BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 637|
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THIRD READING
Bill No: AB 637
Author: Hill (D)
Amended: 4/2/09 in Assembly
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 7-0, 6/8/09
AYES: Correa, Ashburn, Benoit, Ducheny, Liu, Padilla,
Wiggins
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/14/09 - See last page for vote
SUBJECT : Public Employees Retirement System:
contracting agencies
SOURCE : Public Employees Retirement System
DIGEST : This bill requires the Public Employees
Retirement System (PERS) contracting agencies to use
Electronic Funds Transfer (EFT) for the payment of amounts
due to PERS and changes the method for calculating interest
on late employer payments, as specified.
ANALYSIS : Existing PERS law:
1.Allows PERS contracting agencies may pay their employees'
retirement contributions and health premiums through EFT,
or through paper check, and
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2.Permits PERS to charge contracting agencies interest on
late payments, using a rate approximating the average
rate of return on investments.
This bill:
1.Authorizes the PERS Board to require contracting agencies
to make payments for retirement contributions and health
premiums due to PERS through EFT,
2.Specifies that this requirement only becomes effective
upon declaration of the PERS Board,
3.Allows a PERS contracting agency that is unable to comply
with the EFT requirement to apply to the PERS Board for a
waiver allowing the agency to pay in an alternate manner,
as determined by the Board, but not by credit card,
4.Defines the term "electronic funds transfer" as used in
this part, and
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations analysis,
"Significant administrative savings and investment earnings
to CalPERS due to reduced processing costs and earlier
receipt of investable funds from its contracting agencies."
SUPPORT : (Verified 6/26/09)
Public Employees' Retirement System (source)
ARGUMENTS IN SUPPORT : According to PERS, "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
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reports online, allowing contracting agencies and employees
faster access to their accounts, with fewer errors or lags
in posting information. 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."
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Beall, Bill Berryhill,
Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuller, Furutani, Galgiani, Gilmore, Hagman, Hall,
Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Silva, Skinner,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Ammiano, Fuentes, Gaines, Garrick,
Saldana, Smyth, Bass
DLW:nl 6/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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