Amended in Senate August 4, 2014

Amended in Senate September 6, 2013

Amended in Assembly May 1, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 837

Introduced by Assembly Member Wieckowski

begin delete

(Coauthors: Assembly Members Fong and Fox)

end delete

February 21, 2013

An act amend Section begin delete 7522.30 end delete begin insert 7522.04 end insert of the Government Code, relating to public employees’ retirement.

LEGISLATIVE COUNSEL’S DIGEST

AB 837, as amended, Wieckowski. Public employees’ retirement benefits.

begin insert

The California Public Employees’ Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its pension plan or plans to comply with the act, as specified. Among other things, PEPRA prohibits a public employer offering a defined benefit pension plan from exceeding specified retirement formulas for new members and prohibits an enhancement of a public employee’s retirement formula or benefit adopted after January 1, 2013, from applying to service performed prior to the operative date of the enhancement. PEPRA defines terms for those purposes, including defining “new member” to include an individual who becomes a member of any public retirement system for the first time on or after January 1, 2013, and who was not a member of any other public retirement system prior to that date; an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was a member of another public retirement system prior to that date, but who was not subject to reciprocity under specified law; or an individual who was an active member in a retirement system and who, after a break in service of more than 6 months, returned to active membership in that system with a new employer.

end insert begin insert

This bill would specifically exclude from the definition of “new member” a judge, as defined in specified existing law, elected to office before January 1, 2013.

end insert begin delete

The California Public Employees’ Pension Reform Act of 2013 (PEPRA), on and after January 1, 2013, requires a public retirement system, as defined, to modify its plan or plans to comply with the act and, among other provisions, establishes new retirement formulas that may not be exceeded by a public employer offering a defined benefit pension plan, setting the maximum benefit allowable for employees first hired on or after January 1, 2013, as a formula commonly known as 2.5% at age 67 for nonsafety members, one of 3 formulas for safety members, 2% at age 57, 2.5% at age 57, or 2.7% at age 57, and 1.25% at age 67 for new state miscellaneous or industrial members who elect to be in Tier 2.

end delete begin delete

On and after January 1, 2013, PEPRA requires new employees of specified public employers, the California State University, and the judicial branch who participate in a defined benefit plan to have an initial contribution rate of at least 50% of the normal cost rate for that defined benefit plan, rounded to the nearest 1/4 of 1%, or the current contribution rate of similarly situated employees, whichever is greater.

end delete begin delete

This bill would make that provision applicable to new members employed by those entities and new members employed by the Legislature. The bill would except from these provisions a judge who was elected to office prior to January 1, 2013, despite not assuming that office and becoming a member of the Judges’ Retirement System II for the first time until January 1, 2013, or after that date. The bill would also specify that this contribution rate for new members shall be 50% rounded to the nearest 1/4 of 1%, unless a greater contribution rate has been agreed to through the collective bargaining process. The bill would require that, for purposes of calculating the normal cost rate, the actuarial valuation of retirement benefits includes any elements that impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments.

end delete

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 7522.04 of the end insert begin insert Government Code end insert begin insert is
amended to read: end insert

7522.04.  

For the purposes of this article:

(a) “Defined benefit formula” means a formula used by begin delete the end delete begin insert a end insert
retirement system to determine a retirement benefit based on age,
years of service, and pensionable compensation earned by an
employee up to the limit defined in Section 7522.10.

(b) “Employee contributions” means the contributions to a public
retirement system required to be paid by a member of the system,
as fixed by law, regulation, administrative action, contract, contract
amendment, or other written agreement recognized by the
retirement system as establishing an employee contribution.

(c) “Federal system” means the old age, survivors, disability,
and health insurance provisions of the federal Social Security Act
(42 U.S.C. Sec. 301 et seq.).

(d) “Member” means a public employee who is a member begin delete of
any type end delete of a public retirement system or plan.

(e) “New employee” means either of the following:

(1) An employee, including one who is elected or appointed, of
a public employer who is employed for the first time by begin delete any end delete begin insert a end insert
public employer on or after January 1, 2013, and who was not
employed by begin delete any other end delete begin insert another end insert public employer prior to that date.

(2) An employee, including one who is elected or appointed, of
a public employer who is employed for the first time by begin delete any end delete begin insert a end insert
public employer on or after January 1, 2013, and who was
employed by another public employer prior to that date, but who
was not subject to reciprocity under subdivision (c) of Section
7522.02.

(f)  begin insert (1) end insert begin insert   end insert “New begin delete member” end delete begin insert member,” except as provided in
paragraph (2), end insert means any of the following:

begin delete

(1)

end delete

begin insert (A) end insert  An individual who becomes a member of begin delete any end delete begin insert a end insert public
retirement system for the first time on or after January 1, 2013,
and who was not a member of begin delete any other end delete begin insert another end insert public retirement
system prior to that date.

begin delete

(2)

end delete

begin insert (B) end insert  An individual who becomes a member of a public retirement
system for the first time on or after January 1, 2013, and who was
a member of another public retirement system prior to that date,
but who was not subject to reciprocity under subdivision (c) of
Section 7522.02.

begin delete

(3)

end delete

begin insert (C) end insert  An individual who was an active member in a retirement
system and who, after a break in service of more than six months,
returned to active membership in that system with a new employer.
For purposes of this subdivision, a change in employment between
state entities or from one school employer to another shall not be
considered as service with a new employer.

begin insert

(2) Notwithstanding any other provision of this subdivision, a
judge, as defined in subdivision (a) of Section 75502, elected to
office before January 1, 2013, shall not be considered a new
member for the purposes of this article.

end insert

(g) “Normal cost” means the portion of the present value of
projected benefits under the defined benefit that is attributable to
the current year of service, as determined by the public retirement
system’s actuary according to the most recently completed
valuation. For the purpose of determining normal cost, the system’s
actuary may use a single rate of contribution or an age-based rate
of contribution as is applicable to that retirement system.

(h) “Public employee” means an officer, including one who is
elected or appointed, or an employee of a public employer.

(i) “Public employer” means:

(1) The state and every state entity, including, but not limited
to, the Legislature, the judicial branch, including judicial officers,
and the California State University.

(2)  begin delete Any end delete begin insert A end insert political subdivision of the state, or agency or
instrumentality of the state or subdivision of the state, including,
but not limited to, a city, county, city and county, a charter city, a
charter county, school district, community college district, joint
powers authority, joint powers agency, and any public agency,
authority, board, commission, or district.

(3) Any charter school that elects or is required to participate
in a public retirement system.

(j) “Public retirement system” means begin delete any end delete begin insert a end insert pension or retirement
system of a public employer, including, but not limited to, an
independent retirement plan offered by a public employer that the
public employer participates in or offers to its employees for the
purpose of providing retirement begin delete benefits, end delete begin insert benefits end insert or a system of
benefits for public employees that is governed by Section 401(a)
of Title 26 of the United States Code.

begin delete

SECTION 1.  

Section 7522.30 of the Government Code is
amended to read:

7522.30.  

(a) This section shall apply to all public employers
and to all new members. Equal sharing of normal costs between
public employers and public employees shall be the standard. The
standard shall be that employees pay at least 50 percent of normal
costs and that employers not pay any of the required employee
contribution.

(b) The “normal cost rate” shall mean the annual actuarially
determined normal cost for the plan of retirement benefits provided
to the new member and shall be established based on the actuarial
assumptions used to determine the liabilities and costs as part of
the annual actuarial valuation. The plan of retirement benefits shall
include any elements that would impact the actuarial determination
of the normal cost, including, but not limited to, the retirement
formula, eligibility and vesting criteria, ancillary benefit provisions,
and any automatic cost-of-living adjustments as determined by the
public retirement system.

(c) (1) New members employed by those public employers
defined in paragraphs (2) and (3) of subdivision (i) of Section
7522.04, the Legislature, the California State University, and the
judicial branch who participate in a defined benefit plan shall have
an initial contribution rate of at least 50 percent of the normal cost
rate for that defined benefit plan, rounded to the nearest quarter
of 1 percent, unless a greater contribution rate has been agreed to
pursuant to the requirements in subdivision (e). This contribution
shall not be paid by the employer on the employee’s behalf.

(2) For purposes of this subdivision, “new member” does not
include a member who is a judge who was elected to office prior
to January 1, 2013, despite assuming the office of judge, and
becoming a member of the Judges’ Retirement System II, for the
first time on or after that date.

(d) Notwithstanding subdivision (c), once established, the
employee contribution rate described in subdivision (c) shall not
be adjusted on account of a change to the normal cost rate unless
the normal cost rate increases or decreases by more than 1 percent
of payroll above or below the normal cost rate in effect at the time
the employee contribution rate is first established or, if later, the
normal cost rate in effect at the time of the last adjustment to the
employee contribution rate under this section.

(e) Notwithstanding subdivision (c), employee contributions
may be more than one-half of the normal cost rate if the increase
has been agreed to through the collective bargaining process,
subject to the following conditions:

(1) The employer shall not contribute at a greater rate to the
plan for nonrepresented, managerial, or supervisory employees
than the employer contributes for other public employees, including
represented employees, of the same employer who are in related
retirement membership classifications.

(2) The employer shall not increase an employee contribution
rate in the absence of a memorandum of understanding that has
been collectively bargained in accordance with applicable laws.

(3) The employer shall not use impasse procedures to increase
an employee contribution rate above the rate required by this
section.

(f) If the terms of a contract, including a memorandum of
understanding, between a public employer and its public
employees, that is in effect on January 1, 2013, would be impaired
by any provision of this section, that provision shall not apply to
the public employer and public employees subject to that contract
until the expiration of that contract. A renewal, amendment, or
any other extension of that contract shall be subject to the
requirements of this section.

end delete