Legislative Alert – July 2011Categories: Legislative Updates
…BELL BILL UPDATE
Over thirty bills were introduced this session in response to the Bell scandal dealing with transparency issues related to compensation, retirement, auditing, and governance. Only six bills are still moving as we near the end of the legislation session. The following are retirement and compensation-related bills that are still moving this year:
AB 89 (Hill): prohibits retirement benefit calculations based on final compensation higher than the federal compensation limit defined in IRC 401(a)(17).The limit for calendar year 2011 is $245,000. This already applies to members that entered the system after 1996 and just codifies existing limits. Currently in Senate Appropriations Committee.
AB 1184 (Gatto): had some substantial amendments recently. This bill is designed to address the issue raised in the city of Bell where employees were hired (some at the end of their careers) and were given significant salary increases than what they were making at their previous agencies, i.e. City of Glendale. The bill now requires PERS to develop guidelines that an agency not experience a significant increase in actuarial liability due to increased compensation paid by another agency to a non-represented employee and to implement program changes to ensure that a contracting agency that creates a significant increase in actuarial liability due to increased compensation bears the associated liability. This bill is designed to give CalPERS the flexibility to determine how to assess the liability to the employer that gave the excessive increase. The bill also prohibits PERS from administering replacement plans for new hires.
SB 46 (Correa): requires public employees and elected officials that file Statements of Economic Interest (FPPC Form 700) to also file a compensation disclosure form. The League is seeking amendments to strip the bill of its contents and look at a possible expansion of the State Controller report, which is already required. There is opposition related to the duplicative nature of the bill. Further, reimbursement payments would be required to be disclosed on this new compensation disclosure form even though reimbursement payments are not compensation and therefore should not be placed on a compensation disclosure form. The bill has been pending before the Senate for action
AB 1344 (Feuer) would amend the Brown Act, election statute, and create new sections of code related to executive level management contracts. Below are compensation-related issues in the bill:
- Define compensation as salary, stipend, or bonuses for the purpose of the bill.
- Define cost-of-living adjustment.
- Define local agency executive to mean a person who is not subject to collective bargaining and who is a chief executive or a department head.
- Prohibit contracts executed on or after Jan. 1, 2011 from including automatic renewals of the contract if the contract also provides for an automatic increase in the level of compensation that exceeds a cost-of-living adjustment.
- Prohibit contracts from including cash settlements that exceed the limits already provided in current law.
- Require that contracts be adopted at a regular public meeting.
- Require that any contract executed or renewed between a local agency and an officer or employee of a local agency that provides paid leave salary offered by the local agency to the officer or employee pending an investigation shall require that any salary provided for that purpose be fully reimbursed if the officer or employee is convicted of a crime involving an abuse of his or her office or position.
Currently in the Senate Appropriations Committee.
… RETIREMENT-RELATED BILLS
Following are the public employee retirement-related bills that have been introduced for the 2011-2012 Legislative Session which have either been signed into law or are still alive this year. The legislature is currently in recess but will be back August 15th until it adjourns for the year on September 9. We will keep tracking these bills for further changes as the session moves forward and update their status in next month’s Legislative Alert.
Bills Enacted Into Law
SB 322 (Mcleod) PERS Benefit Limit
This bill was enacted into law as Chapter 47 of 2011 and prohibits a PERS member who receives benefits based on credited service with multiple employers from receiving annual retirement benefits exceeding the federal dollar limitations set forth in IRC Section 415(b)(1)(A) of Title 26 – $195,000, even for service under multiple employers.
Bills Still Alive
AB 340 (Furutani) County Employee Post-Retirement Service
This bill, after January 1, 2012, would prohibit a person who has been retired for service from a ’37 Act County retirement system from being reemployed in any capacity without reinstatement into the system for 6 months. This bill was amended to also prohibit a variety of payments, including unscheduled overtime, payments for unused vacation, sick leave, or compensatory time off, and housing and vehicle allowances from being included in final compensation calculations.
AB 344 (Furutani) PERS Retiree Appointments
This bill would delete the option for a PERS retiree to serve without reinstatement from retirement under an appointment that exceeds 960 hours in any fiscal year. The bill also prohibits any exceptions to the law prohibiting compensation increases during the final compensation period and 2 years preceding for employees not in a group or class.
AB 873 (Furutani) PERS and STRS Retiree Employment
This bill would now prohibit a retired STRS or PERS board member and certain officers from representing another person before PERS or STRS for 4 years and from assisting in a business activity for 2 years, if they participated in obtaining the award of, or in negotiating, a contract or contract amendment with PERS or STRS. It also prohibits them from working as a placement agent in connection with PERS and STRS for 10 years.
AB 1028 (Comm. on Pub. Empl., Ret. and S. S.) PERS Housekeeping Bill
Along with modifying the definition of “payrate” for school members to include amounts deducted for participation in a deferred compensation, retirement, money purchase pension, or flexible benefits plan, the PERS housekeeping bill now requires that emergency/special skills appointments of retired member without reinstatement be interim appointments to a vacant position during recruitment for a permanent appointment, and would prohibit an agency from appointing a retired person under this provision more than once.
AB 1247 (Fletcher) Retirement System Annual Reports
AB 1247 would require the PERS board to submit an annual report to the Legislature, Governor, and Treasurer, limiting the scope of the report to state employee retirement plans, and would revise the adjustments of the investment return assumptions and discount rates utilized by the board any time it calculates the contribution rates.
AB 1248 (Hueso) Public Employees Retirement
This bill requires cities and counties to provide social security coverage to all employees not covered under a defined benefit plan, unless they are already covered under an alternate benefit plan for part-time, seasonal, and temporary employees by July 1, 2011. The bill would mean that any city or county providing a defined contribution plan in the future to new hires to reduce pension costs, would have to enroll those employees in Social Security. It also means that any city or county that currently covers its part-time, seasonal and temporary employees with Social Security could not in the future shift them into a lower cost alternative plan to Social Security.
AB 1320 (Allen) Taxpayer Adverse Risk Prevention Account
This bill establishes a fund for each employer that would receive the excess of pension contributions not actuarially required so that the funds can be used in years when contributions are less than what is actuarially required (no employer contribution holidays). The employer contribution rate may be reduced when the account exceeds 50% of the employer’s assets.
SB 27 (Simitian) Compensation and Return-to-Work
For STRS members, SB 27: (1) prohibits one employee from being a class; (2) enhances provisions preventing pension spiking; (3) and shifts compensation paid in addition to salary or wages directly to the credit of the Defined Benefit Supplement Program. For both STRS and PERS members: (1) after January 1, 2013, prohibits a retiring member from returning to work for 6 months; (2) provides that any change in compensation principally for the purpose of enhancing a member’s benefits would not be included in the retirement benefit calculation; and (3) prohibits final compensation increases from exceeding the average increase received within the 2 preceding years by employees in the same or a related group.
SB 349 (Negrete McLeod) STRS Housekeeping Bill
The STRS housekeeping bill makes various technical and minor policy (and sometimes not so minor) changes to increase the efficiency of the pension plan and its programs. Among other technical provisions, this bill makes conforming changes to reconcile differences between the defined benefit pension plan and the Cash Balance plan. The bill removes the $500 late reporting penalty for the DB and Cash Balance Benefit (CB) programs and specifies that retired DB members are not allowed to make contributions to the CB Program. The bill also specifies that the zero-dollar earnings limit for members who retire under the normal retirement age of 60 applies to a member’s age at the most recent retirement and makes conforming changes to reconcile the differences between the DB and the CB post-retirement employment limitations; including reducing the time CB retirees must wait to return to work to the earlier of 180 days or age 60, allowing retirees over 60 to perform service without limitation, and requiring post-retirement earnings limit exemption paperwork to be filed within 60 days. This bill has passed both houses.
SB 350 (Negrete McLeod) PERS School Member Survivor Allowance
This bill would merge the first, second, and third levels of the 1959 Survivor Benefit for contracting local agencies of PERS that currently provide one of those levels of benefits to employees, and allow PERS to suspend employee premiums of $2 monthly when the funding pool is determined to contain surplus funds.
Following are important dates/deadlines for the 2011 legislative year:
July 15 – Summer Recess
Aug. 15 – Legislature reconvenes
Aug. 26 – Last day for fiscal committees to hear and report bills to the Floor
Sept. 2 – Last day to amend on the Floor
Sept. 9 – Last day for any bill to be passed
Oct. 9 – Last day for Governor to sign or veto bills
Nov. 2 – General Election.
Feel free to contact PARS with any question or requests for further information. Additional news, and an archive of past Legislative Alerts, is available on the PARS website at www.pars.org.
Vice President, Public Affairs
Public Agency Retirement Services (PARS)
(800) 540-6369 ext. 135
The contents of this publication reflect PARS’ understanding of the facts. Before taking any action based on this information, consult professional advisors regarding your agency’s specific objectives and circumstances. For further information, contact PARS.