The Public Employees Retirement Law requires that, upon the death of any state or school member after retirement and while receiving a retirement allowance, the sum of $2,000 be paid to the members designated beneficiary, as specified. Existing law provides that the additional employer contributions required to fund this benefit be computed as a level percentage of member compensation, and these are deposited in the Public Employees Retirement Fund, a continuously appropriated fund.

This bill would authorize the Board of Administration of the Public Employees Retirement System, beginning on or after January 1, 2017, to adjust the death benefit amount following each actuarial valuation to reflect changes in the All Urban California Consumer Price Index, as specified.

By authorizing the board to increase contributions deposited in the Public Employees Retirement Fund, this bill would make an appropriation.

The Public Employees Retirement Law requires that, upon the death of any state or school member after retirement and while receiving a retirement allowance, the sum of $2,000 be paid to the members designated beneficiary, as specified. Existing law provides that the additional employer contributions required to fund this benefit be computed as a level percentage of member compensation, and these are deposited in the Public Employees Retirement Fund, a continuously appropriated fund.

This bill, on and after January 1, 2017, would increase the amount of payment to school members, described above, to not less than $5,000. The bill would authorize the Board of Administration of the Public Employees Retirement System System, beginning on or after January 1, 2017, to adjust the death benefit amount following each actuarial valuation based on to reflect changes in the All Urban California Consumer Price Index, as specified.

By increasing authorizing the board to increase contributions to deposited in the Public Employees Retirement Fund, this bill would make an appropriation.

The Public Employees Retirement Law requires that, upon the death of any state or school member after retirement and while receiving a retirement allowance, the sum of $2,000 be paid to the members designated beneficiary, as specified. Existing law provides that the additional employer contributions required to fund this benefit be computed as a level percentage of member compensation, and these are deposited in the Public Employees Retirement Fund, a continuously appropriated fund.

This bill, on and after January 1, 2017, would increase the amount of payment to school members, described above, to $7,045. By not less than $5,000. The bill would authorize the Board of Administration of the Public Employees Retirement System to adjust the death benefit amount following each actuarial valuation based on changes in the All Urban California Consumer Price Index, as specified.

By increasing contributions to the Public Employees Retirement Fund, this bill would make an appropriation.

The Public Employees Retirement Law requires that, upon the death of any state or school member after retirement and while receiving a retirement allowance, the sum of $2,000 be paid to the members designated beneficiary, as specified. Existing law provides that the additional employer contributions required to fund this benefit be computed as a level percentage of member compensation, and these are deposited in the Public Employees Retirement Fund, a continuously appropriated fund.

This bill, on and after January 1, 2017, would increase the amount of payment to school members, described above, to $7,045. By increasing contributions to the Public Employees Retirement Fund, this bill would make an appropriation.

GOVERNOR'S VETO

GV Bill Id:AB 1878

Author:(Jones-Sawyer)

As Enrolled Ver:August 25, 2016

2/3 vote

SUMMARY: Authorizes the California Public Employees' Retirement System (CalPERS) Board of Administration to adjust the current $2,000 postretirement death benefit paid to the beneficiary of a state or school member after each actuarial valuation to reflect changes in the All Urban California Consumer Price Index.

EXISTING LAW: The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired.

Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree burial benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

FISCAL EFFECT: According to the Assembly Appropriations Committee, "Unknown cost pressures if CalPERS chooses to increase postretirement death benefits based on changes in inflation."

COMMENTS: According to the author, "Classified school employees perform duties that are critical to fostering a positive learning environment for students, including security, janitorial, clerical, transportation, and food service. Despite their vital importance, these workers are amongst the lowest paid school employees during and after their career.

"Furthermore, when district dismissals take place, it is classified employees who are the first to lose their jobs. It is estimated that 10% of classified employees lost their jobs during the Recession, which does not include the classified employees who took pay cuts.

"In 1945, a $300 death benefit was established for CalPERS members to cover funeral and burial expenses. In 2000, the death benefit was raised to $2,000. Since then funeral costs have increased significantly while the death benefit for CalPERS school employees has remained stagnant. In 2015, according to the National Funeral Directors Association, the average funeral cost is $7,181; and this does not include costs associated with the cemetery, grave space, or monument, which increases the cost of funerals significantly more. To cover funeral expenses, surviving family members and loved ones report having to secure high-interest loans, embarrassingly ask community members for assistance, and spend down limited savings."

According to supporters, "The death benefit amount provided to different public employee groups varies considerably. The survivors of members of California State Teachers' Retirement System (CalSTRS) and the University of California Retirement System receive $6,163 and $7,500 respectively. The current death benefit amount for classified school employees is far below the actual cost of funerals, putting their survivors in difficult positions upon the death of a loved once. Classified employees are low-wage workers whose families often do not have the means to pay for funerals. AB 1878 would better align the death benefit of classified school employees with the actual costs of funerals and with the death benefit received by other educators."

Prior legislation:

AB 507 (Garcia) of 2013 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 2606 (Mendoza) of 2012 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 617 (Davis) of 2011 would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. This bill was not heard in the Assembly PER&SS Committee at the request of the author.

SB 1209 (Romero) of 2010 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments (COLA) annually thereafter. This bill failed passage in the Senate Public Employment and Retirement Committee.

AB 1477 (Krekorian) of 2009 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. This bill was held in the Assembly Appropriations Committee.

AB 844 (Negrete McLeod) of 2005 would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 2688 (Alquist) of 2002 would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. This bill was held in the Assembly Appropriations Committee.

AB 1162 (Alquist) of 2001 would have increased from $2,000 to $5,000 the lump sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. This bill was held in the Assembly Appropriations Committee.

AB 50 (Migden), Chapter 947, Statutes of 2000, raised the death benefit for retired school members from $600 to $2,000.

AB 1829 (Correa) of 2000 would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 1640 (Migden), Chapter 296, Statutes of 1998, authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump sum retired member death benefit.

GOVERNOR'S VETO MESSAGE:

This bill authorizes the California Public Employees' Retirement System Board to increase the lump-sum post-retirement death benefit for state and school members based on inflation.

Given the state's huge unfunded pension liabilities, I don't believe it is prudent to add the additional costs that this bill would require.

Analysis Prepared by: Karon Green / P.E.,R., & S.S. / (916) 319-3957 FN: 0005072

 THIRD READING  

Bill No: AB 1878

Author:

:

Vote:

SENATE PUBLIC EMP. & RET. COMMITTEE: 3-1, 6/27/16

AYES: Pan, Beall, Hall

NOES: Moorlach

NO VOTE RECORDED: Morrell

SENATE APPROPRIATIONS COMMITTEE: 5/2, 8/11/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

ASSEMBLY FLOOR: 57-19, 6/2/16 - See last page for vote

SUBJECT:

SOURCE: California Federation of Teachers

DIGEST: This bill authorizes the Board of Administration of the California Public Employees’ Retirement System (CalPERS) to annually adjust the $2,000 lump-sum death benefit for state and school members, based on changes in the All Urban California Consumer Price Index, after each actuarial valuation.

ANALYSIS:

Existing law:

1. Provides, through CalPERS, varying levels of postretirement death benefits according to membership category and status, generally a “lump-sum" of money at the time of the retiree's death, paid to whomever the retiree chooses as a beneficiary.
2. Provides state and school member retirees with a lump-sum death benefit of $2,000.
3. Allows school employers to individually contract with CalPERS for a higher lump-sum benefit in the amount of of $3,000, $4,000 or $5,000.
4. Provides, for retirees covered by the California State Teachers’ Retirement System, a lump-sum death benefit of $6,163, which may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

This bill authorizes the CalPERS board to adjust the $2,000 lump-sum death benefit for state and school member retirees, based on changes in the All Urban California Consumer Price Index, following each annual actuarial valuation.

Background

The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired.

Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree death benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump-sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

Related/Prior Legislation

AB 507 (Garcia, 2013) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. The bill was held in the Assembly Appropriations Committee.

AB 2606 (Mendoza, 2012) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. The bill was held in the Assembly Appropriations Committee.

AB 617 (Davis, 2011) would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. The bill was not heard in the Assembly Public Employees, Retirement, and Social Security Committee at the request of the author.

SB 1209 (Romero, 2010) would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments annually thereafter. The bill failed passage in the Senate Public Employment and Retirement Committee.

AB 1477 (Krekorian, 2009) would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. The bill was held in the Assembly Appropriations Committee.

AB 844 (Negrete McLeod, 2005) would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. The bill was held in the Assembly Appropriations Committee.

AB 2688 (Alquist, 2002) would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. The bill was held in the Assembly Appropriations Committee.

AB 1162 (Alquist, 2001) would have increased from $2,000 to $5,000 the lump-sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. The bill was held in the Assembly Appropriations Committee.

AB 50 (Migden, Chapter 947, Statutes of 2000) raised the death benefit for retired school members from $600 to $2,000.

AB 1829 (Correa, 2000) would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. The bill was held in the Assembly Appropriations Committee.

AB 1640 (Migden, Chapter 296, Statutes of 1998) authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump-sum retired member death benefit.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, CalPERS would incur a one-time administrative cost of $50,000 to modify existing information technology systems and benefit publications. Additionally, because the cost of the death benefit is factored into the CalPERS’ contribution rate structure, it could potentially lead to higher state department contribution rates in future years.

SUPPORT: (Verified 8/11/16)

California Federation of Teachers (source)

California Labor Federation

California School Employees Association, AFL-CIO

California State Retirees

California Teachers Association

Retired Public Employees Association

OPPOSITION: (Verified 8/11/16)

None received

ARGUMENTS IN SUPPORT: As stated by the sponsor, the California Federation of Teachers:

Classified school employees perform duties that are critical to fostering a positive learning environment for students, including security, janitorial, clerical, transportation, and food service. These workers are amongst the lowest paid school employees during their careers and post-retirement. Furthermore, most classified staff do not have life insurance. These factors leave the survivors of classified school employees in difficult positions after the passing of a loved one.

The death benefit for CalPERS school employees has not kept pace with the rising costs of funerals. In 1945, a $300 death benefit was established for CalPERS members to cover funeral and burial expenses. In 2000, the death benefit was raised to $2,000. Since then funeral costs have increased significantly while the death benefit for CalPERS school employees has remained stagnant. In 2015, according to the National Funeral Directors Association, the average funeral cost $7,181, and this does not include costs associated with the cemetery, grave space, or monument, which increases the cost of funerals significantly more.

The current death benefit for classified school employees is far below the actual cost of funerals. AB 1878 will ensure the death benefit keeps pace with inflation and will help ensure the survivors of deceased classified employees can afford to bury their deceased loved ones.

ASSEMBLY FLOOR: 57-19, 6/2/16

AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Baker, Brough, Chávez, Gallagher, Grove, Harper, Jones, Kim, Lackey, Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Bigelow, Dahle, Beth Gaines, Hadley

Prepared by:

8/16/16 9:04:38

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1878 (Jones-Sawyer) - Public Employees’ Retirement System: state or school members: postretirement death benefit

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1878 would authorize the Board of Administration of the California Public Employees’ Retirement System (CalPERS) to annually adjust the $2,000 lump-sum death benefit for state and school members, based on changes in the All Urban California Consumer Price Index, after each actuarial valuation.

Fiscal Impact:

CalPERS would incur a one-time administrative cost of $50,000 to modify existing information technology systems and benefit publications. Additionally, because the cost of the death benefit is factored into the CalPERS’ contribution rate structure, it could potentially lead to higher state department contribution rates in future years

Background:

The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired.

Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree death benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

Proposed Law:

This bill would authorize the CalPERS board to adjust the $2,000 lump-sum death benefit for state and school member retirees, based on changes in the All Urban California Consumer Price Index, following each annual actuarial valuation.

Related Legislation:

• AB 507 (Garcia, of 2013) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held under submission on the Suspense File of the Assembly Appropriations Committee.
• AB 2606 (Mendoza, of 2012) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held under submission on the Suspense File of the Assembly Appropriations Committee.

Staff Comments:

. CalPERS has yet to complete its actuarial analysis of the current version of the bill, but costs to state departments via higher contribution rates could be significant.

-- END --

SENATE COMMITTEE ON

PUBLIC EMPLOYMENT AND RETIREMENT

Dr. Richard Pan, Chair

2015 - 2016 Regular

Bill No: AB 1878 Hearing Date: 6/27/16

Subject: Public Employees’ Retirement System: school members: postretirement lump-sum death benefit

SOURCE: California Federation of Teachers

ASSEMBLY VOTES:

DIGEST: This bill authorizes the Board of Administration of the California Public Employees’ Retirement System (CalPERS) to annually adjust the $2,000 lump-sum death benefit for state and school members, based on changes in the All Urban California Consumer Price Index, after each actuarial valuation.

ANALYSIS:

Existing law:

1. Provides, through CalPERS, varying levels of postretirement death benefits according to membership category and status, generally a “lump-sum" of money at the time of the retiree's death, paid to whomever the retiree chooses as a beneficiary.
2. Provides state and school member retirees with a lump-sum death benefit of $2,000.
3. Allows school employers to individually contract with CalPERS for a higher lump-sum benefit in the amount of of $3,000, $4,000 or $5,000.
4. Provides, for retirees covered by the State Teachers’ Retirement System, a lump-sum death benefit of $6,163, which may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

This bill:

1. Authorizes the CalPERS board to adjust the $2,000 lump-sum death benefit for state and school member retirees, based on changes in the All Urban California Consumer Price Index, following each annual actuarial valuation.

Background

The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired.

Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree death benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

Related/Prior Legislation

AB 507 (Garcia, of 2013) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 2606 (Mendoza, of 2012) would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 617 (Davis, of 2011) would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. This bill was not heard in the Assembly PER&SS Committee at the request of the author.

SB 1209 (Romero, of 2010) would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments (COLA) annually thereafter. This bill failed passage in the Senate Public Employment and Retirement Committee.

AB 1477 (Krekorian, of 2009) would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. This bill was held in the Assembly Appropriations Committee.

AB 844 (Negrete McLeod, of 2005) would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 2688 (Alquist, of 2002) would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. This bill was held in the Assembly Appropriations Committee.

AB 1162 (Alquist, of 2001) would have increased from $2,000 to $5,000 the lump sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. This bill was held in the Assembly Appropriations Committee.

AB 50 (Migden, Chapter 947, Statutes of 2000) raised the death benefit for retired school members from $600 to $2,000.

AB 1829 (Correa, of 2000) would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 1640 (Migden, Chapter 296, Statutes of 1998) authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump sum retired member death benefit.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. Significant benefit costs over a 20-year period to CalPERS. The first payment on the additional unfunded liability created by this bill is projected to be in the range of $30 million in FY 2018-2019.
2. One-time administrative costs of $50,000 for CalPERS to modify existing procedures and publications.

SUPPORT:

California Federation of Teachers (source)

California Labor Federation

California School Employees Association, AFL-CIO

California State Retirees

California Teachers Association

Retired Public Employees Association

OPPOSITION:

None received

ARGUMENTS IN SUPPORT:

As stated by the sponsor:

Classified school employees perform duties that are critical to fostering a positive learning environment for students, including security, janitorial, clerical, transportation, and food service. These workers are amongst the lowest paid school employees during their careers and post-retirement. Furthermore, most classified staff do not have life insurance. These factors leave the survivors of classified school employees in difficult positions after the passing of a loved one.

The death benefit for CalPERS school employees has not kept pace with the rising costs of funerals. In 1945, a $300 death benefit was established for CalPERS members to cover funeral and burial expenses. In 2000, the death benefit was raised to $2,000. Since then funeral costs have increased significantly while the death benefit for CalPERS school employees has remained stagnant. In 2015, according to the National Funeral Directors Association, the average funeral cost $7,181, and this does not include costs associated with the cemetery, grave space, or monument, which increases the cost of funerals significantly more.

The current death benefit for classified school employees is far below the actual cost of funerals. AB 1878 will ensure the death benefit keeps pace with inflation and will help ensure the survivors of deceased classified employees can afford to bury their deceased loved ones.

ASSEMBLY THIRD READING

ATR Bill Id:AB 1878

Author:(Jones-Sawyer)

As Amended Ver:May 31, 2016

Majority vote

SUMMARY: Authorizes the California Public Employees' Retirement System (CalPERS) Board of Administration to adjust the current $2,000 postretirement death benefit paid to the beneficiary of a state or school member after each actuarial valuation to reflect changes in the All Urban California Consumer Price Index.

EXISTING LAW: The California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired.

Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree burial benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

FISCAL EFFECT: According to the Assembly Appropriations Committee, "Unknown cost pressures if CalPERS chooses to increase postretirement death benefits based on changes in inflation."

COMMENTS: According to the author, "Classified school employees perform duties that are critical to fostering a positive learning environment for students, including security, janitorial, clerical, transportation, and food service. Despite their vital importance, these workers are amongst the lowest paid school employees during and after their career.

"Furthermore, when district dismissals take place, it is classified employees who are the first to lose their jobs. It is estimated that 10% of classified employees lost their jobs during the Recession, which does not include the classified employees who took pay cuts.

"In 1945, a $300 death benefit was established for CalPERS members to cover funeral and burial expenses. In 2000, the death benefit was raised to $2,000. Since then funeral costs have increased significantly while the death benefit for CalPERS school employees has remained stagnant. In 2015, according to the National Funeral Directors Association, the average funeral cost is $7,181; and this does not include costs associated with the cemetery, grave space, or monument, which increases the cost of funerals significantly more. To cover funeral expenses, surviving family members and loved ones report having to secure high-interest loans, embarrassingly ask community members for assistance, and spend down limited savings."

According to supporters, "The death benefit amount provided to different public employee groups varies considerably. The survivors of members of California State Teachers' Retirement System (CalSTRS) and the University of California Retirement System receive $6,163 and $7,500 respectively. The current death benefit amount for classified school employees is far below the actual cost of funerals, putting their survivors in difficult positions upon the death of a loved once. Classified employees are low-wage workers whose families often do not have the means to pay for funerals. AB 1878 would better align the death benefit of classified school employees with the actual costs of funerals and with the death benefit received by other educators."

Prior legislation:

AB 507 (Garcia) of 2013 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 2606 (Mendoza) of 2012 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.

AB 617 (Davis) of 2011 would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. This bill was not heard in the Assembly PER&SS Committee at the request of the author.

SB 1209 (Romero) of 2010 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments (COLA) annually thereafter. This bill failed passage in the Senate Public Employment and Retirement Committee.

AB 1477 (Krekorian) of 2009 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. This bill was held in the Assembly Appropriations Committee.

AB 844 (Negrete McLeod) of 2005 would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 2688 (Alquist) of 2002 would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. This bill was held in the Assembly Appropriations Committee.

AB 1162 (Alquist) of 2001 would have increased from $2,000 to $5,000 the lump sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. This bill was held in the Assembly Appropriations Committee.

AB 50 (Migden), Chapter 947, Statutes of 2000, raised the death benefit for retired school members from $600 to $2,000.

AB 1829 (Correa) of 2000 would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. This bill was held in the Assembly Appropriations Committee.

AB 1640 (Migden), Chapter 296, Statutes of 1998, authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump sum retired member death benefit.

Analysis Prepared by: Karon Green / P.E.,R., & S.S. / (916) 319-3957 FN: 0003113

Date of Hearing: April 27, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1878

Author:(Jones-Sawyer) – As Amended Ver:March 28, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill increases the postretirement death benefit paid to the beneficiary of a school member of the California Public Employees' Retirement System (CalPERS) from $2,000 to not less than $5,000, starting on January 1, 2017, and authorizes the CalPERS Board of Administration to adjust the death benefit after each actuarial valuation based on changes in the All Urban California Consumer Price Index.

FISCAL EFFECT:

1. Significant benefit costs over a 20-year period to CalPERS. The first payment on the additional unfunded liability created by this bill is projected to be in the range of $30 million in FY 2018-2019.
2. One-time administrative costs of $50,000 for CalPERS to modify existing procedures and publications.

COMMENTS:

1. Background and purpose. California Public Employees' Retirement Law provides varying levels of death benefits according to membership category and status, each providing a "lump-sum" of money to survivors at the time of the member's death. According to the author, AB 1878 would better align the death benefit of classified school employees with the actual costs of funerals and with the death benefit received by other educators.
2. Death benefits for public employee retirement systems. The original lump-sum death benefit of $300 for all retired CalPERS members was enacted in 1945. However, over the years, the Legislature began to provide different benefit levels to different categories of members: state, school, local, Judges' Retirement Systems (JRS and JRS II), Legislators' Retirement System (LRS), active, and retired. Currently, state and school members have a retiree death benefit of $2,000. School employers also have the ability to amend their individual contracts with CalPERS to provide enhanced retiree death benefits of $3,000, $4,000 or $5,000. Local members have a minimum benefit of $500, with an option to provide up to $5,000 through contract amendment. Members of JRS have no retiree burial benefit, while members of LRS receive $600.

The California State Teachers' Retirement System currently provides a lump sum death payment for survivors of retired members of $6,163. The amount of the death payment may be adjusted by the Teachers' Retirement Board following each actuarial valuation based on changes to the All Urban California Consumer Price Index.

1. Prior legislation. A number of bills since 1998 have tried to increase the CalPERS postretirement death benefit paid to a beneficiary. Specifically
2. AB 507 (Garcia) of 2013 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.
3. AB 2606 (Mendoza) of 2012 would have increased, over a period of four years, the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,000. This bill was held in the Assembly Appropriations Committee.
4. AB 617 (Davis) of 2011 would have increased the postretirement death benefit paid to the beneficiary of a school member of CalPERS from $2,000 to $6,163. This bill was not heard in the Assembly PER&SS Committee at the request of the author.
5. SB 1209 (Romero) of 2010 would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $5,000 incrementally over a period of three years with cost of living adjustments (COLA) annually thereafter. This bill failed passage in the Senate Public Employment and Retirement Committee.
6. AB 1477 (Krekorian) of 2009, would have increased the postretirement death benefit paid to the beneficiary of a CalPERS school member from $2,000 to $6,163. This bill was held in the Assembly Appropriations Committee.
7. AB 844 (Negrete McLeod) of 2005 would have increased the postretirement death benefit for state members of CalPERS who retired on or before July 1, 2006 from $2,000 to $5,000. This bill was held in the Assembly Appropriations Committee.
8. AB 2688 (Alquist) of 2002, would have increased the various death benefits paid to all members and retirees in the retirement systems administered by CalPERS to $7,500. This bill was held in the Assembly Appropriations Committee.
9. AB 1162 (Alquist) of 2001, would have increased from $2,000 to $5,000 the lump sum death benefit available to retired CalPERS state and school members who retired on or before July 3, 2002, and whose death occurred on or after January 1, 2001. This bill was held in the Assembly Appropriations Committee.
10. AB 50 (Migden), Chapter 947, Statutes of 2000, raised the death benefit for retired school members from $600 to $2,000.
11. AB 1829 (Correa) of 2000, would have increased the death benefit for both state and school members who retired prior to July 3, 2001 to $5,000. This bill was held in the Assembly Appropriations Committee.
12. AB 1640 (Migden), Chapter 296, Statutes of 1998, authorized school employers and contracting agencies the option to amend their contract to provide a $2,000, $3,000, $4,000, or $5,000 lump sum retired member death benefit.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081