BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2510 (Fletcher)
Hearing Date: 08/02/2010 Amended: 04/27/2010
Consultant: Maureen Ortiz Policy Vote: PE&R 5-0
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BILL SUMMARY: AB 2510 allows the City of San Diego to contract
with CalPERS in order to provide postemployment health care
benefits to certain employees, subject to a collective
bargaining agreement.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Health care benefits --------unknown, potential
savings------ Local
Admin expenses ------------minor,
absorbable----------- Special*
*Public Employees Retirement Fund
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STAFF COMMENTS:
AB 2510 could result in substantial savings to the City of San
Diego if the negotiated rates with providers and the
administrative costs are lower than those now paid, which could
also result in a significant reduction in the city's unfunded
liabilities. It is estimated that the current unfunded
liability for annuitant healthcare would decrease from $157
million to approximately $121 million, and that the annual
expenses would drop from $28.5 million to $21.5 million. Those
numbers apply to the entire City of San Diego.
The City of San Diego currently provides healthcare to its
employees and retired annuitants through its own local system.
The city pays for the cost of employees and their dependents,
but covers only the healthcare cost of retired annuitants (not
the annuitants' dependents).
The CalPERS' Board of Administration administers the Public
Employees' Medical and Hospital Care Act (PEMHCA). Under
PEMHCA, eligible agencies may contract with CalPERS to provide
health care benefits for their employees and annuitants.
Contracting agencies must offer health care to both active and
retired employees, and must also contribute toward the
employees' cost of health care. Current law provides three
different options for employer contributions that allow for full
vesting for annuitants. It also allows school employers to use
collective bargaining to establish an employer contribution
amount for annuitants with at least 5 years of credited service.
AB 2510 applies to employees of the City of San Diego who are
members of the San Diego Police Officers Association, and
unclassified or unrepresented employees under the following
conditions:
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AB 2510 (Fletcher)
a)The benefit will be applied on a prospective basis only.
b)The employer contribution for postretirement health coverage
shall be subject to credited years of service that the
employee worked with the City of San Diego, and a memorandum
of understanding.
c)If the MOU establishes a retroactive date, the health care
benefit will be applied only on a prospective basis.
d)Any employee who retires before the MOU is signed may not
participate.
e)An employee must have at least 10 years of credited service
with the City of San Diego.
There are approximately 2,000 employees within the San Diego
Police Officers Association.
The Governmental Accounting Standards Board (GASB) Statement 45
requires governmental entities to account for, on their
financial statements, the estimated costs and liabilities
associated with post-employment health benefits for current and
future retirees. Agencies must now schedule investment activity
to meet this liability, establish a current budget liability, or
otherwise mitigate the impact of these future evaluations.