BILL ANALYSIS
AB 966
Page 1
Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Ed Hernandez, Chair
AB 966 (P.E., R.& S.S. Com.) - As Amended: March 26, 2009
SUBJECT : Public employee benefits.
SUMMARY : Makes several minor or technical amendments to
various sections of the Government Code administered by the
California Public Employees' Retirement System (CalPERS) that
are necessary for the continued efficient administration of the
system. Specifically, this bill:
1)Clarifies the language defining final compensation for member
of specified bargaining units to make it clear that these
provisions apply to member hired for the first time after
January 1, 2007.
2)Clarifies that the final compensation period is 12 consecutive
months for optional National Guard members.
3)Specifies that National Guard Service does not count as state
service for the purpose of vesting for retiree health benefits
in accordance with the original intent of the legislation.
4)Increases, from three to 10 years from the time of discovery,
the period of time in which CalPERS can recover overpayments
due to the death of a retired member or beneficiary.
5)Permits CalPERS to purchase or construct a building outside
the region to be used as an emergency or business continuity
center.
6)Allows CalPERS to specify the manner in which a member must
provide notice of a change in status in order to allow for
electronic notification.
7)Clarifies that while the Department of Finance or the State
Auditor are barred under existing law from duplicating
CalPERS' periodic financial audits, they are not precluded
from conducting other types of audits on the system.
8)Recodifies provisions concerning National Guard members in an
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appropriate subsection of the government code to enhance
comprehension and administration.
9)Prohibits an employer from passing on to an employee costs
associated with the employer's failure to enroll an employee
into membership and requires an employer that fails to
withhold and submit an employee's contributions within the
applicable timeframe to notify CalPERS and to take no action
until authorized by CalPERS.
10)Clarifies the standards for mandatory membership threshold
for part-time employees so that simply meeting the threshold
is sufficient.
11)Expands the authority of a contracting agency to amend its
contract or previous contract amendments to provide different
benefits with respect to service performed after the effective
date of the contract amendment if provided to everyone in a
classification, to the new local safety officer, local
sheriffs and school safety member classifications.
12)Extends the prohibition on providing benefits to some, but
not all members of a class to the new local safety officer and
school safety member classifications.
13)Clarifies the payroll reporting guidelines for school
employees by defining the term "payrate" more clearly. Also
addresses concerns regarding the correct terminology referring
to classified school employees by removing the term
"noncertificated".
14)Clarifies that the term "compensation earnable" as it is used
in the part-time service section falls under the same
definition of compensation earnable as used in other parts of
the law.
15)Removes the requirement that a member must have 20 years of
state service in order to be eligible for partial service
retirement.
16)Specifies that the effective date of a retirement application
submitted more than nine months after the member's
discontinuance of state service is the first of the month in
which the member's application is received at an office of the
board or by an employee of CalPERS designate by the board.
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17)Authorizes CalPERS to bill any retired member whose warrant
is insufficient to pay for benefits they are receiving. The
amendments would clarify that this section applies equally to
all members.
18)Allows CalPERS to grant a retirement effective date earlier
than the first day of the month in which the nonmember's
application is received in CalPERS if the application is
received within nine months of the requested effective date,
eliminating the disparity between the guidelines for setting
member and non-member retirement dates.
19)Ensures that the benefits paid out to a member will never
exceed the Internal Revenue Code Section 415 (IRC 415) limits,
irrespective of other regulations regarding the payment of
cost of living adjustments (COLA's).
20)Lengthens the time frame, from 30 to 60 days, the open
enrollment period for retiring state employees enrolled in
flexible benefit plans to enroll in a CalPERS offered health
plan.
21)Clarifies board authority to manage reserves within CalPERS'
self-funded health plans.
22)Clarifies how final benefit payments are to be paid following
the death of a member of the Judges' Retirement System (JRS) I
or II if there is no estate.
23)Required reinstatement and forfeiture of allowance for JRS I
and JRS II members elected or appointed to the bench after
retirement.
24)Makes several technical and non-substantive amendments to the
Public Employees' Retirement Law (PERL) necessary to avoid
confusion in the administration of the laws.
FISCAL EFFECT : Unknown.
COMMENTS : The following information regarding this bill has
been provided by CalPERS:
1)Current law allows CalPERS three years from the time of
discovery to recover overpayments due to the death of a
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retired member or beneficiary. When this time period is
insufficient for recovery, CalPERS is forced to write off such
overpayments. If CalPERS is not informed immediately of a
payee's death, the payments continue until CalPERS is
notified. In many cases CalPERS identifies a payee death
through a third-party vendor. This process can take some
time, and multiple benefit payments may have been made prior
to identifying these unreported deaths and stopping payments.
This bill provides a ten-year recovery period from the time of
discovery of overpayments.
2)Current law restricts the location of any real property
purchased for CalPERS' use to Sacramento County. Sound
disaster preparedness planning requires that any emergency
facility be located in such a location that no single event
can render ineffective both CalPERS' headquarters and
emergency centers. In order to avoid common risk factors
associated with locating a recovery center in the same
geographic area and meet CalPERS evolving business continuity
operations, this bill permits CalPERS to purchase or construct
a building outside the region to be used as an emergency or
business continuity center.
3)Current law requires the CalPERS board to conduct periodic
financial audits of the system. It also bars the Department
of Finance or the State Auditor from duplicating these audits.
This bill makes it clear that the language does not preclude
the Department of Finance or State Auditor from conducting
other types of audits on the system.
4)Currently, if an employer has failed to enroll an eligible
employee into CalPERS membership within 90 days of qualifying
when the employer knows or can reasonably be expected to have
known of that eligibility, the employer is responsible for
arrears of the member contributions and $500 in administrative
costs per member. This bill clarifies that the employer is
responsible for this cost and can't pass it back to the
employee.
Additionally, CalPERS has the authority and processes in place
to make the necessary adjustments when it becomes aware that
less than the correct amount of contributions required of
members, the state, or any contracting agency was paid. When
an employer tries to make these adjustments on their own
without adhering to CalPERS policies it can result in
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unnecessary administrative difficulties. To ensure that these
situations are remedied as efficiently as possible this bill
clarifies that an employer should contact CalPERS before
taking corrective action.
5)Current law contains some confusing language regarding the
mandatory membership threshold for part-time employees.
Currently the law gives a threshold, but does not make it
clear whether an employee simply needs to meet this threshold
or much actually exceed it to qualify. This bill makes clear
that meeting the threshold is sufficient.
6)Government Code (GC) Section 20475 allows a contracting agency
to amend its contract or previous amendments to its contract
to provide different benefits or provisions or to provide any
combination of those changes with respect to service performed
after the effective date of the contract amendment as long as
they are provided uniformly to everyone in a classification.
Over the years as new classifications have been added to the
Public Employees' Retirement Law (PERL), GC Section 20475 has
not been appropriately amended to include these new
classifications, and currently this provision is not available
to the member classifications of local safety officer or
school safety member. This bill allows GC Section 20475 to be
applicable to any of the member classifications if the agency
so elects by amendment to its contract.
7)Current law generally prohibits any contract or contract
amendment from providing any retirement benefits for some, but
not all, members of local miscellaneous, local police officer,
local firefighter, county peace officer, or local safety
officer classifications. Over the years as new
classifications have been added to PERL, GC Section 20479 has
not been appropriately amended to include these new
classifications. This amendment adds the school safety member
classification to the classifications prohibited from
providing any retirement benefits only to select members.
8)Clarifies that the term "compensation earnable" as it is used
in the part-time service section falls under the same
definition of compensation earnable as used in other parts of
the law. This will impede efforts by part-time employees to
artificially increase their retirement compensation.
9)Partial Service Retirement is a program administered by the
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Department of Personnel Administration, which began in 1983 as
a way to retain seasoned employees who otherwise planned to
retire on a service retirement. The program allows employees
to reduce their hours while drawing both a paycheck and a
partial retirement allowance. The Partial Service Retirement
Program has been modified over its lifespan. An earlier
modification established the minimum age for participation at
50 with 20 years of service or the necessary years of service
where the sum of the age plus service equaled or exceeded 65.
In 2004, the Board adopted a regulation that defined "normal
retirement age" in order to comply with prior IRS rulings. As
a result, the qualifying age of 50 was replaced with "normal
retirement age". At that time, the 20 year requirement should
have been deleted. Therefore, this bill deletes the 20 years
of service requirement to participate in the Partial Service
Retirement Program.
10)Clarifies provisions of existing law related to the
retirement effective date used when a member's application is
received more than nine months after the date the member
discontinued his/her state service, to provide that the
effective date of a written application for retirement
submitted to the board more than nine months after the
member's discontinuance of state service will be the first of
the month in which the member's application is received at an
office of the board or by an employee of this system
designated by the board.
11)CalPERS currently has the ability to deduct premiums for
certain expenses directly from a state retired member's
retirement allowance or from the allowances and benefits, as
specified, pursuant to regulations adopted by the board. This
bill authorizes CalPERS to, at a member's request, extend this
same courtesy to non-state retirees.
12)This bill allows CalPERS to grant a retirement effective date
earlier than the first day of the month in which the
nonmember's application is received if the application is
received within nine months of the requested effective date.
Non-members are the former spouses of CalPERS members who have
been awarded a community property account. Current law
provides that a nonmember retirement application becomes
effective no earlier than the first day of the month in which
the application is received by CalPERS. The only exception
currently provided by law is for cases in which it can be
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demonstrated that the non-member was incompetent to act on his
or her behalf continuously from the date of dissolution or
legal separation.
In the case of CalPERS members who apply for disability or
service retirement, an application can be made retroactive as
long as it is received within nine months of the requested
effective date. This disparity between the processes for
members and nonmembers creates a benefit inequity for the
nonmembers, as well as creating additional possibilities for
misunderstandings and administrative appeals during the
retirement process.
13)Adds a new section of code in order to ensure that the
benefits paid out to a member will never exceed the IRC 415
limits, irrespective of other regulations regarding the
payment of COLA's.
14)Lengthens the time frame, from 30 to 60 days, the open
enrollment period for retiring state employees enrolled in
flexible benefit plans to enroll in a CalPERS offered health
plan. This change will make these provisions consistent with
other laws regarding enrollment at the time of retirement.
15)Under the Public Employees' Meidcal and Hospital Care Act,
health plan rates charged by CalPERS must be reasonably
reflective of the costs of the plans, while granting
significant latitude to the board in setting those rates.
This bill clarifies the board's authority to use the reserves
generated by one or more of its self-funded health benefit
plans between in order to reduce rates.
16)Where the Judges' Retirement Law (JRL) is silent on a
particular issue there are provisions that provide for the JRL
to be administered and governed pursuant to the PERL to the
same extent and with the same effect as if those PERL
provisions are in the JRL. Although it is appropriate to refer
to the PERL, there are times when a clarifying amendment is
more appropriate to ease administration and member
understanding.
Both JRS I and JRS II provide for payment of an allowance or
other benefit to the estate of a deceased member if there is
not a survivor or designated beneficiary eligible to receive
the payment. However, the law does not specify that the estate
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must be probated, nor does it provide direction for payment of
the benefits if the estate is not probated. This bill adds
clarifying language to JRS I and JRS II on administering final
payment of benefits to an estate, whether probated or not,
consistent with the PERL.
17)The PERL does not permit a retired "elected officer" to serve
without reinstatement to the same office he/she retired from
and collect a pension from the portion of service based on
that elective office. This proposal would add an express
provision to the JRL to make it clear that any retired judge
who is elected or appointed to the office as a judge as
defined in JRL, must reinstate to active membership in JRS I
or II. There is no intent to take away the rights of a judge
to sit on assignment as provided by current provisions of law.
This bill requires reinstatement to active membership and
suspension of the retirement allowances of JRS I and JRS II
members elected or appointed to the bench after retirement.
This bill is similar to AB 3041 (PER&SS Committee) of 2008 which
was vetoed by the Governor due to the 2008-2009 State Budget
delay.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Employees' Retirement System (Sponsor)
California School Employees Association
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957