Legislative Alert – February 2012Categories: Legislative Updates
…REPUBLICANS INTRODUCE GOVERNOR BROWN’S PENSION REFORM PLAN
Governor Jerry Brown translated his 12-point pension reform plan in February into bill form that included much greater detail. The legislation did not have a bill number or author, and was what is often referred to as an “unbacked bill.” But last Wednesday, Republican legislators introduced a series of bills that closely match Brown’s 12-point plan and urged Democrats to support it.
GOP members reiterated Brown’s concerns about growing pension obligations for current and future retired state workers. A coalition of public worker unions said that the bills are a political maneuver by the GOP rather than a genuine sign of support for Brown’s reform plan.
Democrats have said they will review Brown’s plan in a bipartisan pension reform conference committee — which will hold its final meeting next week — before offering specific recommendations for pension reform legislation.
The Governor’s plan is intended to reduce the taxpayer burden for state retiree healthcare costs and make public retirement benefits more sustainable. Below is a summary of the reform proposals in the plan:
For all public employees
1. Require employees to contribute at least 50 percent of the annual cost of their pension benefits.
2. Prohibit employees who retire after enactment from working for a public employer, except in an emergency to prevent stoppage of public business or if skills are needed for limited duration; limited to 960 hours per year.
3. Prohibit collection of pension benefits for employees convicted of a felony in carrying out official duties, in seeking an elected office or appointment, or in connection with obtaining salary or pension benefits.
4. Prohibit retroactive pension increases, starting January 1, 2013.
5. Prohibit pension holidays for employees and employers and make total contributions equal to at least normal annual cost.
6. Prohibit “Air-Time” service credit purchases.
For newly hired public employees
7. Create a Hybrid retirement plan that is mandatory for new hires and optional for current employees, that…
- Targets 75% of final compensation; 30 years of service and retirement age of 57 for safety members;
- 35 years of service and age 67 for all other public employees;
- With an annual benefit cap of 120% of Social Security wage base (cap would be $132,120 in 2012) if not receiving Social Security
8. Require final compensation used in defined benefit calculations to be based on a final three-year average.
9. Require benefit calculations to be based on regular, recurring pay – excluding special bonuses, unplanned overtime, payouts for unused vacation or sick leave.
10. Require 25-year vesting for maximum state retiree healthcare benefits.
11. Increase pension board independence and expertise by adding three public representatives to the CalPERS Board.
…ONLY ONE BALLOT INITIATIVE REMAINS
Only one of the six pension reform initiatives that were proposed for the November 2012 ballot remains at this point. The others failed to gather enough signatures by the appropriate deadlines. Two were dropped by the proponents and three more failed to qualify because not enough valid signatures were gathered by the deadlines.
The “Fair and Proportional Retirement for Public Officials Act of 2012” was introduced by Larry Click, an activist from Riverside County. This initiative proposed the following:
- Limit retirement benefits for candidates for office, government officials, and government advisors, to the benefits provided to workers at lowest benefit level in the same agency.
- Limit basis for calculation of such retirement benefits to years of service with government agency in which last served.
- Apply retroactively to any retirement benefits government officials set for themselves, unless enacted by majority popular vote.
Proponents of this initiative have until March 8, 2012, to collect the necessary 800,000 valid signatures to qualify for the ballot in November 2012.
… RETIREMENT-RELATED BILLS
The following bills have carried over from 2011 and are still active for the 2011-12 Legislative Session. The bill filing deadline was February 24, and new bills are still coming into print, so we will have a full report on new bills introduced in the March Alert.
AB 344 (Furutani) PERS Retiree Appointments
This bill would eliminate 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 preceding years for employees not in a group or class.
AB 1184 (Gatto) Excess Compensation
This is one of the bills in response to the City of Bell scandal. This bill requires PERS to develop guidelines so that an agency does 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. The bill also prohibits PERS from administering replacement plans for new hires.
AB 1248 (Hueso) Social Security Mandate
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 to new hires to reduce pension costs would have to, in the future, 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 both PERS and STRS members, SB 27: (1) prohibits, after January 1, 2013, 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. 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.
SB 46 (Correa) Compensation Disclosure
This bill would require until January 1, 2019 all public officials to file an annual compensation disclosure form, to be posted by each public agency on their website. The Controller will develop the form.
…2012 LEGISLATIVE CALENDAR
Following are important dates/deadlines for the upcoming legislative year:
February 24 Last day for legislators to introduce new bills
March 29 Spring recess
April 9 Legislators return from spring recess
May 15 Governor’s May Revision for the budget
June 15 California Constitution requires Budget Bill passed by midnight
June 30 Constitution requires the Budget Bill be enacted by the Governor
July 6 Last day for policy committees to meet, summer recess begins
August 6 Legislature returns from summer recess
August 31 Last day for Legislature to pass bills and send to Governor
September 30 Last day for Governor to sign or veto bills
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.