BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
519 (Ashburn)
Hearing Date: 5/4/2009 Amended: As Introduced
Consultant: Maureen Ortiz Policy Vote: PE&R 7-0
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BILL SUMMARY: SB 519 eliminates the January 1, 2010 sunset on
the 5th level 1959 Survivor Benefit for certain state and school
employees who do not participate in the social security program.
The bill also prevents an increase in age eligibility and a
decrease in benefits that would coincide with the sunset.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Survivor benefit ---loss of savings of approximately
$4,300 annually--- General
Admin expenses -----one-time savings of
$28------------ Special*
*Public Employees Retirement Fund
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STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense file.
Under current law, the existing 5th level of survivor benefits
will sunset on January 1, 2010, and instead survivors of school
employees will revert to the 3rd level, and survivors of state
employees will revert to either the 3rd or 2nd level depending
on contract. Those levels pay a significantly lower monthly
allowance to survivors. The benefit is paid as a monthly
allowance, including health benefits, that varies depending upon
whether the surviving spouse is with, or without, qualifying
dependent children, and the number of those dependents. For
example, a surviving spouse without any dependent children
currently receives $750 per month upon turning age 60, but
without this bill, will revert to receiving a benefit of only
$350 per month beginning at age 62. A survivor with two or more
children currently receives $1,800 per month which will be
reduced to $840 if the sunset on the benefit level is not
removed or extended. There are approximately 77,000 state
employees covered by the 1959 5th level benefit, and
non-industrial pre-retirement deaths have been averaging about
60 per year. Using the CalPERS assumed rate of return of 7.75%
on investments, the cost of the 5th level benefit is $4.6
million annually to state employers. Currently, the 3rd benefit
level does not require an employer contribution since the
contribution from employees covers the entire cost of the
benefit. The pool for school employees is currently "super
funded" which means that the current assets are sufficient to
pay off the total program liabilities accrued to date.
Therefore, there is no employer contribution for school
employees at this time.
There will not be any administrative expenses associated with
implementing this bill since it merely continues a benefit that
is already in place. If, however, SB 519 is not enacted,
CalPERS will have approximately $28,000 in administrative
expenses to adjust the allowance of each state and school
survivor.to a previous level of benefit.
Page 2
SB 519 (Ashburn)
The 1959 Survivor Benefit Program was enacted as a way for
members who are not covered by society security to provide a
death benefit for their survivors. It is a pre-retirement
monthly allowance paid to the surviving spouse and/or children
of state members and specified school members who are not
covered by the federal Social Security Act. In regard to the
state, this group includes Highway Patrol officers, all peace
officers and firefighters, and safety employees working in
correctional institutions and in support of law enforcement.
This survivor benefit is paid only when the employee dies due to
non-work related causes before retirement. Employees who die
due to injury or illness incurred on the job are eligible for
the Special Death Benefit which can not be paid in conjunction
with the 1959 Survivor Benefit.
There are several levels of the 1959 Survivor Benefit with each
paying a different monthly allowance. Without an extension or
elimination of the sunset as provided in this bill, school
survivors covered under the 5th level will revert to the 3rd
level. State survivors will revert to the 2nd level (or the 3rd
level if the member died before 1985 or is in a bargaining unit
that has agreed to the 3rd level benefit). The amount of the
benefit varies depending on whether there are dependent children
under age 22, and the number of those dependents. For example,
a spouse without dependent children would receive one of the
following amounts at age 60 or 62:
2nd level -- $225 per month at age 62
3rd level -- $350 per month at age 62
5th level -- $750 per month at age 60.
Essentially, this could mean that a surviving spouse who is
currently receiving $750 per month, plus health benefits, and is
age 60, would have that benefit completely terminated. It would
be reinstated upon the surviving spouse turning age 62, however,
the allowance would only be $350 per month.
The current benefit under the 5th level was implemented as a
result of the enactment of SB 400 (Chapter 555, Statutes of
1999), however, this eligibility was scheduled to remain in
effect until January 1, 2010, unless extended by legislation.
SB 519 will eliminate the sunset thereby maintaining the current
level of benefits.
Current law requires employees to pay $2 per month for the cost
of the survivor benefit, and the employer pays the remainder.
However, if the total cost exceeds $4 monthly, the employee and
employer share the premium equally. The premiums are put into a
pool where the funds are invested and used to pay any benefits
required.
The 1959 Survivor Benefit was established for state and school
employees as a substitute for participation in the federal
Social Security Program. Under social security, employers pay
6.2% of payroll. For comparison purposes, the state contributes
$310 per month for an employee with a monthly salary of $5,000
if that employee participates in social security. However, the
state contributes only $5.20 per month for an employee with the
same salary who does not participate in social security but is
covered under the 1959 Survivor Benefit.