BILL ANALYSIS
SB 519
Page 1
Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 519 (Ashburn) - As Amended: June 25, 2009
Policy Committee: P.E.R. &
S.S.Vote:6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill eliminates the January 1, 2010 sunset on the 5th level
1959 Survivor Benefit for certain state and school employees
covered under the California Public Employees' Retirement System
(CalPERS) who do not participate in the social security program.
Under current law, these benefits would revert to lower levels.
FISCAL EFFECT
1)DPA indicates that, relative to current law, the bill will
result in a loss of employer contribution savings that would
otherwise occur as a result of the scheduled benefit reduction
on January 1, 2010. The loss of savings would be $2.3 million
in 2009-10 ($1.5 million GF) and $4.6 million ($3 million GF)
thereafter.
2)According to DPA, there would be no cost relative to the
2009-10 budget, since the budget assumes employer
contributions at the current level for the full year.
COMMENTS
1)Background . The 1959 Survivor Benefit was created in 1959 as a
substitute for Social Security for survivors of state and
school employees who die prior to retirement. The benefit is
paid for employees who are not included in Social Security and
who die while in active service prior to retirement. The
benefit is only paid when the employee dies due to non-work
related causes. If the safety employee dies due to injury or
illness incurred on the job, he or she is subject to the
SB 519
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"Special Death Benefit."
In the case of state and school employers, employees pay a
portion of the cost of insuring for the benefit via payroll
deduction, and the State or school district pays any remaining
costs. The cost for employees is $2 per month unless the
monthly premium exceeds $4, in which case the premium is
shared equally between employee and employer. Some school
districts are coordinated with Social Security, and would
therefore not be subject to this benefit.
The benefit has evolved over the years, and there are several
monetary levels of benefits. The original 1st level of
benefits and the 2nd level, which was established in 1975, are
closed and no longer available to CalPERS contracting
agencies. The 3rd, 4th, and "indexed" levels are available to
CalPERS contracting agencies, which may contract for whichever
levels they choose. Survivors of state and school employee
members are eligible for the 5th level of benefits. There are
about 77,000 state employees covered by the 1959 5th level
benefit.
The current monthly premium for 5th level benefits is $10, of
which $5 is paid by employers and $5 is paid by employees.
The benefit is paid as a monthly allowance, including health
benefits, that varies depending on whether the surviving
spouse has dependents. As an example, under the current 5th
level of benefits, a surviving spouse with no dependent
children currently receives $750 per month beginning at age
60. Absent this bill, the benefit would revert to the 3rd
level, meaning the spouse would receive only $350 beginning at
age 62. A spouse with two or more children currently receives
$1,800 per month under the 5th level benefit, but would
receive only $840 per month under the 3rd level benefit after
2010..
2)Rationale . According to the Department of Personnel
Administration, the sponsor of the bill, "CHP officers,
firefighters, peace officers, and school classified employees
who die unexpectedly in their prime earning years do not have
Social Security coverage for their surviving dependent
children and spouses. The 1959 Survivor Benefit Program, in
effect for 50 years, provides an extremely valuable safety net
for these employees and their families, at a little over $5
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per employee per month in state costs and at no cost currently
to school districts."
3)Fiscal issue . According to DPA, this bill will not result in
added costs relative to the 2009-10 budget because funding for
the 5th level benefit is assumed for the full year. However,
it does result in lost savings that would otherwise occur
under existing law. Give the significant fiscal consequences
of continuing the benefits, an alternative the committee may
wish to consider would be to provide for continued 5th level
death benefits, but to alter the contribution schedule so that
employees pay a larger share of the monthly premiums. As one
illustration, having employees pick up the full cost of the
differential between 3rd level premiums and 5th level premiums
result in added employee contributions of $5.00 per month.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081