BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2053 (Allen) - San Francisco Bay Area Rapid Transit District
Amended: As Introduced Policy Vote: PE&R 4-1
Urgency: No Mandate: No
Hearing Date: June 25, 2012
Consultant: Maureen Ortiz
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 2053 creates an exemption for the San
Francisco Bay Area Rapid Transit District (BART) to establish a
vesting requirement for post-retirement health benefits coverage
that is different than what is allowed under current law for
agencies that contract with the California Public Employees
Retirement System (CalPERS).
Fiscal Impact: Minor, absorbable administrative expenses to
CalPERS (Special), and potentially significant savings to BART,
depending upon the terms of the new contract.
Background: Existing law allows local governmental agencies to
contract with CalPERS to provide health benefits to employees
and retirees through the Public Employees' Medical and Hospital
Care Act (PEMHCA). If a contracting agency elects to cover its
employees for health care under PEMHCA, it has the following
options to choose from in determining contribution amounts for
annuitants:
1)A contracting agency can opt to make the employer contribution
amount equal for both active employees and annuitants. Under
this option, an employee who retires and meets the definition
of annuitant becomes 100% vested and receives an employer
contribution amount equal to what the active employees
receive.
2)A contracting agency that joins PEMHCA on or after January 1,
1986, has the option to pay a lesser employer contribution
amount for annuitants than for active employees as long as the
agency increases its contribution for annuitants each year
until it equals the agency's contributions for active
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employees. Based on this formula, it may take 20 years for
the lesser annuitant contribution amount to equal the active
employee contribution amount. Under this option, an employee
who retires and meets the definition of annuitant becomes 100%
vested and receives an employer contribution amount equal to
the lesser contribution amount.
3)A contracting agency has the option to be subject to a pre-set
"vesting schedule" of specific percentages based on an
employee's credited years of service to determine the employer
contribution amount for annuitants. Under this option, an
employee must work at least 10 years to qualify for an
employer contribution of 50% toward retiree healthcare
increasing 5 percent each year of service, until the employee
is 100 percent vested at 20 years of service.
Proposed Law: AB 2053 will authorize BART to make contributions
for postretirement health benefits for members of the district
board of directors, its unrepresented employees, and for any
unit of employees whose terms and conditions of employment are
determined through collective bargaining subject to the
following conditions:
a) The contribution must be based on credited years of service,
b) The contribution rate must be the result of a mutually agreed
upon collective bargaining agreement, and
c) Contributions for postretirement health benefits for
unrepresented employees may only be provided with the same
eligibility criteria and schedule provided to the represented
employees.
Specifically, the new option provided in AB 2053 must require
employees to have at least 10 years of service with the district
(unless retired on disability) and the agreement must provide a
full employer contribution for those employees who have
completed 15 years of credited service (unless retired on
disability).
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AB 2053 provides that any new option negotiated pursuant to this
legislation will only apply to district employees who are first
hired on or after July 1, 2013 (the start of the new contract),
or to employees hired on or after the date specified in the
agreement.
Related Legislation: There have been many bills introduced in
recent years to provide exceptions to the vesting and
contribution provisions of PEMHCA including the following:
AB 2510 (Fletcher), Chapter 600/2010 which provided the
City of San Diego with the ability to establish a vesting
requirement for post-retirement health benefits coverage
that is different than what is allowed under current law
for contracting agencies.
AB 1506 (Kuehl), Chapter 326/1995, which authorized the
Santa Monica Community College District and the Mt. San
Antonio Community College Districts to establish their own
schedule of employer contributions for post-retirement
health benefit coverage under PEMHCA.
SB 1294 (Berryhill), currently pending in the Assembly
Appropriations Committee, authorizes Mariposa County to
implement an employer contribution formula for current
employees that is lesser than what is currently provided to
current retirees.
Staff Comments: BART is in the process of beginning
negotiations with its employee bargaining groups in anticipation
of the expiration of its current bargaining agreement on June
30, 2013. There are many different aspects of and issues
involved in the collective bargaining process, and due to
increased costs of health care in recent years employer
contributions toward annuitant health care is a growing concern
for many employers - thus becoming one of the important
collective bargaining tools for both parties. While the intent
of AB 2053 is to provide BART with an option that is not
currently allowed under CalPERS, the specific language in the
bill does limit any potential agreement to its terms. The
current contract provides for 100% vesting for BART employees
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with 5 years of service.
Any new vesting schedule will be subject to collective
bargaining. The provisions of
AB 2053 will only apply to employees who are first hired on or
after July 1, 2013, or any other date specified in the new
bargaining agreement. The bill specifies that its provisions
will not be applicable to any employee who retires before the
effective date of the memorandum of understanding