BILL ANALYSIS
SB 1139
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Date of Hearing: June 23, 2010
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Alberto Torrico, Chair
SB 1139 (Correa) - As Introduced: February 18, 2010
SENATE VOTE : 35-0
SUBJECT : State retirement: benefit programs.
SUMMARY : Makes several minor or technical amendments to
various sections of the Government Code administered by the
California Public Employees' Retirement System (CalPERS) that
are necessary for the continued efficient administration of the
system. Specifically, this bill :
1)Changes the month in which the Purchasing Power Protection
Adjustment (PPPA) is assessed from January to May in order to
coordinate the timing of the adjustment with the
Cost-of-Living Allowance (COLA).
2)Clarifies that a judge may leave office without retiring and
still maintain health benefits under the conditions currently
specified in the Judges Retirement System II Law (JRS II).
3)Changes references in existing law from "deferred
compensation" to "tax-preferred retirement savings," thereby
expanding the types of retirement savings programs the Board
may establish to include those with after-tax payments.
FISCAL EFFECT : None.
COMMENTS : The following information regarding this bill has
been provided by CalPERS:
Coordinate Timing of Annual COLA and PPPA Adjustments
CalPERS pays two types of benefits to retirees to ensure that
retirement allowances maintain purchasing power despite
inflation: the PPPA and the COLA. Many factors affect these
benefits, including retirement year, membership type, and former
employer's contract provisions.
The COLA benefit is an annual cost-of-living increase that
begins in the second calendar year after retirement and is
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adjusted each May after that. The PPPA is an added protection
against inflation for those members whose benefits fall below a
specified percent of their original purchasing power based on
the Consumer Price Index for all cities. Unlike the COLA, there
is no specific timetable for when a retiree can become eligible
for the PPPA. The PPPA adjustment occurs in January of each
year for eligible retirees.
SB 1139 conforms the annual COLA adjustment and the PPPA in the
same month each year. In the first year of implementation, the
PPPA adjustments will be deferred from January to May to
synchronize the two benefits, with retroactive application to
January to adjust for the delay. Implementation must be
deferred to January 1, 2012 so that required automation changes
can be developed, built, and tested after CalPERS' new
automation system is installed and operating.
Health Benefits for Judges That Leave Office Early
The JRS II was established in 1994 to create a fully funded,
actuarially-sound retirement system for Supreme and Appellate
Court justices, Superior Court judges, and Municipal Court
judges appointed or elected on or after November 9, 1994. As of
September 2009, it includes 1130 active members and 17 retirees.
The JRS II offers a combination of two basic types of retirement
benefits: a defined benefit plan and a monetary credit plan.
The defined benefit plan provides a lifetime monthly benefit of
up to 75 percent of final annual salary (percentage is based on
age at retirement and years of service). The monetary credit
plan allows for a refund of member contributions, a portion of
the employer contributions, and interest. Lifetime benefits are
not provided under the monetary credit plan.
Under JRS II, a judge is eligible to retire upon attaining both
age 65 and 20 or more years of service, or upon attaining age 70
with a minimum of five years of service. It also includes
early retirement provisions that outline retirement benefits for
a judge who "leaves judicial office" after specified numbers of
years. The Public Employees Medical Hospital Care Act (PEMHCA)
outlines access to CalPERS health benefits after "retirement"
pursuant to JRS II.
Currently, statutes in PEMHCA and JRS II use different
terminology to describe a judge who leaves office after accruing
five or more years of service and becomes eligible to receive
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JRS II benefits. JRS II specifies the retirement benefits of "a
judge who leaves judicial office after accruing five or more
years of service." PEMHCA outlines the health benefits of a
judge who "retires." SB 1139 would change the language in
PEMHCA from "retires" to "leaves judicial office" to align it
with the language in JRS II and eliminate any ambiguity between
the two statutes.
The CalPERS Supplemental Income Program
SB 2026 (Craven), Chapter 1659, Statutes of 1990, authorized
CalPERS to establish a deferred compensation program for CalPERS
members, and created the Public Employees' Deferred Compensation
Fund under the exclusive control of the CalPERS Board of
Administration. The statute granted broad authority for CalPERS
to offer a 457 plan, 403(b) plan, or any other form of deferred
compensation arrangement authorized by the Internal Revenue Code
and approved by the CalPERS Board. The program is self-funded
through fees assessed against participating employees and/or
contracting employers and invested and administered in a series
of accounts established within the Public Employees' Deferred
Compensation Fund.
Several changes in federal and state law have occurred since
enactment of the enabling statutes authorizing establishment of
the CalPERS Deferred Compensation Program in 1991. The enabling
statutes for CalPERS' deferred compensation program predate many
of these changes, including the imposition of governmental plan
trust requirements for 457(b) plans, and the creation of certain
forms and features of deferred compensation arrangements now
authorized under federal law, including ROTH-type and other
after-tax or non-traditional deferred compensation savings
arrangements.
By allowing the program to offer any form of after-tax
retirement savings arrangement, the enabling statutes provided
fairly broad authority. However, it has been fifteen years since
they were amended, and so, existing law does not necessarily
reflect the full range and scope of the subsequent changes to
federal tax law. Therefore, this bill allows CalPERS to expand
the tax-preferred retirement savings arrangements and make
technical and conforming changes to its deferred compensation
program statutes.
REGISTERED SUPPORT / OPPOSITION :
SB 1139
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Support
California Public Employees' Retirement System (Sponsor)
American Federation of State, County and Municipal Employees
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957