BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2510|
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THIRD READING
Bill No: AB 2510
Author: Fletcher (R)
Amended: 4/27/10 in Assembly
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE : 5-0, 6/23/10
AYES: Correa, Corbett, Ducheny, Hollingsworth, Liu
NO VOTE RECORDED: Ashburn
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/02/10
AYES: Kehoe, Alquist, Ashburn, Corbett, Emmerson, Price,
Wolk, Wyland, Yee
NO VOTE RECORDED: Leno, Walters
ASSEMBLY FLOOR : 71-0, 5/24/10 - See last page for vote
SUBJECT : Public employees retirement: contracting
agencies:
postretirement health benefits
SOURCE : City of San Diego
DIGEST : This bill authorizes the City of San Diego to
contract under the Public Employees Medical and Hospital
Care Act, administered by the California Public Employees'
Retirement system, for a retiree health care vesting
schedule that is not currently available in law. This new
schedule will be subject to, and dependent upon, a
memorandum of understanding between the City of San Diego
and the affected San Diego employees' exclusive
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representative.
ANALYSIS :
Existing Law
1.Establishes the Public Employees Medical and Hospital
Care Act (PEMHCA), administered by the California Public
Employees' Retirement System (CalPERS), to provide health
coverage for employees and annuitants of the State,
California State University, and contracting local
agencies and schools.
2.Establishes several coverage options for contracting
local agencies:
A.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.
B.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.
C.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 percent of that
paid for active employees, increasing five percent per
year until, after 20 years of service, the annuitant is
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eligible for 100 percent of the employer contribution for
active members. At least five 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
percent 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 based on no less
than five 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 percent thereafter; and a vesting
schedule specific to Alameda County Transportation
Improvement Authority that provides 50 percent after five
years and increases to 100 percent after 15 years.
3.Allows an annuitant who does not receive employer paid
health care to pay for his or her own premiums and
premiums for eligible dependents.
This bill:
1.Allows the City of San Diego and members of the San Diego
Police Officers Association to agree in a memorandum of
understanding (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.
2.Requires that the MOU may not be subject to impasse
procedures.
3.Specifies that this law may not be applicable to anyone
who retires prior to the MOU effective date.
4.Allows the City of San Diego to agree with unclassified
or unrepresented employees to provide this level of
coverage for that group also.
Comments
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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 percent 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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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
According to the Senate Appropriations Committee, this bill
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
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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.
SUPPORT : (Verified 8/3/10)
City of San Diego (source)
Peace Officers Research Association of California
San Diego Police Officers Association
ARGUMENTS IN SUPPORT : The San Diego Police Officers
Association states that this bill will improve the
officers' health care options while simultaneously reducing
costs for the city.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De
La Torre, De Leon, DeVore, Emmerson, Eng, Feuer,
Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,
Hill, Huber, Huffman, Jeffries, Jones, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nestande,
Niello, Nielsen, Norby, V. Manuel Perez, Portantino,
Ruskin, Salas, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Yamada, John A. Perez
NO VOTE RECORDED: Bass, Evans, Hall, Hernandez, Knight,
Nava, Saldana, Villines, Vacancy
CPM:cm 8/3/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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