BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2510
Lou Correa, Chair Hearing date: June 23, 2010
AB 2510 (Fletcher) as amended 4/27/10 FISCAL: YES
PUBLIC EMPLOYEES MEDICAL AND HOSPITAL CARE ACT: NEW CONTRACT
OPTION FOR CITY OF SAN DIEGO
HISTORY :
Sponsor: City of San Diego
Prior legislation: AB 1506 (Kuehl),
Chapter 326, Statutes of 1995
AB 468 (Hayashi),
Chapter 320, Statutes of 2009
ASSEMBLY VOTES :
PER & SS 6-0 4/21/10
Appropriations 16-0 5/12/10
Assembly Floor 71-0 5/24/10
SUMMARY :
Would allow the City of San Diego to contract under the
Public Employees Medical and Hospital Care Act (PEMHCA),
administered by the California Public Employees' Retirement
System (CalPERS), for a retiree health care vesting schedule
that is not currently available in law. This new schedule
would be subject to, and dependent upon, a memorandum of
understanding (MOU) between the city of San Diego and the
affected San Diego employees' exclusive representative.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) establishes PEMHCA, administered by CalPERS, to
provide health coverage for employees and annuitants of
the State, California State University, and contracting
local agencies and schools.
b) establishes several coverage options for contracting
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local agencies:
i) The employer contribution amount is equal for both
active employees and annuitants. Under this option,
eligible annuitants receive an employer contribution
amount equal to what the active employees receive.
The employer contribution may be no less than
approximately $100 per month but may be higher.
ii) The employer contribution is less for annuitants
than for active employees. This option is available
for agencies that contracted for PEMHCA after January
1, 1986. Under this option, the employer increases
its contribution amount for annuitants each year until
that amount is equal to the employer's contribution
for active employees. The law requires that annual
increases must be enough so that the contribution for
retirees is equal to the contribution for active
members within 20 years.
iii) The employer's contribution is based on a vesting
schedule. Under this option, the retiree benefit is
determined by a pre-set "vesting schedule" of
specific percentages based on the retiree's credited
years of service earned while employed.
The basic vesting schedule requires an annuitant
to have worked at least 10 years in public employment
to qualify for an employer contribution equal to 50%
of that paid for active employees, increasing 5% per
year until, after 20 years of service, the annuitant
is eligible for 100% of the employer contribution for
active members. At least 5 years of the credited
service must have been worked for the employer
providing the annuitant health coverage. Under this
plan, the annuitant's dependent is eligible for
coverage of 90% of whatever amount the annuitant
receives.
There have been variations on this model
legislated in recent years, including an option for
schools to collectively bargain a vesting schedule
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based on no less than 5 years of credited service; a
vesting schedule specific to North Orange County
Community College District and Riverside County
Superintendent of Schools that pays nothing until the
employee has 15 years of service, and 100%
thereafter; and a vesting schedule specific to
Alameda County Transportation Improvement Authority
that provides 50% after 5 years and increases to 100%
after 15 years.
(c) allows an annuitant who does not receive employer
paid health care to pay for his or
her own premiums and premiums of eligible dependents.
2) This bill :
a) allows the City of San Diego and members of the San
Diego Police Officers Association to agree in a MOU to
an employer contribution for retiree health coverage
based on a specific number of credited years of service,
which may not be less than 10 years of service with the
City of San Diego.
b) requires that the MOU may not be subject to impasse
procedures.
c) specifies that this law may not be applicable to anyone
who retires prior to the MOU effective date.
d) allows the City of San Diego to agree with unclassified
or unrepresented employees to provide this level of
coverage for that group also.
e) requires the City of San Diego to provide CalPERS with
notification of any such agreement and any additional
information needed to implement the agreement.
FISCAL :
According to the Assembly Appropriations analysis, the bill
is cost neutral for CalPERS, and could save money for the
City of San Diego to the extent that CalPERS can negotiate
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lower rates for its larger participant pool and lower
administrative costs as compared to what San Diego is
currently paying.
COMMENTS :
1) Why doesn't San Diego contract for one of the existing
PEMHCA options ?
According to the City of San Diego, the sponsor of this bill :
The City of San Diego currently provides healthcare to its
employees and retired annuitants through its own local
system. The city pays for the health premiums of employees
and their dependents, but only covers the healthcare costs
of the retired annuitants. Retirees must cover the costs
of any dependents they wish to cover.
Thus, no PEMPHCA option for contracting agencies fits San
Diego's current model, since the basic option that includes
a vesting schedule requires employer coverage of
annuitants' dependents.
The author concludes that the provision in current law that
requires a local agency electing to participate in PEMHCA
to provide at least 90% of the cost of dependent coverage
is cost prohibitive to many local agencies, including the
City of San Diego. This bill would allow the City of San
Diego to participate in PEMHCA without having to provide
contributions for dependents of retired annuitants.
According to information provided to the committee, the San
Diego Police Officers Association and the City of San Diego
recently agreed, through collective bargaining, to
participate in PEMHCA if the change proposed in this bill
is signed into law.
2) Arguments in Support
The San Diego Police Officers Association states that AB 2510
will improve officers' health care options while
simultaneously reducing costs for the city.
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3) SUPPORT :
City of San Diego (Sponsor)
Peace Officers Research Association of California
(PORAC)
San Diego Police Officers Association
4) OPPOSITION :
None to date
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