BILL ANALYSIS �
AB 2472
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2472 (Public Employees, Retirement and Social Security
Committee)
As Amended June 16, 2014
Majority vote
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|ASSEMBLY: |75-0 |(April 24, |SENATE: |34-0 |(August 7, |
| | |2014) | | |2014) |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : Makes various minor policy and technical changes to
various sections of the Government Code governing the California
Public Employees' Retirement System (CalPERS) to maintain and
ensure effective administration of the system. Specifically,
this bill :
1)Clarifies that termination of membership for a State Second
Tier (Tier 2) member occurs upon termination of service with a
CalPERS employer if the member has less than 10 years of
service and has no accumulated contributions in the retirement
fund at the time.
2)Clarifies that state member eligibility for retirement at age
50 for service under both State First Tier (Tier 1) and Tier 2
benefit formulas only applies to members who are not subject
to the Public Employees' Pension Reform Act of 2013 (PEPRA)
benefit formulas.
3)Allows the use of the employer contribution rate in effect at
the time the compensation is earned when making prior period
adjustments.
4)Allows a member, including a member of the Judges' Retirement
System I (JRS I)and Judges' Retirement System II (JRS II), to
make a change to their election of a survivor benefit option
if CalPERS receives their request within 30 days of the
issuance of their first retirement payment
5)Corrects an incorrect cross-reference and clarifies that a
retired judge who is subsequently elected or appointed to
judicial office must forfeit his or her retirement allowance
and reinstate to active membership.
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6)Eliminates obsolete reporting requirements from the Public
Employees' Retirement Law (PERL).
The Senate amendments make additional clarifying and technical
changes to the PERL.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : According to the sponsor, CalPERS, this bill "would
make several changes in the PERL necessary for the maintenance
and good governance of CalPERS, and to ensure its statutes are
clear." The following information was provided to the Committee
by CalPERS:
1)Among other things, PEPRA established a new lower Tier 2
pension benefit formula with a higher retirement age under as
an optional choice for new employees of the state on and after
January 1, 2013, that are new member of the retirement system.
PEPRA also required participants in both the old and new
CalPERS Tier 2 benefit programs to pay contributions equaling
half of the normal cost of the benefit for the first time on
and after that date.
These two changes have required subsequent amendments to the
PERL some of which were contained in SB 220 (Beall), Chapter
526, Statutes of 2013, and others which are now included in
this bill. The bill would add cross-references to this code
section throughout other sections of the PERL to ensure
existing standards and requirements that apply to other
benefit formulas, will also apply to this new benefit formula.
This bill specifies the minimum retirement age for
participants in the new Tier 2 benefit formula consistent with
PEPRA. It will also clarify that all Tier 2 participants must
refund their accumulated contributions in order to no longer
be considered members of CalPERS.
2)Under existing law, if a correction of the amount of
compensation reported by a contracting agency requires
additional employer contributions, the contributions must be
computed using the employer contribution rate in effect at the
time of the adjustment. However, when the current employer
contribution rate is used to adjust previous period
compensation reporting errors, the difference between the two
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rates may be so great in some cases that such adjustments
result in the employer paying more, and in some cases the
employer paying less, than is necessary to cover the cost of
the benefit.
Currently, payroll corrections and employer contribution
adjustments are completed by CalPERS employers on an ongoing
basis utilizing the my|CalPERS system, which is designed to
use the current employer rates when employers submit payroll
adjustments for prior periods. There are thousands of these
employer initiated adjustments completed each month that
automatically apply the current employer contribution rates
for both current year and prior period adjustments.
To more accurately reflect the correct contributions owed and
minimize inequity, this bill will allow the use of the
employer contribution rate in effect at the time the
compensation is earned when making prior period adjustments.
3)As an alternative to receiving an unmodified allowance, a
CalPERS member may elect to receive a reduced monthly benefit
so that upon his or her death, either a lump sum of remaining
member contributions will be paid, or an ongoing monthly
allowance will be paid, to one or more named beneficiaries.
These alternative choices are called Options or Optional
Settlements.
Existing law allows members to change their option election
prior to their first benefit payment on account of any
retirement allowance or, in the event of a change of
retirement status after retirement, prior to the benefit
payment immediately following the change in retirement status.
However, the recently implemented my|CalPERS member database
is now able to release several types of member payments on a
weekly basis, and provides CalPERS additional flexibility to
accept members' changes to their option elections even after
the first payment is made. This bill will allow members to
make a change to their option election if CalPERS receives
their request within 30 days of the issuance of their first
retirement payment. This will allow members who may not
realize the extent to which the option they elected, combined
with tax and other benefit deductions, has reduced their
monthly retirement allowance, to make a different choice.
In addition, the JRS I and JRS II law have the same existing
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requirement that an election, revocation, or change of
election must be made prior to receipt of the first retirement
payment. This proposal also ensures that JRS I and JRSII
statutes are consistent with the proposed change in the PERL.
4)Under existing law, a retired judge that participates in the
JRS I cannot be elected or appointed to serve as a judge while
continuing to receive retirement benefits through the JRS I,
except for a retired judge while serving under assignment by
the Chair of the Judicial Council. In such instances, the
benefit of the retired judge is reduced by the amount of that
salary or compensation earned during the time he or she is on
assignment, and he or she does not earn service credit or
become entitled to additional retirement benefits on account
of that assignment. The Judges' Retirement Law II (JRL II)
does not contain a similar prohibition, which may cause
unnecessary confusion and misunderstanding for members and
employers.
This bill will add a similar provision to the JRL II to make
clear that a retired judge that participates in the JRS II
cannot be elected or appointed to serve as a judge while
continuing to receive retirement benefits through the JRS II,
except for a retired judge while serving under assignment by
the Chair of the Judicial Council.
5)AB 256 (De La Torre), Chapter 708, Statutes of 2005, required
CalPERS to examine the feasibility and cost-effectiveness of
creating a single statewide health care pool for all school
employees. CalPERS submitted the study titled Feasibility of
Offering Health care Coverage to School Employees as Outlined
in AB 256 to the Legislature in March 2008.
In addition, AB 1585 (Accountability and Administrative Review
Committee), Chapter 7, Statutes of 2010, eliminated hundreds
of underutilized and unnecessary annual reports to the
Legislature produced by state agencies, including the
following two CalPERS reports: Annual Report on All Matters
Under Board Jurisdiction and Pre/Post Retirement Death
Allowance Payments.
This bill will delete these obsolete reporting requirements.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
AB 2472
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319-3957
FN: 0004406