BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 752
Lou Correa, Chair Hearing date: September 4, 2009
SB 752 (Correa) as amended 8/24/09 FISCAL: NO
'37 ACT: ORANGE COUNTY OPTIONAL LOWER TIER OF RETIREMENT
BENEFITS FOR NEW AND INCUMBENT EMPLOYEES
HISTORY :
Sponsor: Orange County Board of Supervisors
Orange County Employees Association
(OCEA)
Prior legislation: none
ASSEMBLY VOTES :
Senate PE&R 7-0 4/27/09
Senate Approps 13-0 5/18/09
Senate Approps 12-0 5/28/09
Senate Floor 39-0 6/03/09
PER & SS 6-0 7/08/09
Assembly Floor 78-0 9/01/09
SUMMARY :
As amended in the Assembly , would implement a recently
negotiated bargaining agreement between Orange County and the
OCEA, providing a second tier option for new non-safety
employees, and providing incumbent non-safety employees a
one-time election to enter the new lower tier, for
prospective service only .
BACKGROUND :
1) Orange County provides retirement benefits to their
employees under the County Employees Retirement Act of 1937
('37 Act)
The committee is advised that Orange County administers their
own retirement plan for County employees. Orange County is
one of the 20 counties in California that have established
David Felderstein
Date: 9/02/09 Page 1
independent, county-administered retirement plans.
2) Legislation necessary for new benefit configurations
under the '37 Act Law
The committee is advised that, if any of the '37 Act counties
negotiates a benefit that is not already part of the '37 Act
Law's provisions, a bill is necessary to be passed by the
Legislature and signed into law by the Governor to permit the
granting of that benefit.
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Date: 9/02/09 Page 2
ANALYSIS :
1) Orange County currently provides a 2.7% @ age 55 formula
for its non-safety employees represented by OCEA
The committee is advised that retirement benefits for
non-safety employees of Orange County represented by OCEA are
calculated using the 2.7% @ age 55 formula. When these
benefits were adopted several years ago, the collective
bargaining agreement between Orange County and OCEA provided
that the employees would pick up the extra cost of the
enhanced retirement benefit.
2) This bill implements a recently negotiated bargaining
agreement between Orange County and OCEA to provide an
optional lower second tier new non-safety employees, and
gives incumbent non-safety employees a one-time election to
enter the new lower tier, for prospective service only.
3) New Orange County employees first hired after the
effective date of this bill
For employees first hired after the adoption of a resolution
by the board of supervisors, or the governing body of a
district within the county authorizing this option, this
bill :
a) requires employees to make a written election between
the current 2.7% at age 55 formula or the newly offered
1.62% at age 65 formula which also includes a Defined
Contribution (DC) component,
b) specifies that this irrevocable election must be made
within 45 calendar days of beginning employment with the
county, and
c) specifies that if a new employee fails to make an
election within the 45 days, the employee will be deemed to
have elected the 1.62% at age 65 formula.
4) Incumbent Orange County employees who are already in
bargaining units covered by the 2.7% @ age 55 formula
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Date: 9/02/09 Page 3
For incumbent Orange County employees in currently in the
2.7% at age 55 formula, this bill :
a) allows, within 180 calendar days of approval of the
resolution, employees to make a one-time written election
to have all future service calculated under the 1.62% at
age 65 formula, and
b) requires employees electing the 1.62% at age 65 formula
to sign an affidavit stating they fully understand the
impact of terminating the 2.7% at age 55 formula and that
the election is irrevocable.
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Date: 9/02/09 Page 4
5) Incumbent Orange County employees who move into
bargaining units covered by the 2.7% @ age 55 formula
For incumbent Orange County employees who move into a
position covered by the 2.7% at age 55 formula, this bill :
a) requires employees to make a one-time written election
between the two formulas - the 2.7% at age 55 formula or
the 1.62% at age 65 formula - within 45 calendar days of
becoming eligible for the 2.7% at age 55 formula,
b) requires employees electing the 1.62% at age 65 formula
to sign an affidavit stating they fully understand the
impact of terminating the 2.7% at age 55 formula and that
the election is irrevocable, and
c) specifies that failure to make an election within 45
calendar days will be cause for termination of employment.
6) Spousal signature required from any employee choosing the
lower retirement benefit
Because retirement benefits are community property in a
marriage, this bill requires any current county employee
electing the 1.62% at age 65 formula to include the signature
of the designated beneficiary of the employee's pension
acknowledging the election or to include a written
declaration that one of the following is applicable:
a) the beneficiary has no identifiable community property
interest in the benefit,
b) the employee does not know the whereabouts of the
beneficiary,
c) the beneficiary has refused to sign the written
acknowledgement, or
d) the beneficiary is incapacitated due to a mental or
physical condition.
7) Knowingly providing false information
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Date: 9/02/09 Page 5
This bill specifies that a person who knowingly provides
false information in the written declaration is subject to a
civil penalty of not less than $1,000 and not more than
$25,000.
8) Optional Orange County employer contribution on behalf of
those employees who choose the lower tier of retirement
benefits
This bill allows employees electing the 1.62% at age 65
formula to receive a contribution from the county or district
to a Defined Contribution plan, but does not require a
contribution from the County.
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Date: 9/02/09 Page 6
9) Orange County safety members not offered the lower tier
of retirement benefits
This bill specifies that these provisions do not apply to
safety members.
10) Orange County employees who choose the lower tier may
pay an additional contribution to supplement the higher tier
of retirement benefits
This bill :
a) allows the county to require employees electing the
1.62% at age 65 formula to pay additional member
contributions beyond the normal rate of contribution
required under current law,
b) specifies that these additional contributions will not
result in an additional benefit to the member but do become
part of the accumulated contributions of the member for the
following purposes only:
- funding the annuity portion of the member's retirement
allowance, or
- withdrawal of contributions by the member upon
terminating membership in the retirement system.
11) Date of hire used for calculating the benefits of new
employees once they choose a retirement benefit level
This bill specifies that the date of membership for new hires
making an election between the two specified pension
calculations will be retroactive to the date of hire.
FISCAL EFFECT :
Unknown
COMMENTS :
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Date: 9/02/09 Page 7
1) Arguments in support
According to the Orange County Employees Association (OCEA),
a co-sponsor:
"SB 752 allows miscellaneous employees in Orange County to
voluntarily opt-in to a new hybrid retirement plan for new
and general members of the retirement system. The optional
hybrid plan includes a 1.62% at age 65 Defined Benefit Plan
as well as a Defined Contribution Plan?Current employees
will have the option of staying in the 2.7% at age 55 plan
or electing the new hybrid plan. No employee will be
forced out of the 2.7% at 55 plan. This is part of a
collectively-bargained agreement between the parties. OCEA
believes that SB 752, which implements this agreement, is
in all parties' best interest."
According to Orange County, a co-sponsor:
"The County of Orange is pleased to join with the OCEA in
supporting SB 752. The agreement is an innovative
partnership of the OCEA and the County to address the needs
of our workforce while remaining responsible stewards of
taxpayer dollars."
2) OPPOSITION :
None to date
David Felderstein
Date: 9/02/09 Page 8