BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2510
                                                                  Page  1

          Date of Hearing:   May 12, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  AB 2510 (Fletcher) - As Amended:  April 27, 2010 

          Policy Committee:                              P.E.R. &  
          S.S.Vote:    6-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill authorizes the City of San Diego to contract with  
          CalPERS to provide retiree health care benefits for its  
          employees based on the terms set forth in the collective  
          bargaining agreement reached between the city and certain of its  
          employees. The bill applies to employees that:

          1)Have at least 10 years active service with the city.

          2)Retire after the date the governing memorandum of  
            understanding is signed.

          3)Are members of the San Diego Police Officers Association or  
            are unclassified or unrepresented employees of the city.

          FISCAL EFFECT

          1)Cost-neutral to CalPERS, as premiums and administrative costs  
            are paid by the contracting agency.

          2)Reduction in costs to San Diego, to the extent that CalPERS'  
            negotiated rates with providers and administrative costs are  
            lower than the city's. 

          COMMENTS
           
          1)Background  . Existing law establishes the Public Employees'  
            Medical and Hospital Care Act (PEMHCA) under the  
            administration of CalPERS. A contracting agency (city,  
            counties, or special districts) electing to contract with  
            CalPERS is subject to legal requirements regarding employer  








                                                                  AB 2510
                                                                  Page  2

            contribution amounts (a minimum of 10 years service to vest  
            for 50% of normal employer contribution rates, rising up to  
            100% of employer contribution rates at 20 years), and  
            dependent coverage (at least 90% of the primary coverage  
            rate).

           2)Rationale  . This bill is intended to allow the City of San  
            Diego to contract with CalPERS for retiree health care under  
            the terms set forth in the MOU with its peace officers. These  
            terms differ from state law, in that they could involve a  
            shorter full vesting period (10 years instead of 20 years) and  
            a lower reimbursement rate for dependents.  According to the  
            author, contracting with CalPERS will save the city money  
            because the larger state pool spreads risk and lowers cost,  
            its administrative overhead costs are lower, and it has more  
            market power to negotiate with health care providers. 
           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081