BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 966
Lou Correa, Chair Hearing date: June 8, 2009
AB 966 (Asm. PER&SS Comm.) as amended 6/2/09
FISCAL: YES
PERS: ANNUAL TECHNICAL HOUSEKEEPING OMNIBUS BILL
HISTORY :
Sponsor: California Public Employees Retirement System
(PERS)
Prior legislation: annual bill
ASSEMBLY VOTES :
PER & SS 6-0 4/22/09
Appropriations 16-0 5/06/09
Assembly Floor 73-0 5/14/09
SUMMARY :
Would make several minor or technical amendments to various
sections of the Government Code administered by PERS that are
necessary for the continued efficient administration of the
system.
ANALYSIS :
1) This bill 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) This bill clarifies that the final compensation period is
12 consecutive months for optional National Guard members.
3) This bill 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) This bill increases, from three to 10 years from the time
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of discovery, the period of time in which PERS can recover
overpayments due to the death of a retired member or
beneficiary.
5) This bill permits PERS to purchase or construct a
building outside the region to be used as an emergency or
business continuity center.
6) This bill allows PERS to specify the manner in which a
member must provide notice of a change in status in order to
allow for electronic notification.
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7) This bill clarifies that while the Department of Finance
or the State Auditor are barred under existing law from
duplicating PERS' periodic financial audits, they are not
precluded from conducting other types of audits on the
system.
8) This bill recodifies provisions concerning National Guard
members in an appropriate subsection of the government code
to enhance comprehension and administration.
9) This bill 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 PERS and to take no
action until authorized by PERS.
10) This bill clarifies the standards for mandatory
membership threshold for part-time employees so that simply
meeting the threshold is sufficient.
11) This bill 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) This bill 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) This bill 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) This bill 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.
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15) This bill removes the requirement that a member must
have 20 years of state service in order to be eligible for
partial service retirement.
16) This bill 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 PERS designate by
the board.
17) This bill authorizes PERS 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) This bill allows PERS to grant a retirement effective
date earlier than the first day of the month in which the
nonmember's application is received in PERS 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) This bill 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 (COLAs).
20) This bill 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 PERS
offered health plan.
21) This bill 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.
22) This bill requires reinstatement and forfeiture of
allowance for JRS I and JRS II members elected or appointed
to the bench after retirement.
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23) This bill makes several technical and non-substantive
amendments to the Public Employees Retirement Law (PERS Law)
necessary to avoid confusion in the administration of the
laws.
BACKGROUND :
The following information regarding this bill has been
provided by PERS .
1) Existing PERS law allows three years from the time of
discovery to recover overpayments due to the death of a
retired member or beneficiary. When this time period is
insufficient for recovery, PERS is forced to write off such
overpayments. If PERS is not informed immediately of a
payee's death, the payments continue until PERS is notified.
In many cases PERS 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) Existing PERS law restricts the location of any real
property purchased for PERS' 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 PERS' headquarters and emergency
centers.
In order to avoid common risk factors associated with
locating a recovery center in the same geographic area and
meet PERS evolving business continuity operations, this bill
permits PERS to purchase or construct a building outside the
region to be used as an emergency or business continuity
center.
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3) Existing PERS law requires the PERS 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) Existing PERS law currently, if an employer has failed to
enroll an eligible employee into PERS 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, existing PERS law provides 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 PERS
policies it can result in unnecessary administrative
difficulties.
To ensure that these situations are remedied as efficiently
as possible, this bill clarifies that an employer should
contact PERS before taking corrective action.
5) Existing PERS law contains some confusing language
regarding the mandatory membership threshold for part-time
employees, and 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) Existing PERS law , Government Code (GC) Section 20475,
allows a PERS contracting agency to amend its contract or
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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 PERS Law, 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.
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7) Existing PERS 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 PERS Law, GC Section
20479, has not been appropriately amended to include these
new classifications.
This bill adds the school safety member classification to the
classifications prohibited from providing any retirement
benefits only to select members.
8) This bill 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 change will impede efforts by
part-time employees to artificially increase their retirement
compensation.
9) Existing law provides the Partial Service Retirement, a
program administered by the 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) This bill clarifies provisions of existing PERS law
related to the retirement effective date used when a member's
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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) Existing PERS law provides 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 PERS, at a member's request, to extend
this same courtesy to non-state retirees.
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12) This bill allows PERS 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 PERS 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 PERS. The only exception
currently provided by law is for cases in which it can be
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 PERS 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) This bill 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 COLAs.
14) This bill 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 PERS
offered health plan. This change will make these provisions
consistent with other laws regarding enrollment at the time
of retirement.
14) Existing Judges' Retirement System (JRS) law is silent
on a particular issue there are provisions that provide for
the JRL to be administered and governed pursuant to the PERS
Law to the same extent and with the same effect as if those
PERS Law provisions are in the JRL. Although it is
appropriate to refer to the PERS Law, there are times when a
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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 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 PERS Law.
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15) Existing PERS law 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 bill would add an express provision to the JRS Law to
make it clear that any retired judge who is elected or
appointed to the office as a judge as defined in JRS Law,
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.
COMMENTS :
1) Similar bill vetoed last year
This bill is similar to AB 3041 (PER&SS Committee) 2008 which
was vetoed by the Governor due to the 2008-2009 State Budget
delay.
2) SUPPORT :
American Federation of State, County and Municipal
Employees (AFSCME)
California School Employees Association, AFL-CIO
3) OPPOSITION :
None to date
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