BILL ANALYSIS �
AB 1028
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1028 (Public Employees, Retirement and Social Security
Committee)
As Amended September 1, 2011
Majority vote
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|ASSEMBLY: |73-0 |(May 2, 2011) |SENATE: |35-0 |(September 7, |
| | | | | |2011) |
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Original Committee Reference: P.E.,R.& S.S.
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)Conforms the Public Employees' Retirement Law (PERL) to the
changes made in statute last year by SB 1007 (Hancock),
Chapter 633, Statutes of 2010, which required candidates for
elected positions to the (CalPERS and California State
Teachers' Retirement System boards to file periodic campaign
reports in generally the same manner as candidates for other
state offices.
2)Clarifies the definition of "payrate" to include any amount
deducted from participation in a deferred compensation plan;
payment for participation in a 401(k) or 403(b) plan; payment
into a qualified 401(a) plan; and, participation in a flexible
benefits program.
3)Removes the restriction prohibiting a contracting agency or
school employer from asking for a new amortization period more
than once.
4)Allows the CalPERS Board of Administration to reflect in the
employer contribution rates changes in retirement benefits or
member contribution rates for the State plans immediately upon
the effective date of the change or as soon thereafter as can
be accomplished given the Board's meeting schedule, instead of
at the beginning of the succeeding fiscal year.
5)Deletes obsolete code references and adds new code references,
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as needed, to sections of law applicable to patrol members.
6)Clarifies that both service credit and compensation earnable
will be calculated as if a furloughed trial court employee
were not subject to furlough for the purpose of determining a
retirement allowance.
7)Requires that appointments of specified retired CalPERS
members conform to the following:
a) They must be temporary and require specialized skills;
b) An employer may only allow a member to exceed the 960
hour limit once;
c) Annuitant payrates must be limited to the maximum
published pay schedule for the vacant position.
8)Clarifies that a member retired for disability who has been
employed by an employer without reinstatement, as specified,
cannot be concurrently employed as a retired annuitant under a
separate provision allowing for employment after retirement.
9)Authorizes CalPERS to pay lump-sum death benefits to a Public
Administrator when certain requirements are met and the estate
of the member qualifies for summary disposition as a small
estate with a value of $30,000 or less.
10)Conforms the PERL to the federal Heroes Earnings Assistance
and Relief Tax (HEART) Act which entitles survivors of a
member who dies while performing qualified military service to
any additional benefits that they would have received had the
member died as an active employee.
11)Makes other technical wording and grammatical corrections and
corrects or deletes inaccurate or obsolete code section
references.
The Senate amendments make additional clarifying and
non-controversial changes to Government Code sections found in
the PERL.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version approved by the Senate.
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FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : The following information regarding this bill has
been provided by CalPERS:
1)Board Candidate Campaign Statements:
In 1998 a modified campaign statement filing process for elected
members of the CalPERS Board of Administration was added to
the Political Reform Act (PRA) and mirrored in the PERL.
Under these provisions candidates for the CalPERS board,
including incumbent board members running for re-election,
were required to file one pre-election statement and one
post-election statement disclosing contributions received and
expenditures made.
Last year this modified process for CalPERS board candidates was
deleted from the PRA and CalPERS board candidates are now
required to follow the same reporting requirements as other
elected officials. However, the provision in the PERL was not
amended to conform to this increased reporting requirement.
2)Definition of Payrate:
The PERL was amended in 2000 in an effort to clarify and
standardize the reporting of compensation and service for
school employees. The amendments defined the terms
"compensation earnable", "payrate", and "special compensation"
as they relate to school employees.
The original intent of these changes was to mirror other
provisions of the PERL that included in the definition of
"payrate" amounts deducted from a member's salary for
participation in a tax-deferred retirement plan, in a deferred
compensation plan and in a flexible benefits program. This
was the current practice at the time the language was drafted
and remains so today.
Unfortunately, when the changes were made in 2000, not all of
the relevant language was included.
This bill would add the relevant language so that the definition
of "payrate" for school members would include any amount
deducted for participation in a deferred compensation plan,
payment for participation in a 401(k) plan, payment into a
qualified 401(a) plan and participation in a flexible benefits
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program.
3)Amortization Periods:
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 financial 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.
4)Employer Contribution Rates:
Current law requires as part of the annual budget process that
the Governor include in his budget proposal the retirement
contribution rates for liability for benefits on account of
State employees, as established by the Board. The Legislature
is then required to adopt the submitted rates and authorize
the appropriation in the Budget Act.
Over the past six months, the State has negotiated and adopted
Memoranda of Understanding with a majority of its bargaining
units that have, among other things, increased normal
retirement ages for new hires and increased employee
retirement contribution rates.
In August, the Board implemented a policy change so that, to the
extent consistent with the Board's legal and fiduciary
responsibilities, changes in retirement benefits or member
contribution rates are reflected in the employer contribution
rates for the State plans immediately upon the effective date
of the change or as soon thereafter as can be accomplished
given the Board's meeting schedule, instead of at the
beginning of the succeeding fiscal year.
This bill would align statute with the Board's current rate
setting process and reflect the recently adopted Board policy.
5)Patrol Members:
Recent statutory changes require higher contribution rates from
state patrol members and specify that new patrol members (as
of October 2010) shall be subject to lower retirement formulas
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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)Furloughed Trial Court Employees:
Current law specifies that a mandatory furlough for trial court
employees shall not have a negative impact on the employees'
retirement benefits.
This section clarifies that both service credit and compensation
earnable shall be calculated as if the employee were not
subject to furlough for the purpose of determining a
retirement allowance.
7)Strengthening and Clarifying Rules Regarding Post-Retirement
Employment:
CalPERS employers may hire retired annuitants for a number of
reasons. Under certain situations, a retired annuitant must
possess specialized skills that are needed for a limited time
or during an emergency to prevent a stoppage of public
services. Existing law limits these appointments to 960 hours
of service in a given fiscal year and requires the total
compensation for these appointments not to exceed the maximum
pay scale for the vacant position.
Not all of the legal provisions that administer these types of
appointments include identical language. This creates the
potential for inconsistency, as well as potential abuse of the
system with regard to the temporary nature of these
appointments and the limits on payrates.
This bill would clarify that these types of appointments are 1)
temporary and must require specialized skills; 2) members may
only be permitted to exceed the 960 hours once; and 3)
annuitant payrates are limited to the maximum published pay
schedule for the vacant position.
Another provision of the PERL provides for permanent employment
of a member retired for industrial or ordinary disability with
a CalPERS employer under certain conditions. One of these
conditions is that the sum of the member's monthly disability
retirement pension and his or her monthly earnings cannot
exceed the maximum monthly compensation currently paid in the
position from which the member retired.
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In order to ensure that a disabled retired member does not
exceed this limit, this bill will clarify the member cannot be
concurrently employed as a retired annuitant under a separate
employment after retirement provision.
8)Death Benefit Payments to Public Administrators:
Existing law provides for payment of lump sum death benefits to
a member's designated beneficiary or, in the absence of a
designated beneficiary, to survivors in the following order:
spouse or registered domestic partner; children; parent; or
siblings. If there is no designated beneficiary or survivor
entitled to receive the lump sum death benefit, the benefit
becomes payable to the member's estate. In some case, the
Public Administrator may be authorized to dispose of an estate
without probate.
A statutory change is needed to clarify that in the case of a
small estate with a value of $30,000 or less, CalPERS may pay
death benefits to a the Public Administrator without first
requiring the Public Administrator to provide Letters of
Administration.
The death benefits at issue are sometimes as low as $500, or
consist of just the prorated allowance for the days the payee
was living in the month of his or her death. In these
situations, the death benefit is not substantial enough for
the Public Administrator to justify incurring the expense of
obtaining Letters of Administration.
This bill will authorize CalPERS to pay lump sum death benefits
to a Public Administrator when certain requirements are met
and the estate of the member qualifies for summary disposition
as a small estate.
9)CalPERS compliance with the Federal HEART Act:
The federal HEART Act was signed into law by President Bush in
2008 to provide tax and retirement advantages to military
personnel and their families. Among other things, the HEART
Act protects survivor benefits for employees who die during
active military service. Specifically, when a member dies
while performing qualified military service, the member's
survivors are entitled to any additional benefits that they
would have received had the member died as an active employee.
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Pension plans must be amended to comply with the HEART Act.
In CalPERS' case, amendments to the PERL must be made by June
30, 2013. This bill will add needed language to the PERL to
bring it into compliance with the HEART Act requirements.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0002678