BILL ANALYSIS �
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THIRD READING
Bill No: SB 1251
Author: Huff (R)
Amended: 4/24/14
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 4-0, 4/21/14
AYES: Torres, Walters, Block, Gaines
NO VOTE RECORDED: Evans
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : California Public Employees Pension Reform Act of
2013: joint power authority: employees
SOURCE : City of Brea
City of Fullerton
DIGEST : This bill requires a joint powers authority (JPA)
formed by one or more public employers, on or after January 1,
2013, to provide employees meeting specified criteria with the
defined benefit plan or formula that was available to employees
of the employer on December 31, 2012. This bill prohibits the
formation of a JPA on or after January 1, 2013, in a manner that
exempts a new employee or a new member from the requirements of
the Public Employees' Pension Reform Act of 2013 (PEPRA).
ANALYSIS :
Existing law:
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1.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.
2.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 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.
3.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), as specified.
4.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.
5.Requires legacy employees (i.e., employees who are not subject
to PEPRA)-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.
This bill:
1.Requires 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:
A. An employee of the public employer hired prior to
January 1, 2013, who is subsequently employed by the JPA
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without a break in service of more than 180 days.
B. 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.
1.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, requires the JPA to indicate
which defined benefit plan or formula applies to employees who
are grandfathered under the legacy member provisions.
2.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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/12/14)
City of Brea (co-source)
City of Fullerton (co-source)
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. Consequently, this would prevent
the two agencies from taking advantage of the cost and
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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."
JL:k 5/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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