BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 837 (Wieckowski) - Public Employees Retirement Benefits
Amended: August 4, 2014 Policy Vote: PE&R 4-1; Jud 6-0
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Maureen Ortiz
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 837 exempts judges who were elected to office
prior to January 1, 2013 from the provisions of the Public
Employees' Pension Reform Act (PEPRA).
Fiscal Impact:
Minor, absorbable administrative costs to CalPERS (Special
Fund)
Increased employer costs of approximately $75,000 annually
(General Fund*)
The actuarial increase in employer costs result from the reduced
employee contribution rate and long-term costs associated with
the pre-PEPRA final compensation period. *Superior Court judges
salary and retirement benefits are paid from the Trial Court
Trust Fund. Additionally, employers will need to recalculate
the employee contribution and refund overpayments back to the
date of employment.
Background: The Judges Retirement System II (JRS II) is
administered by the California Public Employees' Retirement
System (CalPERS). JRS II provides a retirement formula equal to
3.75% of the judge's final compensation for each year of
service. However, in order to receive these benefits the judge
must be either age 70 or older with at least 5 years of service,
or be age 65 or older with at least 20 years of service. Final
compensation is based on the highest twelve months and the
judges' retirement benefit may not exceed 75% of final
compensation. A judge who is not eligible for a retirement
benefit may receive monetary credits in either a lump sum or as
an annuity.
AB 837 (Wieckowski)
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Judges who were hired or took office prior to January 1, 2013
pay 8% of compensation to CalPERS toward their retirement
benefits.
The Public Employees' Pension Reform Act (PEPRA) made major
revisions to laws governing the public retirement system. It
provides that all new members of CalPERS who are hired on or
after January 1, 2013 will be subject to higher employee
contributions and a lesser retirement benefit formula. PEPRA
codified a standard of equal sharing of costs between public
employers and employees by requiring employees to pay at least
50 percent of normal costs for a defined benefit plan, and
prohibited employers from paying any of the required employee
contribution. Specifically, for members of JRS II, PEPRA
provides that new members will be required to pay one half of
the normal cost of their retirement benefits - currently 15% of
the member's salary.
Proposed Law: AB 837 will exempt judges who were elected in
2012, but who did not take office until 2013, from provisions of
the Pension Reform Act.
Staff Comments: There are eight judges who were elected in 2012
but did not take office until 2013. They were elected in
either June or November, but were unable to assume office until
January 2013 since the seats they were filling were not yet
vacant. These individuals were not previously public employees
and, as such, are considered new members for purposes of PEPRA.
There have been judges who were elected in 2013 who were former
public employees such as district attorneys and county counsels
who were grandfathered under the PEPRA rules that allow public
employees to move between public employers and retirement
systems without the loss of their status as legacy members under
CalPERS.
As part of the Pension Reform Act, employees hired on or after
January 1, 2013 are required to pay one half of the normal cost
of their benefits. At this time the normal cost of the JRS II
plan is slightly over 30%, and new judges subject to PEPRA are
currently paying 15% as member contributions.
AB 837 (Wieckowski)
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