BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 1114
Norma Torres, Chair HEARING DATE: April 21, 2014
SB 1114 (Walters) as introduced 2/19/14 FISCAL: YES
STATE EMPLOYEES: RETIREE HEALTH CARE VESTING
HISTORY :
Sponsor: Author
Other legislation: SB 846 (Correa),
Chapter 162, Statutes of 2010
SUMMARY :
SB 1114 would increase the number of years of service
necessary for state employees to vest for retiree health care
and reduce the amount of the employer contribution for
retiree health care. These changes would apply to all state
employees first hired on and after January 1, 2015.
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 Care Act (PEMHCA), administered by the
California Public Employees' Retirement System
(CalPERS), which creates a statutory framework for state
employee and retiree health care benefits.
c) establishes an employer contribution formula for
retirees, referred to as the 100/90 formula, which, for
the member, is equal to 100% of the weighted average
premium amount for the four most highly utilized plans
during the previous year, and equal to 90% of that
amount for the member's dependent.
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d) establishes, for most active state workers, an
employer contribution formula that is equal to either
80% or 85% of the weighted average premium amount for
the member and 80% for the dependent. (Some state
bargaining units do not have a statutory requirement for
the employer contribution but have employer contribution
requirements in their relative memoranda of
understanding).
e) for state employees covered by PEMHCA, establishes
vesting requirements for the employer contribution for
retiree health care. For most employees first hired
after January 1, 1989, the employer contribution is 50%
of the cost of the 100/90 formula after 10 years of
state employment, increasing at the rate of 5% per year
until the employee vests at 100% of the employer
contribution after 20 years of state employment.
f) for state employees in State Bargaining Unit 12 first
hired after January 1, 2011, establishes a vesting
formula that provides an employer contribution of 50% of
the cost of the 100/90 formula after 15 years of state
employment, increasing at the rate of 5% per year until
the employee vests at 100% of the employer contribution
after 25 years of state employment.
g) specifies that these requirements are specific to
state employees of the Executive Branch (i.e., not
employees of the California State University (CSU) or
the judicial or legislative branches).
h) requires a retiree who is covered under PEMHCA, upon
reaching the age of eligibility for Medicare, to enroll
in one of the Medicare supplement plans offered under
PEMHCA.
1)This bill :
a) requires any state employee, including those of the
CSU, judicial, or legislative branches, who is first
hired on or after January 1, 2015, to be subject to a 15
to 25 year vesting schedule (i.e., 50% of the employer
contribution after 15 years of service increasing at the
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rate of 5% per year until the employee vests at 100% of
the employer contribution after 25 years of state
employment).
b) for these employees, eliminates the 100/90 formula
and states that retirees shall not have a contribution
amount that is more generous than that received by
active state employees.
c) states that an employee or annuitant who is enrolled
in a Medicare health benefit plan shall use those
benefits to the fullest extent possible.
COMMENTS :
1)Argument in Support :
According to the author:
According to the most recent figures from the Other
Post-Employment Benefits (OPEB) Actuarial Valuation
Report released by the Controller, California's unfunded
actuarial accrued liability was $64.58 billion (more
than two thirds of our state general fund budget) as of
June 30, 2013.
Increasing vesting ages for new employees would help
reduce OPEB costs and make the benefits more sustainable
over the long-term. Fiscal sustainability would not
only protect California taxpayers, but would also ensure
that state employees receive the benefits they are
promised in retirement. This concept was part of
Governor Brown's 12-point Pension Reform Plan in 2011
but was left out of the final pension reform package (AB
340) that passed in 2012.
The bill would also require all retirees to look to
Medicare to the fullest extent possible when they become
eligible.
2)Argument in Opposition :
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Writing in opposition, SEIU, Local 1000 states:
SB 1114 is another step backwards in efforts to
dismantle public employees' rights to negotiate for
their benefits. For 35 years the Ralph C. Dills Act has
served California and its public employees well. The
state and public employees have negotiated fair benefits
and wages through those years. In difficult budget
years employees made concessions. In good budget years
the state rewarded the dedication and hard work of the
state's public employees with better benefits.
SEIU Local 1000 and other opponents believe that retiree
healthcare is a bargainable issue and "should be done
through honest negotiations."
3)OPPOSITION :
Association of California State Supervisors (ACSS)
American Federation of State, County and Municipal
Employees, AFL-CIO (AFSCME)
California Association of Professional Scientists (CAPS)
California Correctional Peace Officers Association (CCPOA)
California State Retirees (CSR)
Professional Engineers in California Government (PECG)
Retired Public Employees Association (RPEA)
Service Employees International Union, Local 1000 (SEIU)
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