BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 1141
Gloria Negrete McLeod, ChairHearing date: April 18, 2012
SB 1141 (Walters) as introduced 2/21/12 FISCAL: YES
PUBLIC EMPLOYEES: MEMORANDA OF UNDERSTANDING REGARDING
RETIREE HEALTH CARE
HISTORY :
Sponsor: Author
Prior legislation: SB 519 (Ashburn)
Chapter 519, Statutes of 2009
SB 1142 (Walters), 2012
also before this committee
SB 1143 (Walters), 2012
also before this committee
SUMMARY :
SB 1141 would prohibit a memorandum of understanding (MOU)
between a public employer and an employee group from agreeing
to provide a retiree health care benefit unless each employee
hired after January 1, 2013 pays at least 50% of the
actuarially required contributions to fund the health care
benefits.
This requirement would apply to all public employers and
their employees, including the University of California and
charter cities.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) requires that public employers and official employee
representatives collectively bargain over issues relative
to wages and working conditions.
b) establishes the Public Employees Medical and Hospital
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Care Act (PEMHCA), administered by the Public Employees'
Retirement System (CalPERS), which creates a statutory
framework for state employee and retiree health care
benefits and allows local public agencies to voluntarily
contract with CalPERS for health care coverage for their
employees and retirees.
c) requires an employer who contracts for PEMHCA coverage
for active employees to also provide PEMHCA coverage for
retirees.
d) for state employees covered by PEMHCA, establishes the
minimum and maximum vesting requirements and the employer
and employee contributions for active and retiree health
care.
e) for local employers who contract for PEMHCA,
establishes varying vesting requirements and employer
contribution rates according to the individual contract.
f) under PEMHCA, requires that the premium payments for
active and retiree health care be paid in full on a
pay-as-you-go basis by the employer, and that the
employee or retiree shall pay the portion of the premium
not covered by the employer.
g) allows an employer to voluntarily prefund the
actuarially determined liability for providing retiree
health care benefits for its retirees by depositing money
into the Annuitant's Health Care Coverage Fund,
administered by CalPERS, or into some other investment
fund.
h) does not provide a statutory or administrative
framework, either in state or federal law, to allow
employees to directly contribute to prefund retiree
health care costs.
i) specifies that contributions to the Annuitant's Health
Care Coverage Fund by an employer are the property of the
employer and that contributing to prefund retiree health
care costs does not, in and of itself, create, change, or
vest the obligations of the employer to provide benefits
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for employees or annuitants.
j) requires, specific to a collective bargaining agreement
between the state and state bargaining unit 5 (Highway
Patrol officers), that specified annual salary increases
for patrol officers would instead be redirected to
prefund retiree health care obligations for patrol
officers, and also requires that those contributions may
not be refundable under any circumstances.
k) in general, requires that the employer from which the
employee retires will be the employer that is the sole
provider of that employee's retiree health care benefits.
In other words, an employee who works for multiple
employers may be subject to various retiree health care
coverage plans, but the only employer that actually
provides retiree health care coverage for an employee is
the last employer prior to retirement, and the only if
the employee qualifies under that employer's plan.
l) in general, provides a vested right to a retirement
benefit for which an employee has paid contributions, as
long as those contributions remain credited to the
employee in the applicable benefit plan. Therefore, an
employee may work for multiple public employers, and upon
retirement, receive either multiple monthly retirement
benefit checks from different retirement systems, or if
the employers are all participants in one retirement
system (such as CalPERS) a single monthly retirement
check funded by multiple employers on a pro rata basis.
2) This bill :
a) establishes a prohibition in the collective bargaining
process: a public employer and represented employees may
not enter into an agreement to provide retiree health
care unless all employees hired after January 1, 2013 pay
at least 50% of the actuarially required contributions to
fund the health care benefits.
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b) states that if the provisions of an existing MOU are in
conflict with this requirement, the existing MOU will be
controlling until it expires, and that this requirement
shall be controlling thereafter.
c) defines public employer to include the three branches
of state government, the California State University
(CSU), the University of California (UC), and any
political subdivision of the state, including a charter
city.
d) states that employer and employee contributions to pay
for benefits under PEMHCA are subject to prefunding
requirements, but states that those requirements are
contained in the prohibition to enter into an MOU to
provide retiree health care unless employees hired after
January 1, 2013 pay at least 50% of the actuarially
required contributions to fund the health care benefits.
COMMENTS :
1) Argument in Support :
According to the author:
"Rising health care premiums and an increasing number of
retirees has contributed to greater state costs in providing
Other Post-Employment Benefits such as retiree health
benefits. Requiring public employees to contribute to their
retiree benefits during their working years would
significantly reduce the state's costs for future health
benefits and make the funding system more sustainable."
2) Arguments in Opposition :
Organizations representing employees universally object to
placing prohibitions or requirements on the collective
bargaining process. According to American Federation of
State, County, and Municipal Employees, SB 1141 violates
collective bargaining rights. AFSCME opposes restricting the
rights of employees to enter into collective bargaining
agreements to provide post-employment health benefits. SEIU,
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Local 1000 states, "This bill violates the Ralph C. Dills Act
and would result in major pay deductions for many public
employees."
Health Access California, calls attention to federal health
reform requirements that allow an employee who is offered
unaffordable health care coverage to receive subsidized
coverage through the California Health Benefits Exchange.
"For every full-time, full-year employee offered unaffordable
coverage, and employer faces a penalty of $2,000 per
employee." "Requiring employees to pay half the value of the
health benefit is a bad idea for low and moderate income
workers: it makes the cost of coverage unaffordable and
often involves cost sharing in the form of copays and
deductibles that discourage use of appropriate and necessary
care, such as doctor visits, prescription drugs, and lab
tests."
3) OPPOSITION :
American Federation of State, County and Municipal
Employees (AFSCME)
Association for Los Angeles Deputy Sheriffs (ALADS)
California Association of Professional Scientists (CAPS)
California Public Defenders Association
California School Employees Association (CSEA), AFL-CIO
Glendale City Employees Association (GCEA)
Health Access California
Laborers' Locals 777 & 792
Los Angeles Probation Officers' Union, AFSCME, Local 685
Organization of SMUD Employees (OSE)
Peace Officers Research Association of California (PORAC)
Professional Engineers in California Government (PECG)
Riverside Sheriffs' Association
San Bernardino Public Employees Association (SBPEA)
San Diego County Court Employees Association
San Luis Obispo County Employees Association (SLOCEA)
Santa Rosa City Employees Association (SRCEA)
Service Employees International Union, Local 1000 (SEIU
Local 1000)
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