BILL ANALYSIS �
SB 350
Page 1
Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
SB 350 (Negrete McLeod) - As Introduced: February 15, 2011
SENATE VOTE : 25-14
SUBJECT : Public Employees' Retirement System: preretirement
death benefits.
SUMMARY : Merges the first, second, and third levels of the
1959 Survivor Benefit for contracting local agencies of the
California Public Employees' Retirement System (CalPERS) that
currently provide one of those levels of benefits, and allows
CalPERS to suspend employee premiums of $2 monthly when the
funding pool is determined to contain surplus funds.
Specifically, this bill :
1)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 funded status of that pool
and ensure continued full funding of premiums so that
employers will not be required to contribute for this benefit.
2)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.
EXISTING LAW :
1)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 issues.
2)Defines an eligible survivor as a spouse or a registered
domestic partner who either cares for dependent children or
has reached age 62 or older. A dependent child is defined as
SB 350
Page 2
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.
3)Establishes six levels of 1959 Survivor Benefit, including the
following:
-----------------------------------------------------------------
|LEVEL |WHO |MONTHLY BENEFIT AMOUNT |STATUS OF LEVEL |
| |PARTICIPATES| | |
| | | | |
|-------+------------+---------------------------+----------------|
|First |Local |With 1 child: $360 |Closed since |
| |Contracting |With 2 or more children: |1/1/94 |
| |Agencies |$430 | |
| | |Spouse only at age 62: | |
| | |$180 | |
|-------+------------+---------------------------+----------------|
|Second |Local |With 1 child: $450 |Closed since |
| |Contracting |With 2 or more children: |1/1/94 |
| |Agencies |$538 | |
| | |Spouse only at age 62: | |
| | |$225 | |
|-------+------------+---------------------------+----------------|
|Third |Local |With 1 child: $700 |Closed since |
| |Contracting |With 2 or more children: |7/1/2001 |
| |Agencies |$840 | |
| | |Spouse only at age 62: | |
| | |$350 | |
|-------+------------+---------------------------+----------------|
|Fourth |Local |With 1 child: $1,900 |Contract option |
| |Contracting |With 2 or more children: |since 7/1/2001 |
| |Agencies |$2,280 | |
| | |Spouse only at age 62: | |
| | |$950 | |
|-------+------------+---------------------------+----------------|
|Fifth |State and |With 1 child: $1,500 |Established |
| |School |With 2 or more children: |level since |
| |Employers |$1,800 |1/1/2000 |
| | |Spouse only at age 62: | |
| | |$750 | |
SB 350
Page 3
|-------+------------+---------------------------+----------------|
|Indexed|Local |With 1 child: $1,149 |Contract option |
| (2% |Contracting |With 2 or more children: |since 1/1/2000 |
|annuall|Agencies |$1,723 | |
|y) | |Spouse only at age 62: | |
| | |$574 | |
-----------------------------------------------------------------
4)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.
5)Allows PERS 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.
FISCAL EFFECT : Unknown.
COMMENTS : 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 adjustment (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
SB 350
Page 4
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%."
This bill is similar to AB 1821 (Ma) of last year which would
have used the excess reserves from the CalPERS 1959 Survivor
Benefit Program to merge the 1st, 2nd, and 3rd benefit levels
into a single contracting agency pool paying the current Level 3
survivor benefit. The bill was vetoed by the Governor. In his
veto message, the Governor stated, in pertinent part:
"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."
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957