BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 350 (Negrete McLeod)
Hearing Date: 04/11/2011 Amended: As Introduced
Consultant: Maureen Ortiz Policy Vote: PE&R: 3-2
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BILL SUMMARY: SB 350 merges the assets and liabilities of the
first, second, and third benefit levels of the 1959 Survivor
Benefit Program into a single contracting agency pool which will
be used to pay the higher Level 3 benefit to eligible survivors
effective July 1, 2012.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Admin costs -----------------minor,
absorbable--------------- Special*
Higher benefit ------unknown,
potentially over $150-------- Special*
*Public Employees Retirement Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
According to CalPERS, the first and second levels of the program
have significant excess reserves which can only be used for
payment of 1959 Survivor Benefits. Merging the first and second
levels into the third level will result in paying those
survivors who are currently receiving Level 1 and Level 2
benefit payments, the higher Level 3 benefit. Since the average
increase would be approximately $295 per month, if more than 42
individuals are currently receiving the Level 1 or Level 2
benefits, annual costs from the special fund will exceed
$150,000. There are currently 139 survivors who are receiving
the Level 1 and Level 2 benefit. It should be note that the
payments for this benefit will come from funds that can only be
used for these purposes, and that merging the three pools will
minimize the probability of further employer premiums and
simplify administration of the program by reducing the number of
benefit levels.
The projected assets and liabilities as of June 30, 2010 of the
first, second, and third pools indicate that Level 1 has assets
of approximately $26 million and liabilities of only $2 million;
SB 350 (Negrete McLeod)
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Level 2 has assets of about $6.9 million with liabilities of
approximately $2 million; and, Level 3 has assets of $70.8
million and liabilities of $25 million. It is estimated that
combining the three levels and paying the higher level 3
benefits will provide an overall funding rate of about 304%.
SB 350 will result in higher benefit levels for survivors who
are currently participating in the first and second levels since
they will receive a benefit at the higher third level. At the
same time, the bill would provide increased funding stability
for the employers participating in the third level.
The 1959 Survivor Benefit was established to provide a benefit
that is similar to the survivor benefit provided by Social
Security, but it is for survivors of employees who do not
participate in Social Security such as firefighters and police
officer, and who die prior to retirement from non work-related
causes. There are six levels of the 1959 Survivor Benefits as
follows:
---------------------------------------------------------------
| 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 | |
| | | Spouse only at age 62: | |
| | | $350 | |
SB 350 (Negrete McLeod)
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|--------+---------------+-------------------------+------------|
|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: |since1/1/200|
|2% | | $1723 |0 |
|annually| | Spouse only at age 60: | |
|) | | $574 | |
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Unlike Social Security, the 1959 Survivor Benefit does not pay a
cost-of-living allowance (with the exception of the indexed
formula). The first and second level pools are no longer open
to new members because the benefit they provide is insufficient
for its
original purpose. New benefit pools have been created in order
to provide a more realistic replacement for eligible survivors.
The benefit is funded by a $2 monthly fee for
members who wish to participate, and the employer pays any
additional costs that are necessary. SB 350 will allow the
Board to suspend the $2 employee monthly premium
if the combined pool has a surplus in excess of 200 percent of
the total liabilities of the pool.
Eligible survivors include a surviving spouse if that spouse has
care of an eligible child, or if he or she is at least age 62.
A child or stepchild who has never been married is eligible for
benefits while under age 22.
This bill is identical to AB 1821 (Ma) which was vetoed by
SB 350 (Negrete McLeod)
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Governor Schwarzenegger last year. The veto message follows:
This bill results in arbitrarily increasing the level of
benefits being paid out to those beneficiaries that did not
contribute towards this increased level of benefit. While
I recognize that surplus funds are not being utilized in
the specified 1959 Survivor Benefit Program funds, it does
not make sense to increase the benefit amounts to even the
small number of participants that would be affected by this
measure. That is a policy that runs counter to the overall
pension reform direction I believe the state should be
adopting.