BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 1251
Norma Torres, Chair HEARING DATE: April 21, 2014
SB 1251 (Huff) as amended 4/21/14 FISCAL: YES
JOINT POWER AUTHORITY: PENSION BENEFIT FORMULA
HISTORY :
Sponsor: City of Brea (Co-Sponsor)
City of Fullerton (Co-Sponsor)
Other legislation: AB 340 (Furutani),
Chapter 296, Statutes of 2012
SUMMARY :
This bill clarifies how employees may be treated upon
transfer from an employer to a newly created Joint Powers
Authority (JPA) with regard to their pension benefits.
Legacy employees (i.e., employees who are not subject to the
Public Employees' Pension Reform Act of 2013-or PEPRA) may be
subject to the benefit formula offered by the employer on
December 31, 2012. Employees who are subject to PEPRA would
only be eligible for the new pension formulas established by
PEPRA.
BACKGROUND AND ANALYSIS :
1)Existing law :
a) authorizes, under the Joint Exercise of Powers Act,
public agencies to enter into agreements to jointly
exercise any power common to the contracting parties,
including providing for the creation of an agency or
entity that is separate from the parties to the
agreement and is responsible for the administration of
the agreement.
b) allows local public employers forming a JPA to
contract with the California Public Employees'
Retirement System (CalPERS), the California State
Teachers' Retirement System (CalSTRS), or one of the
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1937 Act county retirement systems to offer retirement
benefits to their employees if the JPA meets the federal
definition of a governmental plan. The JPA is then a
new contracting employer in the retirement system.
c) allows public employees who move between public
employers-usually within a 180-day timeframe-limited
special privileges under laws (such as when the move is
between two employers in the same retirement system) or
reciprocity agreements between retirement systems (such
as when the change in employment occurs between
employers in different retirement systems), including:
i) The right to have highest final compensation from
one employer applied to service with all employers
when calculating the employee's pension(s).
ii) The right to use years of service from all
employers for the purpose of vesting for retirement or
disability benefits.
a) establishes, under PEPRA, a new retirement plan
formula and requires public employers to offer the PEPRA
formula to new employees first hired into public service
after January 1, 2013, as defined.
b) requires pre-PEPRA members-sometimes referred to as
"legacy" members-who were first hired into public
service prior to January 1, 2013, and who move between
public employers within a 180-day time period, to be
grandfathered and eligible to receive the benefit plans
offered to employees of the public employer on December
31, 2012.
1)This bill :
a) authorizes a JPA formed after January 1, 2013, to
offer the legacy retirement formula that was available
on December 31, 2012, from the public employer(s)
establishing the JPA to the following individuals:
i) An employee of the public employer hired prior to
January 1, 2013, who is subsequently employed by the
JPA without a break in service of more than 180 days.
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ii) An employee hired after January 1, 2013, who was
exempt from PEPRA due to the grandfathering provisions
and therefore eligible to receive the retirement plan
in place on December 31, 2012.
b) provides that, if more than one employer forms the
JPA, and, therefore more than one retirement plan was in
place for those employers on December 31, 2012, then the
JPA shall indicate which defined benefit plan or formula
shall apply to employees who are grandfathered under the
legacy member provisions.
c) clarifies that the formation of a JPA on or after
January 1, 2013, shall not act in a manner so as to
exempt a member from PEPRA who would otherwise be
subject to PEPRA.
COMMENTS :
1)Arguments in Support :
According to the author:
The cities of Brea and Fullerton are attempting to
create a Joint Powers Authority (JPA) for joint fire
services, and existing personnel from both cities would
be transferred into the JPA. However, the passage of
the Public Employee Pension Reform Act (PEPRA)
introduced a new and unintended challenge into the
feasibility of JPA formation.
The Brea/Fullerton JPA would be a newly formed public
agency. With the adoption of PEPRA in 2012, all new
public agencies formed after January 1, 2013, would be
required to use the new pension formulas outlined in the
law.
Because the new pension formulas are reduced, the cities
of Brea and Fullerton would not be able to move their
current employees over without a loss of benefits - even
though there would be no lapse in their public service
or change in their duties and responsibilities.
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Consequently, this would prevent the two agencies from
taking advantage of the cost and operational
efficiencies a JPA would offer. Without the ability to
transfer current city employees to the JPA, this good
governance effort to consolidate services may become
unworkable.
According to the sponsors:
Brea and Fullerton recognize that the most efficient and
effective model for the long term success of
consolidating the two fire districts is the formation of
"a JPA which would become the employer of the
consolidated staff, to provide the ongoing functions of
joint Fire Command Operations, and finally to set up the
structure to allow for the consolidation of fire service
functions of the two cities.
Clearly the most expeditions path to successful
formation of this innovative approach to achieving
efficiency in local government is one that avoids or
minimizes employee concerns about detrimental impacts to
their retirement security."
2)SUPPORT :
City of Brea, Co-Sponsor
City of Fullerton, Co-Sponsor
3)OPPOSITION :
California Professional Firefighters (CPF), Oppose Unless
Amended
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