BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 782
                                                                  Page  1

          Date of Hearing:   March 30, 2011

            ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL 
                                      SECURITY
                              Warren T. Furutani, Chair
                AB 782 (Brownley) - As Introduced:  February 17, 2011
           
          SUBJECT  :   Public employee benefits: audits.

           SUMMARY  :   Allows the California Public Employees' Retirement 
          System (CalPERS) to assess a reasonable charge on employers to 
          recover additional costs incurred when an audit of the employer 
          takes an excessive amount of hours to complete.  Specifically, 
           this bill  :  

          1)Requires CalPERS to notify an employer of the estimated time 
            to complete an audit prior to initiating the audit.

          2)Requires CalPERS to identify the factors on which the estimate 
            is based.

          3)Authorizes CalPERS to assess a reasonable charge on an 
            employer to recover its additional costs when the time 
            required to complete an audit exceed the estimate.

           EXISTING LAW  :

          1)Requires employers who contract with CalPERS to provide 
            necessary information, documents, and records for an audit to 
            determine the correctness of retirement benefits.

          2)Authorizes CalPERS to recover the costs of administering the 
            system including its audit and other expenses through the 
            administrative fee included in the annual retirement 
            contribution rates.  According to CalPERS, this method 
            distributes the cost associated with excessive audit time 
            among all employers, rather than charging those employers who 
            are directly responsible.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   The CalPERS Office of Audit Services (OFAS) 
          initiated audits of contracting employers in 1990 in response to 
          reports of alleged pension spiking.  CalPERS audits contracting 
          agencies for retirement benefit compliance and health benefit 








                                                                  AB 782
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          coverage for employers who contract with CalPERS for health 
          benefits.  The audits take from three days to two weeks, 
          depending on the size of the agency.

          According to CalPERS, OFAS has performed approximately 900 
          employer audits since 1990 and is expected to complete 54 audits 
          in FY 2010-11 and 89 audits in FY 2011-12.

          CalPERS states they occasionally experience difficulty with 
          employers who are uncooperative or have poor internal controls 
          and recordkeeping, resulting in excessive time and cost to 
          CalPERS staff.  Some of these audits have required OFAS staff 
          time in excess of the hours that OFAS would have estimated for 
          completion of an audit of a comparable employer and resulted in 
          large unanticipated administrative costs to CalPERS.

          This bill would provide a means for CalPERS to recover costs 
          from employers whose actions were the cause of the additional 
          administrative costs associated with an audit.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Public Employees' Retirement System (Sponsor)

           Opposition 
           
          None on file
           
          Analysis Prepared by :    Karon Green / P.E., R. & S.S. / (916) 
          319-3957