efficiency, and benefits employers by providing
them up-to-date fiscal information and improving their budget
planning."
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957