BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1028
Gloria Negrete McLeod, Chair Hearing date: June 27, 2011
AB 1028 (Asm. PER&SS Committee) as amended 6/16/11
FISCAL: YES
CALPERS: ANNUAL HOUSEKEEPING BILL
HISTORY :
Sponsor: California Public Employees Retirement System
(CalPERS)
Prior legislation: SB 1139 (Correa)
Chapter 639, Statutes of 2010
AB 966 (Assembly PER&SS Committee)
Chapter 130, Statutes of 2009
ASSEMBLY VOTES :
PER & SS 6-0 3/30/11
Appropriations 15-0 4/13/11
Assembly Floor 73-0 5/02/11
SUMMARY :
AB 1028 makes technical and non-controversial changes to
various sections of the Government Code administered by
CalPERS. This is CalPERS' annual housekeeping bill.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) establishes CalPERS, the State's largest public
retirement system, which provides retirement, death, and
health benefits to over 1.6 million employees and
retirees of the State, the California State University
(CSU), school districts, and local public agencies
including cities, counties, and special districts.
Pamela Schneider
Date: 6/17/11 Page 1
2) This bill :
a) makes clarifying and non-controversial changes to
Government Code sections found in the Public Employees"
Retirement Law as follows:
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| Bill | GC | Change |
|Sectio|Sectio| |
| n | n | |
|------+------+----------------------------------------------------|
|1 |20096.|Recently enacted laws require Board candidates to |
| |5 |be subject to the same reporting requirements as |
| | |other types of elected officials. |
| | | |
| | |This section conforms obsolete filing requirements |
| | |for Board candidates to these new requirements. |
|------+------+----------------------------------------------------|
|2 |20636.|Current law defines which parts of an employee's |
| |1 |compensation may be used as final compensation to |
| | |calculate benefits. |
| | | |
| | |This bill clarifies sections defining compensation |
| | |earnable for classified school employees to make |
| | |them consistent with laws and rules regarding |
| | |compensation earnable for other types of CalPERS |
| | |members, clarifying that compensation earnable, |
| | |which includes payrate and special compensation, |
| | |includes monies deducted from pay for participation |
| | |in a 401(k), 403(b), (401(a), deferred compensation |
| | |plan, or flexible benefits program. |
|------+------+----------------------------------------------------|
|3 |20812 |Current law allows the board to adopt 30-year |
| | |funding periods to amortize unfunded accrued |
| | |actuarial obligations for the purpose of setting |
| | |employer rates. The board may approve a one-time |
| | |request from a contracting agency for a new |
| | |amortization period based on the agency's financial |
Pamela Schneider
Date: 6/17/11 Page 2
| | |necessity, but may also deny the request if |
| | |granting the request would subject the fund to |
| | |unsound financial risk. |
| | | |
| | |This bill removes the restriction prohibiting a |
| | |contracting agency from asking for a new |
| | |amortization period more than once. |
|------+------+----------------------------------------------------|
| | |In 2010 and 2011, the State bargained with |
|4 |20814 |employees to increase employee contribution rates |
| | |to CalPERS and to reduce benefits for new |
| | |employees, thus reducing the annual rate the State |
| | |needs to pay to fund benefits. The Board acted to |
| | |reduce the State's rate immediately to reflect the |
| | |savings achieved through collective bargaining, |
| | |instead of requiring the State to wait for a lower |
| | |rate to be set in the annual rate setting cycle, |
| | |thus saving the State millions in the current |
| | |budget year. |
| | | |
| | |This section aligns statute with the Board's |
| | |current rate setting policy of adjusting the |
| | |State's rate to reflect changes in state employee |
| | |contribution rates and benefit plans immediately |
| | |instead of waiting for the annual rate setting, and |
| | |requires that any such actions be consistent with |
| | |the Board's constitutional fiduciary duty. |
|------+------+----------------------------------------------------|
|5, 7 |20820 |Recent statutory changes require higher |
| |21130 |contribution rates from state patrol members and |
| | |specify that new patrol members (as of October |
| | |2010) shall be subject to lower retirement formulas |
| | |and higher retirement ages. |
| | | |
| | |This bill deletes obsolete code references and adds |
| | |new code references, as needed, to sections of law |
| | |applicable to patrol members. |
|------+------+----------------------------------------------------|
|6 |20969.|Current law specifies that a mandatory furlough for |
| |1 |trial court employees shall not have a negative |
| | |impact on the employees' retirement benefits. |
| | | |
| | |This section clarifies that both service credit and |
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Date: 6/17/11 Page 3
| | |compensation earnable shall be calculated as if the |
| | |employee were not subject to furlough for the |
| | |purpose of determining a retirement allowance. |
|------+------+----------------------------------------------------|
|8,9,11|21221 |A number of statutes define the terms under which a |
| |21224 |retiree may work for the State or a public employer |
| |21229 |without being required to reinstate from |
| | |retirement. Requirements include that the employee |
| | |may not work for more than 960 hours in a fiscal |
| | |year, that the appointment be temporary and require |
| | |special skills, and that the pay not exceed what is |
| | |normally paid for that position. However, these |
| | |requirements are not consistently spelled out in |
| | |the statutes, creating potential for |
| | |misinterpreting or abusing the requirements of the |
| | |program. |
| | | |
| | |This bill aligns various provisions governing |
| | |retired workers to ensure that the program |
| | |requirements are consistently applied. |
|------+------+----------------------------------------------------|
|10 |21228 |A member who retires for regular or industrial |
| | |disability may work on an ongoing basis for a |
| | |public employer in a class other than the one he or |
| | |she was disabled from. In such cases, the disabled |
| | |employee's retirement benefit and salary are |
| | |coordinated so that he or she can earn no more than |
| | |the salary the individual was earning prior to the |
| | |disability retirement. |
| | | |
| | |This bill clarifies that a disabled retiree working |
| | |under this program cannot concurrently be working |
| | |as a retiree under other provisions governing |
| | |retired workers. |
|------+------+----------------------------------------------------|
|12 |21490 |A CalPERS retiree receiving a monthly allowance may |
| | |designate any beneficiary to receive certain |
| | |payments upon the retiree's death, as long as the |
| | |designation does not conflict with a spouse's |
| | |rights under community property laws. The |
| | |designation is made by filing the designation in |
| | |writing with CalPERS. |
| | | |
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Date: 6/17/11 Page 4
| | |This bill clarifies that CalPERS may accept a will |
| | |or trust as a "writing filed with" CalPERS. The |
| | |will or trust may revoke a previous beneficiary |
| | |designation. In such cases, the will or trust must |
| | |name the retirement benefit as an asset and will be |
| | |deemed to designate the estate or trust as |
| | |beneficiary. |
|------+------+----------------------------------------------------|
|13, |21493 |Unfortunately, many individuals do not keep their |
|14, |21506 |beneficiary designations up to date. If the |
|15 |21507 |retiree does not have a designated beneficiary, or |
| | |the beneficiary has also died, CalPERS relies on a |
| | |beneficiary order outlined in statute, including |
| | |the retiree's spouse or registered domestic |
| | |partner, children, parents, brothers and sisters, |
| | |or the individual's estate, in descending order, as |
| | |specified. Often the amount to be paid is quite |
| | |small, and may be part of an estate valued at |
| | |$30,000 or less and subject to disposal by a Public |
| | |Administrator without probate. |
| | | |
| | |This bill clarifies that, in these cases, CalPERS |
| | |may pay lump-sum death benefits to a Public |
| | |Administrator when the estate qualifies for summary |
| | |disposition as a small estate. |
|------+------+----------------------------------------------------|
|16 |21533.|Federal laws enacted in 2008 (the HEART Act) |
| |5 |require that the families of employees who die |
| | |while on active military duty receive the same |
| | |employer benefits they would have received had the |
| | |individual died as an active employee. Although |
| | |retirement systems have been in compliance with the |
| | |Heart Act since it was implemented, the Act |
| | |requires that laws governing pension plans be |
| | |amended so that state laws are consistent with the |
| | |requirements of the Act. |
| | | |
| | |This bill amends CalPERS' laws to comply with the |
| | |requirements of the HEART Act. |
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FISCAL :
Pamela Schneider
Date: 6/17/11 Page 5
As reported by Assembly Appropriations, these changes enhance
the ability of staff to effectively administer CalPERS'
benefit programs and may result in minor administrative
savings.
COMMENTS :
1) Argument in Support
CalPERS states,
"That this bill is sponsored to ensure that the statues
administered by CalPERS are as clear and unambiguous as
possible."
2) SUPPORT :
California Public Employees' Retirement System (CalPERS),
Sponsor
3) OPPOSITION :
None to date
#####
Pamela Schneider
Date: 6/17/11 Page 6