BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 350|
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VETO
Bill No: SB 350
Author: Negrete McLeod (D)
Amended: As introduced
Vote: 21
SENATE PUB. EMPLOY. & RETIRE. COMMITTEE : 3-2, 3/21/11
AYES: Negrete McLeod, Padilla, Vargas
NOES: Walters, Gaines
SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SENATE FLOOR : 25-14, 6/1/11
AYES: Alquist, Calderon, Corbett, Correa, De Le�n,
DeSaulnier, Evans, Hancock, Hernandez, Kehoe, Leno, Lieu,
Liu, Lowenthal, Negrete McLeod, Padilla, Pavley, Price,
Rubio, Simitian, Steinberg, Vargas, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Blakeslee, Cannella, Dutton,
Fuller, Gaines, Harman, Huff, La Malfa, Runner,
Strickland, Walters, Wyland
NO VOTE RECORDED: Emmerson
ASSEMBLY FLOOR : 49-27, 8/15/11 - See last page for vote
SUBJECT : California Public Employees Retirement System:
preretirement death benefits
SOURCE : California Public Employees Retirement System
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DIGEST : This bill 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.
ANALYSIS :
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 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:
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| | WHO | MONTHLY BENEFIT AMOUNT | STATUS OF |
|LEVEL | PARTICPATES | | LEVEL |
|-------+---------------+------------------------+------------|
|First |Local |With 1 child: |Closed |
| |Contracting | $360 |since |
| |Agencies |With 2 or more |1/1/1994 |
| | |children: $430 | |
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| | | | |
| | |Spouse only at age 62: | |
| | | $180 | |
|-------+---------------+------------------------+------------|
|Second |Local |With 1 child: |Closed |
| |Contracting | $450 |Since |
| |Agencies |With 2 or more |1/1/1194 |
| | |children: $538 | |
| | |Spouse only at age 62: | |
| | | $225 | |
|-------+---------------+------------------------+------------|
|Third |Local |With 1 child: |Closed |
| |Contracting | $700 |Since |
| |Agencies |With 2 or more |7/1/2001 |
| | |children: $840 | |
| | |Spouse only at age 62: | |
| | | $350 | |
|-------+---------------+------------------------+------------|
|Fourth |Local |With 1 child: |Contract |
| |Contracting | $1900 |Option |
| |Agencies |With 2 or more |since |
| | |children: $2280 |7/1/2001 |
| | |Spouse only at age 60: | |
| | | $950 | |
|-------+---------------+------------------------+------------|
|Fifth |State and |With 1 child: |Established |
| |School | $1500 |level since |
| |Employers |With 2 or more |1/1/200 |
| | |children: $1800 | |
| | |Spouse only at age 60: | |
| | | $750 | |
|-------+---------------+------------------------+------------|
|Indexed|Local |With 1 child: |Contract |
| |Contracting | $1149 |Option |
|(increa|Agencies |With 2 or more |since |
|se | |children: $1723 |1/1/2000 |
|of 2% | |Spouse only at age 60: | |
|annuall| | $574 | |
|y) | | | |
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4.Requires that participating employees pay $2 per month
and that employers pay any remaining costs to fund the
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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.
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 employees 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 percent or more of the total
liabilities of the funding pool.
Prior Legislation
AB 1821 (Ma), 2009-10 Session, 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. Passed the Senate with a vote of 22-12 on
8/19/10. The bill was subsequently 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.
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That is a policy that runs counter to the overall
pension reform direction I believe the state should be
adopting."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
SUPPORT : (Verified 5/26/11)
California Public Employees' Retirement System (source)
PERS Retirement Betterment Committee Inc.
Regional Council of Rural Counties (support if amended)
ARGUMENTS 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 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
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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%."
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 350 without my signature.
This bill allows CalPERS, for certain local government
members, to combine three survivor benefit levels into
the level with the highest benefit and to suspend
employee premiums.
Although the benefits increased by this bill are funded
by substantial excess reserves, the changes this bill
makes should be part of a more comprehensive pension
reform."
ASSEMBLY FLOOR : 49-27, 8/15/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Bradford, Brownley, Buchanan, Butler, Charles Calderon,
Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng,
Feuer, Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon,
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Hall, Hayashi, Roger Hern�ndez, Hill, Huber, Hueso,
Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell,
Monning, Perea, V. Manuel P�rez, Portantino, Skinner,
Solorio, Swanson, Torres, Wieckowski, Williams, Yamada,
John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, 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: Blumenfield, Bonilla, Gorell, Pan
CPM:cm 1/4/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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