BILL NUMBER: AB 1184 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 1, 2011
AMENDED IN ASSEMBLY APRIL 25, 2011
INTRODUCED BY Assembly Member Gatto
(Coauthors: Assembly Members Blumenfield, Gordon, Jeffries, Smyth,
and Williams)
( Coauthor: Senator Liu
)
FEBRUARY 18, 2011
An act to amend Section 21757 of, and to add Section
20532.5 20791 to, the Government Code, relating
to public employees' retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 1184, as amended, Gatto. Public employees' retirement benefits.
The Public Employees' Retirement Law (PERL) creates the Public
Employees' Retirement System (PERS), which provides a defined benefit
to its employees based on age at retirement, service credit, and
final or highest compensation paid to the employee. Existing law
authorizes any public agency to participate in, and make its
employees members of, PERS by contract. In the case of an employee
who has been employed by one or more contracting public agencies,
retirement benefits distributed to that employee are based on the
highest final compensation under any system, and each system makes a
separate retirement payment to the employee based upon the number of
years that the employee worked for each of those agencies.
This bill would provide that the obligations for
retirement benefits that are attributable to excess compensation
earned by a nonrepresented employee who was employed by one or more
public agencies shall be the sole obligation of the subsequent
contracting agency that paid the excess compensation. This bill would
define "excess compensation" as the final compensation of an
employee of a contracting agency who previously worked for another
contracting agency to the extent the final compensation received from
the current contracting agency is 15% or more in excess of the
salary paid by the prior contracting agency, as adjusted for
actuarial increases in that salary state the intent of
the Legislature that a contracting agency not experience a
significant increase in actuarial liability due to increased
compensation paid by another contracting agency to a nonrepresented
employee. The bill would require the Board of Administration of PERS
to develop guidelines in this regard and to implement program changes
to ensure that a contracting agency that creates a significant
increase in actuarial liability due to increased
compensation bears the associated liability. The bill would require
the system actuary to assess an increase in liability in this regard
to the employer that created it at the time the increase is
determined and to make adjustments to that employer's rates as
needed. The bill would apply these requirements to any significant
increase in actuarial liability due to increased
compensation paid to a nonrepresented employee regardless of when the
increase in compensation occurred. The bill would require the board
to report to the Legislature on the implementation of these
provisions .
Existing law requires the Board of Administration of PERS to
establish a plan of replacement benefits for members and any
survivors or beneficiaries whose retirement benefits are limited by a
specified provision of federal law and that cannot be fully
maximized pursuant to PERL.
This bill would prohibit a plan of replacement benefits from being
administered by the board for a person who first becomes a member on
or after January 1, 2013.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 20532.5 is added to the
Government Code, to read:
20532.5. (a) (1) Notwithstanding any other law, the contributions
and disbursements of benefits for that portion of the compensation
of an employee of a contracting agency that constitutes excessive
compensation shall be the sole obligation of the current contracting
agency that paid the excessive compensation to that employee.
(2) The liability of any prior contracting agency for the
contributions and disbursements of benefits of that employee shall be
limited to contributions and other assets sufficient to fund a
retirement allowance calculated using the amount of the employee's
final compensation at the time he or she terminated his or her
service with the prior contracting agency and any amount that is not
excess compensation.
(b) For purposes of this section, "excessive compensation" is the
final compensation of an employee of a contracting agency who
previously worked for another contracting agency to the extent the
final compensation received from the current contracting agency is 15
percent or more in excess of the salary paid by the prior
contracting agency, as adjusted for actuarial increases in that
salary.
(c) This section shall not apply to any employee who is covered by
a memorandum of understanding or to any employee who is a member of
a recognized employee organization as that term is defined in Section
3501.
(d) The actuary, in determining contributions required of
contracting agencies, subject to this section, shall establish a
contribution with respect to excessive compensation separate from,
and independent of, the contribution required for other benefits
under their contracts. The total contribution, in that case, for the
agencies as a group shall be established, and from time to time
adjusted, by actuarial valuation performed by the actuary of the
liability for the benefit or benefits on account of the employees of
all those agencies. Adjustments shall affect only future
contributions and shall take into account the difference between
contributions on hand and the amount required to fund the allowances
or benefits for which entitlement has already been established, as
well as liability for future entitlements to benefits. The
contribution as so established and adjusted from time to time shall
be allocated between the agencies on a basis that, in the opinion of
the board, after recommendation of the actuary, provides an equitable
distribution between the agencies as required by this section.
However, the allocation shall not be based on differences in the
incidence of death or disability in the respective agencies.
(e) (1) Whenever the board, pursuant to subdivision (d),
establishes a separate contribution, it shall maintain the
contribution and any contributions required to be made by employees
toward the cost of the benefit or benefits as a separate account,
which shall be available only for payment of the benefit or benefits
and shall not be a part of the accumulated contributions under this
system of any of the employers or members included.
(2) All contributions in that account, irrespective of the agency
from which they were received, shall be available for payment of the
benefit or benefits with respect to the employees of any agency
included. In the event of termination of any agency's participation
in this system, the liability with respect to all those benefits to
which the agency's employees have become entitled, after
establishment of the rate and prior to the termination, shall be its
contributions, as established under subdivision (d), that have become
due and payable as of the date of termination.
(f) The board and each contracting agency shall modify each
contract to reflect the requirements of this section on or before
July 1, 2012.
SECTION 1. Section 20791 is added to the
Government Code , to read:
20791. (a) It is the intent of the Legislature that a contracting
agency shall not experience a significant increase in actuarial
liability due to increased compensation paid by another contracting
agency to a nonrepresented employee subject to this part.
(b) The board shall develop requirements for defining a
significant increase in actuarial liability due to increased
compensation paid to a nonrepresented employee and to implement
program changes to ensure that a contracting agency that creates a
significant increase in actuarial liability due to increased
compensation paid to a nonrepresented employee that would also apply
to another contracting agency or agencies shall instead bear that
liability.
(c) The system actuary, in accordance with the requirements
established pursuant to subdivision (b), shall assess the increase in
liability to the employer that created it at the time the increase
is determined and shall make adjustments to that employer's rates as
needed to comply with the requirements.
(d) This section shall not apply to compensation paid to an
employee for service performed while covered by a memorandum of
understanding or to compensation paid for service performed while a
member of a recognized employee organization as that term is defined
in Section 3501.
(e) This section shall apply to any significant increase in
actuarial liability, due to increased compensation paid to a
nonrepresented employee, that is determined after January 1, 2012,
regardless of when the increase in compensation occurred.
(f) (1) No later than June 30, 2012, in compliance with Section
9795, the board shall report to the Legislature on the implementation
of this section. The report shall include an explanation of the
guidelines developed by the board pursuant to this section and an
assessment of the implementation and effectiveness of the guidelines.
(2) The requirement for submitting a report imposed under this
subdivision is inoperative on June 30, 2016, pursuant to Section
10231.5.
SEC. 2. Section 21757 of the Government Code is amended to read:
21757. (a) If the retirement benefits of any member or his or her
survivors or beneficiaries payable pursuant to Part 3 (commencing
with Section 20000) would be limited by Section 415 of Title 26 of
the United States Code, the board shall adjust the payment of those
benefits, including, but not limited to, cost-of-living adjustments,
cost-of-living banks, temporary annuities, survivor continuance
benefits, or any combinations thereof, in order to maximize benefits
within the limits of Section 415.
(b) The board shall establish a plan of replacement benefits for
members and any survivors or beneficiaries whose retirement benefits
are limited by Section 415 and cannot be fully maximized pursuant to
Part 3 (commencing with Section 20000). The benefits provided by that
plan may consist of deferred compensation, cash payments, health
benefits, or supplemental disability benefits, as shall be determined
by the board to give effect to the purpose of this part. The factors
the board may take into consideration in making its determination
shall include, but not be limited to, the following: legal
constraints, administrative feasibility, and cost effectiveness. The
board may periodically modify the replacement benefits plan and may
add or eliminate any type of replacement benefits, as necessary, to
carry out the purpose of this part. The administrative costs of the
replacement benefits plan shall be satisfied out of funds credited to
the accounts of the participant members, and shall not be paid from
the retirement fund or the retirement trust fund of a participating
agency.
(c) The application of Section 415 to benefits provided under Part
3 (commencing with Section 20000) and this part shall not be taken
into account for purposes of determining employers' or employees'
contribution rates, until replacement benefits are implemented
pursuant to Section 21758.
(d) Under no circumstances shall the replacement benefit plan
result in increased benefit costs to an employer, member, or
annuitant.
(e) The board shall not administer a plan of replacement benefits
for a person who first becomes a member on or after January 1, 2013.