BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1248|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 1248
Author: Hueso (D)
Amended: 6/30/11 in Senate
Vote: 21
SENATE PUBLIC EMPLOY. & RETIRE. COMMITTEE : 3-2, 6/27/11
AYES: Negrete McLeod, Padilla, Vargas
NOES: Walters, Gaines
ASSEMBLY FLOOR : 52-24, 5/27/11 - See last page for vote
SUBJECT : Local public employees retirement
SOURCE : Author
DIGEST : This bill requires (1) all local public
employers to provide Social Security coverage to any
employee not covered under a defined retirement plan, (2)
grandfathers in an employer's alternate benefit plan for
part-time, seasonal, and temporary employees in place on
July 1, 2011, and (3) grandfathers an employers' defined
contribution plan in place on July 1, 2011.
ANALYSIS :
Existing State Law
1.Creates public retirement systems for public employees,
which, in general, provide defined benefits that are
calculated by multiplying a member's age factor, years of
CONTINUED
AB 1248
Page
2
service, and highest average compensation, as specified
by the retirement system.
2.Specifies that a defined benefit is paid as a retirement
allowance for the member-retiree's lifetime and, as an
option to the member, the lifetime of his or her survivor
at a reduced actuarial amount.
3.Requires that an employee who works at a 50 percent or
higher time base must be included in the employer's
defined benefit retirement plan.
Existing Federal Law
1.Requires that employees be mandatorily included in the
Federal Old Age and Survivor's Insurance (i.e., Social
Security) unless they are members of a public retirement
system.
2.Requires a public employer that does not provide Social
Security to provide a retirement benefit meeting minimum
standards, as specified by federal regulation.
3.Allows public employees to contract to provide Social
Security coverage for their employees.
This bill requires (1) all local public employers to
provide Social Security coverage to any employee not
covered under a defined retirement plan, (2) grandfathers
in an employer's alternate benefit plan for part-time,
seasonal, and temporary employees in place on July 1, 2011,
and (3) grandfathers an employers' defined contribution
plan in place on July 1, 2011.
Background
Who has Social Security ?
------------------------------------------------------------
| SS Coverage | No SS Coverage |
|-----------------------------+------------------------------|
|State Miscellaneous and |State Safety, Peace Officer/ |
|Industrial |Firefighter, Patrol |
|Including Judicial and | |
CONTINUED
AB 1248
Page
3
|Legislative | |
|Branches | |
|-----------------------------+------------------------------|
|School Classified Employees |Teachers |
|-----------------------------+------------------------------|
|Most Local Miscellaneous or |Some Local Miscellaneous |
|General Members |Members |
|-----------------------------+------------------------------|
|Some Local Safety Members |Most Local Safety Members |
| | |
------------------------------------------------------------
As noted above, most local public employers have programs
similar to the state employee program in which
miscellaneous or general employees are included in Social
Security, and safety employees are not. However, some
local employers have opted to cover all employees under
Social Security (including Safety employees) and some local
employers have opted to stay out of Social Security
entirely for all employees (even General or Miscellaneous
employees).
Up until 1951, public employees were not included in Social
Security. In 1951, states were given the option of
including employees in Social Security. In 1991, federal
laws changed once more, and all employees have since then
been required to be covered by Social Security unless they
are public employees and covered under a pension plan that
meets the minimum federal requirements for coverage. The
federal laws, however, do not require that the coverage be
under a traditional defined benefit plan.
Comments
Need for the Bill . According to the author's office, "In
1981, San Diego determined to opt out of Social Security
and provide its employees its own defined benefit pension
plan. Today, San Diego would like to eliminate the defined
benefit pension plan by vote of the people and replace it
with a 401(k) plan?Volatility in the stock market raises
concerns about the security of defined contribution
retirement systems. This volatility becomes an even larger
concern for workers who would not be covered under the
federal Social Security system.
CONTINUED
AB 1248
Page
4
"Allowing local governments to offer a 401(k) only
retirement system will leave workers without a financial
safety net in their retirement years and will shift the
burden to the state in the long-run. If retired workers
require health services, Medi-Cal will have to step in.
Our state's budget for Medi-Cal today is $41 billion, $13
billion of which comes directly from the state's general
fund. If workers do not have enough money in their 401(k)
when they retire, as is common with 401(k) plans,
California will have to supplement their income through our
already burdened SSI/SSP program. These costs are
currently $2.7 billion and already represent the highest
figures in the nation. Allowing California workers to
participate in the Social Security System will protect them
in the future."
Part-time, Seasonal, and Temporary Employees . One group of
employees does not fit neatly into this either/or scenario.
Part-time, seasonal, and temporary employees often do not
work enough hours to be included in the public employer's
defined benefit plan. Some of those employers do not
provide Social Security either. In such cases, the
employer must provide an alternate retirement plan that
meets federal requirements. For example, the State
Teachers' Retirement System administers the Cash Benefit
Program for part-time teachers, which is separate and
different from the main defined benefit plan, and may be
paid at retirement as a lifetime annuity or as a lump-sum.
Similarly, the Department of Personnel Administration
administers an alternate retirement plan for part-time,
seasonal, and temporary state employees.
Some alternate retirement plans are provided in addition to
Social Security, and some are stand-alone programs offered
in lieu of Social Security.
This bill could have the effect of forcing those employers
who only have alternate plans for their part-time,
seasonal, and temporary employees to provide social
Security benefits as well.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
CONTINUED
AB 1248
Page
5
SUPPORT : (Per Senate Public Employment and Retirement
Committee analysis)
American Federation of State, County and Municipal
Employees, AFL-CIO
California Alliance for Retired Americans
California Labor Federation
California Professional Firefighters
California School Employees Association, AFL-CIO
California Teamsters Public Affairs Council
Glendale city Employees Association
Organization of SMUD Employees
Peace Officers Research Association of California
San Bernardino Public Employees Association
San Diego and Imperial Counties Labor Council
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
United Nurses Association of California/Union of Health
Care Professionals
OPPOSITION : (Per Senate Public Employment and Retirement
Committee analysis)
California State Association of Counties (oppose unless
amended)
Los Angeles County Board of Supervisors
Regional Council of Rural Counties
ARGUMENTS IN SUPPORT : The California School Employees
Association supports AB 1248, stating "The current economic
recession has made it increasingly clear that a 401(k)
system does not provide a secure retirement savings because
they can be deleted or wiped out. AB 1248 provides a
sensible requirement to ensure that public employees who
dedicated their lives to the betterment of our schools,
city and state have access to a meaningful retirement
system."
ARGUMENTS IN OPPOSITION : Writing in opposition, the
California State Association of Counties (CSAC) states,
"Some part-time, seasonal, and temporary employees are not
in Social Security and have optional retirement plans that
are separate and different from the traditional defined
CONTINUED
AB 1248
Page
6
benefit plans.
ASSEMBLY FLOOR : 52-24, 5/27/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer,
Fong, Furutani, Galgiani, Gatto, Gordon, Hall, Hayashi,
Roger Hern�ndez, Hill, Huber, Hueso, Huffman, Lara,
Bonnie Lowenthal, Ma, Mendoza, Mitchell, Pan, Perea, V.
Manuel P�rez, Portantino, Skinner, Solorio, Swanson,
Torres, Wieckowski, Williams, Yamada, John A. P�rez
NOES: Conway, Cook, Donnelly, Beth Gaines, Garrick, Grove,
Hagman, Halderman, Harkey, Jeffries, Jones, Knight,
Logue, Mansoor, Miller, Morrell, Nestande, Nielsen,
Norby, Olsen, Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Fletcher, Fuentes, Gorell, Monning
CPM:cm 6/30/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED