BILL ANALYSIS
SB 1139
Page 1
SENATE THIRD READING
SB 1139 (Correa)
As Introduced February 18, 2010
Majority vote
SENATE VOTE :35-0
PUBLIC EMPLOYEES 6-0
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|Ayes:|Torrico, Harkey, | | |
| |Furutani, Hernandez, Ma, | | |
| |Nestande | | |
| | | | |
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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:
1)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.
SB 1139
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The COLA benefit is an annual cost-of-living increase that begins in
the second calendar year after retirement and is 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.
2)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 JRS II benefits.
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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.
3)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.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957 FN:
0005058