BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 350
Gloria Negrete McLeod, Chair
Hearing date: March 21, 2011
SB 350 (Negrete McLeod) as introduced 2/15/11
FISCAL: YES
CALPERS: 1959 SURVIVOR BENEFIT
HISTORY :
Sponsor: California Public Employees' Retirement System
(CalPERS)
Prior legislation: AB 1821 (Ma)
Vetoed, 2010
SUMMARY :
Would merge the first, second, and third levels of the 1959
Survivor Benefit for contracting local agencies of CalPERS
that currently provide one of those levels of benefits to
employees, and allow CalPERS to suspend employee premiums of
$2 monthly when the funding pool is determined to contain
surplus funds.
This merge would result in higher benefit levels for
survivors currently in the first and second levels (who would
be paid at the third level) and provide increased funding
stability for the employers participating in the third level.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) establishes the 1959 Survivor Benefit, a survivor
benefit paid in a similar manner to the survivor benefit
provided by Social Security. The benefit is provided
for survivors of employees who do not participate in
Social Security and who die prior to retirement from non
work-related causes.
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b) defines an eligible survivor as a spouse or
registered domestic partner who either cares for
dependent children or has reached age 62 or older. A
dependent child is defined as one who has never been
married, is living with the surviving spouse or domestic
partner, and is under age 22. The dependent child may
be over age 22 if the child is incapacitated due to a
disability that began prior to age 22. Finally, if
there is no surviving spouse or child, a surviving
parent who was dependent on the employee at the time of
his or her death may receive the benefit.
c) establishes six levels of 1959 Survivor Benefit,
including the following:
---------------------------------------------------------------
| Level | Who | Monthly Benefit Amount | Status of |
| | Participates | | Level |
|--------+---------------+-------------------------+------------|
|First |Local |With 1 child: |Closed |
| |Contracting | $360 |Since |
| |Agencies |With 2 or more children: |1/1/1994 |
| | | $430 | |
| | | Spouse only at age 62: | |
| | | $180 | |
|--------+---------------+-------------------------+------------|
|Second |Local |With 1 child: |Closed |
| |Contracting | $450 |Since |
| |Agencies |With 2 or more children: |1/1/1994 |
| | | $538 | |
| | | Spouse only at age 62: | |
| | | $225 | |
|--------+---------------+-------------------------+------------|
|Third |Local |With 1 child: |Closed |
| |Contracting | $700 |Since |
| |Agencies |With 2 or more children: |7/1/2001 |
| | | $840 | |
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| | | Spouse only at age 62: | |
| | | $350 | |
|--------+---------------+-------------------------+------------|
|Fourth |Local |With 1 child: |Contract |
| |Contracting | $1900 |Option |
| |Agencies |With 2 or more children: |since |
| | | $2280 |7/1/2001 |
| | | Spouse only at age 60: | |
| | | $950 | |
|--------+---------------+-------------------------+------------|
|Fifth |State and |With 1 child: |Established |
| |School | $1500 |level |
| |Employers |With 2 or more children: |since |
| | | $1800 |1/1/2000 |
| | | Spouse only at age 60: | |
| | | $750 | |
|--------+---------------+-------------------------+------------|
|Indexed |Local |With 1 child: |Contract |
|(increas|Contracting | $1149 |option |
|e of |Agencies |With 2 or more children: |since |
|2% | | $1723 |1/1/2000 |
|annually| | Spouse only at age 60: | |
|) | | $574 | |
---------------------------------------------------------------
d) requires that participating employees pay $2 per
month and that employers pay any remaining costs to fund
the benefit, up to $2 per month, after which the cost
(if it is more than $4 per month) is to be split equally
between employer and employee.
e) allows CalPERS to pool the premiums for this benefit
and requires that premiums paid for the 1959 Survivor
Benefit may only be used to pay for that benefit.
2) This bill :
a) allows CalPERS to transfer pooled assets from the
first two levels to the third level, and to increase
survivor benefits in the first two levels to the third
level of benefits. Survivors in the first two levels
will receive a better benefit and the infusion of assets
into the third level funding pool will strengthen the
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funded status of that pool and ensure continued full
funding of premiums so that employers will not be
required to contribute for this benefit.
b) allows CalPERS to suspend employee premiums of $2 per
month as long as the third level funding pool contains
surplus funds equal to 200% or more of the total
liabilities of the funding pool.
FISCAL IMPACT :
CalPERS reports the following levels of assets in the three
funding pools as of the June 30, 2010 valuation:
Level 1: 1163%
Level 2: 342%
Level 3: 283%
Merging the three pools will result in a funding level of
over 300% for the third level pool.
COMMENTS :
1) Argument in support
According to the sponsor, CalPERS:
There are approximately 13,000 participants in the first
two levels. The 3rd level has approximately 46,000
participants. Benefits in the first three levels are set
in statute and do not increase; therefore, premiums are
extremely stable.
The Program was designed as a replacement benefit for
members who are not eligible for Social Security. However,
unlike Social Security, there is no mechanism allowing
eligible survivors to receive a cost-of-living ajustment
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(COLA). The 1st and 2nd level pools are no longer open to
new members because the benefit they provide is
insufficient for its original purpose. New benefit pools
were created in order to provide a more realistic
replacement benefit for eligible survivors. Merging the
pools and paying the 3rd level survivor benefit would
provide a needed COLA increase to participants in the 1st
and 2nd level pools.
Because statute requires Program assets to be used only for
payment of 1959 Survivor benefits, the CalPERS Board of
Administration is sponsoring this bill to merge the members
and assets in the 1st and 2nd levels into the 3rd level
pool and suspend the $2.00 required monthly employee
premium in the 3rd level pool as long as the pool is
running a surplus in excess of 200% of total liabilities.
While this would result in a higher benefit for the small
number of members currently in the 1st and 2nd level pools,
the large surpluses that exist in the first two pools will
be used to minimize the probability of future employer
contributions for contracting agencies in the 3rd level
pool.
After combining the three pools, the funding level of the
3rd pool is estimated to exceed 300%.
2) SUPPORT :
California Public Employees' Retirement System
(CalPERS), sponsor
PERS Retirement Betterment Committee Inc.
Regional Council of Rural Counties (RCRC), Support if
amended
3) OPPOSITION :
None to date
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