AB 284: City of San Juan Capistrano: public employee pension benefits.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-07-13
The California Public Employees Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its pension plan or plans to comply with the act and, among other things, prohibits a public employer that offers a defined benefit pension plan from exceeding specified retirement formulas for new members, as defined. PEPRA permits a public employer to adopt a new defined benefit formula, on or after January 1, 2013, that is not consistent with PEPRA, if that formula is determined and certified by the chief actuary and the board of that employers retirement system to not have a greater risk or greater cost to the sponsoring employer than the defined benefit formula required by PEPRA and the plan is approved by the Legislature.
This bill would approve a specified defined benefit formula applicable to employees of the City of San Juan Capistrano.
The California Public Employees Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its pension plan or plans to comply with the act and, among other things, prohibits a public employer that offers a defined benefit pension plan from exceeding specified retirement formulas for new members, as defined. PEPRA permits a public employer to adopt a new defined benefit formula, on or after January 1, 2013, that is not consistent with PEPRA, if that formula is determined and certified by the chief actuary and the board of that employers retirement system to not have a greater risk or greater cost to the sponsoring employer than the defined benefit formula required by PEPRA and the plan is approved by the Legislature.
This bill would approve a specified defined benefit formula applicable to employees of the City of San Juan Capistrano.
The California Public Employees Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its pension plan or plans to comply with the act and, among other things, prohibits a public employer that offers a defined benefit pension plan from exceeding specified retirement formulas for new members, as defined. PEPRA permits a public employer to adopt a new defined benefit formula, on or after January 1, 2013, that is not consistent with PEPRA, if that formula is determined and certified by the chief actuary and the board of that employers retirement system to not have a greater risk or greater cost to the sponsoring employer than the defined benefit formula required by PEPRA and the plan is approved by the Legislature.
This bill would approve a specified defined benefit formula applicable to employees of the City of San Juan Capistrano.
The California Public Employees Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its pension plan or plans to comply with the act and, among other things, prohibits a public employer that offers a defined benefit pension plan from exceeding specified retirement formulas for new members, as defined. PEPRA permits a public employer to adopt a new defined benefit formula, on or after January 1, 2013, that is not consistent with PEPRA, if that formula is determined and certified by the chief actuary and the board of that employers retirement system to not have a greater risk or greater cost to the sponsoring employer than the defined benefit formula required by PEPRA and the plan is approved by the Legislature.
This bill would approve a specified defined benefit formula applicable to employees of the City of San Juan Capistrano.
(a)The Legislature finds and declares the following:
(1)The California Pension Reform Act of 2013 (PEPRA) created specified defined benefit formulas that are the only defined benefit formulas that a public retirement system is permitted to offer to new members, as that term is defined in Section 7522.04 of the Government Code, unless the Legislature grants its approval for a different defined benefit formula and other requirements are met.
(2)The City of San Juan Capistrano has negotiated memoranda of understanding with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association pursuant to which new employees may elect, in preference to a defined benefit plan provided by PEPRA, a hybrid retirement plan, termed Plan W, that consists of a defined benefit plan component, which provides a lesser defined benefit than that prescribed by PEPRA, and a defined contribution component.
(3)Consistent with requirements of PEPRA, specifically subdivision (d) of Section 7522.02 of the Government Code, the defined benefit plan component of the hybrid plan described in paragraph (2) has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System as representing no greater risk and no greater cost to the employer than the relevant defined benefit formula provided by PEPRA and is thus consistent with the PEPRA principle of reducing the burden of public employee retirement benefits on public agencies.
(b)Pursuant to subdivision (d) of Section 7522.02 of the Government Code, the Legislature hereby approves of the defined benefit formula described in this act.
(a)The Legislature finds and declares the following:
(1)The California Pension Reform Act of 2013 (PEPRA) created specified defined benefit formulas that are the only defined benefit formulas that a public retirement system is permitted to offer to new members, as that term is defined in Section 7522.04 of the Government Code, unless the Legislature grants its approval for a different defined benefit formula and other requirements are met.
(2)The City of San Juan Capistrano has negotiated memoranda of understanding with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association pursuant to which new employees may elect, in preference to a defined benefit plan provided by PEPRA, a hybrid retirement plan, termed Plan W, that consists of a defined benefit plan component, which provides a lesser defined benefit than that prescribed by PEPRA, and a defined contribution component.
(3)Consistent with requirements of PEPRA, specifically subdivision (d) of Section 7522.02 of the Government Code, the defined benefit plan component of the hybrid plan described in paragraph (2) has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System as representing no greater risk and no greater cost to the employer than the relevant defined benefit formula provided by PEPRA and is thus consistent with the PEPRA principle of reducing the burden of public employee retirement benefits on public agencies.
(b)Pursuant to subdivision (d) of Section 7522.02 of the Government Code, the Legislature hereby approves of the defined benefit formula described in this act.
(a)The Legislature finds and declares the following:
(1)The California Pension Reform Act of 2013 (PEPRA) created specified defined benefit formulas that are the only defined benefit formulas that a public retirement system is permitted to offer to new members, as that term is defined in Section 7522.04 of the Government Code, unless the Legislature grants its approval for a different defined benefit formula and other requirements are met.
(2)The City of San Juan Capistrano has negotiated memoranda of understanding with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association pursuant to which new employees may elect, in preference to a defined benefit plan provided by PEPRA, a hybrid retirement plan, termed Plan W, consisting that consists of a defined benefit plan component, which provides a lesser defined benefit than that prescribed by PEPRA, and a defined contribution component.
(3)Consistent with requirements of PEPRA, specifically subdivision (d) of Section 7522.02 of the Government Code, the defined benefit plan component of the hybrid plan described in paragraph (2) has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System as representing no greater risk and no greater cost to the employer than the relevant defined benefit formula provided by PEPRA, PEPRA and is thus consistent with the PEPRA principle of reducing the burden of public employee retirement benefits on public agencies.
(b)Pursuant to subdivision (d) of Section 7522.02 of the Government Code, the Legislature hereby approves of the defined benefit formula described in this act.
(a)The Legislature finds and declares the following:
(1)The California Pension Reform Act of 2013 (PEPRA) created specified defined benefit formulas that are the only defined benefit formulas that a public retirement system is permitted to offer to new members, as that term is defined in Section 7522.04 of the Government Code, unless the Legislature grants its approval for a different defined benefit formula and other requirements are met.
(2)The City of San Juan Capistrano has negotiated memoranda of understanding with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association pursuant to which new employees may elect, in preference to a defined benefit plan provided by PEPRA, a hybrid retirement plan, termed Plan W, consisting of a defined benefit plan component, which provides a lesser defined benefit than that prescribed by PEPRA, and a defined contribution component.
(3)Consistent with requirements of PEPRA, specifically subdivision (d) of Section 7522.02 of the Government Code, the defined benefit plan component of the hybrid plan described in paragraph (2) has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System as representing no greater risk and no greater cost to the employer than the relevant defined benefit formula provided by PEPRA, and is thus consistent with the PEPRA principle of reducing the burden of public employee retirement benefits on public agencies.
(b)Pursuant to subdivision (d) of Section 7522.02 of the Government Code, the Legislature hereby approves of the defined benefit formula described in this act.
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Date
|
Status
|
|---|---|
| Jun 9, 2015 | From committee: Do pass. To Consent Calendar. (Ayes 4. Noes 0.) (June 8). |
| Jul 13, 2015 | Chaptered by Secretary of State - Chapter 66, Statutes of 2015. |
| Jul 13, 2015 | Approved by the Governor. |
| Jul 1, 2015 | Enrolled and presented to the Governor at 2:30 p.m. |
| Jun 25, 2015 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 80. Noes 0.). |
| Jun 25, 2015 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 80. Noes 0. Page 2139.). |
| Jun 18, 2015 | Read third time. Passed. Ordered to the Assembly. (Ayes 37. Noes 0. Page 1490.). |
| Jun 18, 2015 | Read third time. Passed. Ordered to the Assembly. |
| Jun 18, 2015 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after June 20 pursuant to Assembly Rule 77. |
| Jun 10, 2015 | Read second time. Ordered to Consent Calendar. |
| Feb 11, 2015 | Read first time. To print. |
| Jun 3, 2015 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on P.E. & R. |
| May 28, 2015 | Referred to Com. on P.E. & R. |
| May 14, 2015 | Read third time. Passed. Ordered to the Senate. (Ayes 78. Noes 0. Page 1446.) |
| May 14, 2015 | Read third time. Passed. Ordered to the Senate. |
| May 14, 2015 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 7, 2015 | Read second time. Ordered to Consent Calendar. |
| May 6, 2015 | From committee: Do pass. To Consent Calendar. (Ayes 7. Noes 0.) (May 6). |
| Feb 23, 2015 | Referred to Com. on P.E., R., & S.S. |
| Feb 12, 2015 | From printer. May be heard in committee March 14. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jun 25, 2015 | AB 284 BROUGH Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Jun 18, 2015 | Consent Calendar 2nd AB284 Brough | Senate Floor |
Passed |
|
| Jun 8, 2015 | Do pass and be ordered to the Consent Calendar | Senate Standing Committee on Public Employment and Retirement |
Passed |
|
| May 14, 2015 | AB 284 BROUGH Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| May 6, 2015 | Do pass. To Consent Calendar. | Assembly Standing Committee on Public Employees, Retirement, and Social Security |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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|---|---|---|
| Orange County Employees Retirement System | ** Support | Jun 25, 2015 |
AB 284
Page 2
CONCURRENCE IN SENATE AMENDMENTS
AB 284
(Brough)
As Amended June 3, 2015
Majority vote
ASSEMBLY: |
78-0 |
(May 14, 2015) |
SENATE: |
37-0 |
(June 18, 2015) |
Original Committee Reference: P.E., R., & S.S.
SUMMARY:
Approves a specified defined benefit formula (Plan W) for the employees of the City of San Juan Capistrano in lieu of the formula required to be provided under the Public Employees' Pension Reform Act of 2013 (PEPRA). Plan W has been certified as having no greater risk and no greater cost to the employer than the PEPRA formula.
The Senate amendments make technical and clarifying changes to the bill.
EXISTING LAW:
Creates comprehensive public employee pension reform through enactment of PEPRA (and related statutory changes) that apply to all public employers and public pension plans on and after January 1, 2013, excluding the University of California and charter cities and counties that do not participate in a retirement system governed by state statute.
Under PEPRA, changed the retirement benefit plans that may be offered to new public employees, including:
Establishing uniform retirement formulas, including a 2% at age 62 formula for non-safety workers;
Requiring a three-year final compensation period for determining a pension;
Requiring employee member contributions equal to 50% of the normal cost of the employee's benefit plan;
Capping the amount of compensation that can count toward a pension; and,
Restricting the pay items that may be included in pensionable compensation.
Specifies, with some exceptions, that the PEPRA requirements are applicable to new retirement plan members who first become members on and after January 1, 2013.
Authorizes an employer, upon approval of the Legislature, to adopt a new defined benefit formula, on or after January 1, 2013, if that formula is determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the PEPRA formula.
FISCAL EFFECT:
Unknown. This bill is keyed non-fiscal by the Legislative Counsel.
COMMENTS:
According to the author, "In 2014, the City of San Juan Capistrano negotiated a hybrid pension plan with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association for employees new to public service, hired on or after January 1, 2015."
"This plan provides new, nonsafety hires the option to elect coverage under a PEPRA alternative defined benefit formula, 'Plan W.' This option consists of a 1.62% at Age 65 benefit formula combined with a City match of up to a maximum of 1% to a defined contribution plan. New employees may choose the hybrid pension plan or the City’s existing “Plan U” 2.5% at Age 67 benefit pension plan that satisfies PEPRA."
The author concludes, "The hybrid plan has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System (OCERS) as representing 'no greater risk' and 'no greater cost' to the City than the benefit formula otherwise required by PEPRA."
Analysis Prepared by: Karon Green / P.E.,R., & S.S. / (916) 319-3957 FN: 0000923
AB 284
Page 4
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
CONSENT
Bill No: AB 284
Amended: 6/3/15 in Senate
SENATE PUBLIC EMP. & RET. COMMITTEE: 4-0, 6/8/15
AYES: Pan, Morrell, Beall, Hall
NO VOTE RECORDED: Fuller
ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for vote
SUBJECT: City of San Juan Capistrano: public employee pension benefits
SOURCE: City of San Juan Capistrano
DIGEST: This bill approves a specified optional defined benefit formula (Plan W) for the employees of the City of San Juan Capistrano (SJC) in lieu of the formula required to be provided for new employees under the Public Employees' Pension Reform Act of 2013 (PEPRA). Plan W has been certified as having no greater risk and no greater cost to the employer than the PEPRA formula.
ANALYSIS:
Existing law:
Creates comprehensive public employee pension reform through enactment of PEPRA (and related statutory changes) that apply to all public employers and public pension plans on and after January 1, 2013, excluding the University of California and charter cities and counties that do not participate in a retirement system governed by state statute.
Changes, under PEPRA, the retirement benefit plans that may be offered to new public employees, including:
Establishing uniform retirement formulas, including a 2% at age 62 formula for non-safety workers, which caps out at 2.5% at age 67;
Requiring a three-year final compensation period for determining a pension;
Requiring employee member contributions equal to 50% of the normal cost of the employee's benefit plan;
Capping the amount of compensation that can count toward a pension; and
Restricting the pay items that may be included in pensionable compensation.
Specifies, with some exceptions, that the PEPRA requirements are applicable to new retirement plan members who first become members on and after January 1, 2013.
Authorizes an employer, upon approval of the Legislature, to adopt a new, different retirement benefit plan or formula on or after January 1, 2013, if that formula or plan is determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the PEPRA formula or plan.
This bill is uncodified. It provides legislative approval for SJC’s Plan W. This bill makes findings and declarations in regard to the following:
States the PEPRA requirement that alternative defined benefit plans must be approved by the Legislature and meet specified requirements.
States that SJC has negotiated memoranda of understanding with the SJC Management and Professional Employees Association and the SJC Classified Employees Association pursuant to which new employees may elect, instead of the plan required by PEPRA, a hybrid retirement plan (i.e., Plan W) which provides a lesser defined benefit plan than the plan required by PEPRA.
States that the hybrid plan has been certified and determined by the chief actuary of the Orange County Employees Retirement System as having no greater risk and no greater cost to the employer than the relevant defined benefit formula required by PEPRA.
States that the Legislature therefore approves the defined benefit formula described in Plan W.
Background
According to the author:
In 2014, the City of San Juan Capistrano negotiated a hybrid pension plan with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association for employees new to public service, hired on or after January 1, 2015.
This plan provides new, nonsafety hires the option to elect coverage under a PEPRA alternative defined benefit formula, “Plan W.” This option consists of a 1.62% at Age 65 benefit formula combined with a City match of up to a maximum of 1% to a defined contribution plan. New employees may choose the hybrid pension plan or the City’s existing “Plan U” 2.5% at Age 67 benefit pension plan that satisfies PEPRA.
The hybrid plan has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System (OCERS) as representing “no greater risk”
and “no greater cost” to the City than the benefit formula otherwise required by PEPRA.
Comments
According to OCERS:
The OCERS Board of Retirement met on December 15, 2014, and accepted a report from Segal Consulting, the OCERS Board’s chief actuary, dated December 5, 2014 indicating that the proposed alternative benefit formula of 1.62% at age 65 as proposed for new employees of the City of San Juan Capistrano did not provide for any greater risk, or any greater cost than the 2.5% at age 67 formula benefit formula established under PEPRA.
Prior/Related Legislation
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA, which became effective on January 1, 2013.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
City of San Juan Capistrano (source)
Classified Employees Association of the City of San Juan Capistrano
Management and Professional Employees Association of the City of San Juan Capistrano
None received
ARGUMENTS IN SUPPORT: According to the sponsor and supporters, Plan W provides employees new to public service the option of a PEPRA specified defined benefit formula or a hybrid pension plan with a lower cost defined benefit component and a defined contribution component. Plan W is consistent with the PEPRA principle of reducing agency pension costs and is permissible as long as certain conditions are met.
ASSEMBLY FLOOR: 78-0, 5/14/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Linder, Medina
Prepared by: Pamela Schneider / P.E. & R. / (916) 651-1519
6/10/15 12:41:31
**** END ****
AB 284 (Brough) Page 4 of 4
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: AB 284 Hearing Date: 6/08/15
Author: |
Brough |
||
Version: |
06/03/15 As amended |
||
Urgency: |
No |
Fiscal: |
No |
Consultant: |
Pamela Schneider |
||
Subject: City of San Juan Capistrano: public employee pension benefits
SOURCE: City of San Juan Capistrano
ASSEMBLY VOTES:
Assembly Floor: |
78 - 0 |
Assembly Public Employees, Retirement/Soc Sec Committee: |
7 - 0 |
DIGEST: This bill approves a specified optional defined benefit formula (Plan W) for the employees of the City of San Juan Capistrano (SJC) in lieu of the formula required to be provided for new employees under the Public Employees' Pension Reform Act of 2013 (PEPRA). Plan W has been certified as having no greater risk and no greater cost to the employer than the PEPRA formula.
ANALYSIS:
Existing law:
Creates comprehensive public employee pension reform through enactment of PEPRA (and related statutory changes) that apply to all public employers and public pension plans on and after January 1, 2013, excluding the University of California and charter cities and counties that do not participate in a retirement system governed by state statute.
Changed, under PEPRA, the retirement benefit plans that may be offered to new public employees, including:
Establishing uniform retirement formulas, including a 2% at age 62 formula for non-safety workers, which caps out at 2.5% at age 67;
Requiring a three-year final compensation period for determining a pension;
Requiring employee member contributions equal to 50% of the normal cost of the employee's benefit plan;
Capping the amount of compensation that can count toward a pension; and
Restricting the pay items that may be included in pensionable compensation.
Specifies, with some exceptions, that the PEPRA requirements are applicable to new retirement plan members who first become members on and after January 1, 2013.
Authorizes an employer, upon approval of the Legislature, to adopt a new, different retirement benefit plan or formula on or after January 1, 2013 if that formula or plan is determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the PEPRA formula or plan.
This bill:
Is uncodified. It provides legislative approval for SJC’s Plan W. This bill makes findings and declarations in regard to the following:
States the PEPRA requirement that alternative defined benefit plans must be approved by the Legislature and meet specified requirements.
States that SJC has negotiated memoranda of understanding with the SJC Management and Professional Employees Association and the SJC Classified Employees Association pursuant to which new employees may elect, instead of the plan required by PEPRA, a hybrid retirement plan (i.e., Plan W) which provides a lesser defined benefit plan than the plan required by PEPRA.
States that the hybrid plan has been certified and determined by the chief actuary of the Orange County Employees Retirement System as having no greater risk and no greater cost to the employer than the relevant defined benefit formula required by PEPRA.
States that the Legislature therefore approves the defined benefit formula described in this act.
Background
According to the author:
In 2014, the City of San Juan Capistrano negotiated a hybrid pension plan with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association for employees new to public service, hired on or after January 1, 2015.
This plan provides new, nonsafety hires the option to elect coverage under a PEPRA alternative defined benefit formula, “Plan W.” This option consists of a 1.62% at Age 65 benefit formula combined with a City match of up to a maximum of 1% to a defined contribution plan. New employees may choose the hybrid pension plan or the City’s existing “Plan U” 2.5% at Age 67 benefit pension plan that satisfies PEPRA.
The hybrid plan has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System (OCERS) as representing “no greater risk”
and “no greater cost” to the City than the benefit formula otherwise required by PEPRA.
Prior/Related Legislation
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA, which became effective on January 1, 2013.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
According to OCERS:
The OCERS Board of Retirement met on December 15, 2014, and accepted a report from Segal Consulting, the OCERS Board’s chief actuary, dated December 5, 2014 indicating that the proposed alternative benefit formula of 1.62% at age 65 as proposed for new employees of the City of San Juan Capistrano did not provide for any greater risk, or any greater cost that the 2.5% at age 67 formula benefit formula established under PEPRA.
SUPPORT:
City of San Juan Capistrano (source)
Classified Employees Association of the City of San Juan Capistrano
Management and Professional Employees Association of the City of San Juan Capistrano
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
According to the sponsor and supporters:
The plan provides employees new to public service the option of a PEPRA specified defined benefit formula or a hybrid pension plan with a lower cost defined benefit component and a defined contribution component. This plan is consistent with the PEPRA principle of reducing agency pension costs and is permissible as long as certain conditions are met.
AB 284 (Brough) Page 4 of 4
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2015 - 2016 Regular
Bill No: AB 284 Hearing Date: 6/08/15
Author: |
Brough |
||
Version: |
06/03/15 As amended |
||
Urgency: |
No |
Fiscal: |
No |
Consultant: |
Pamela Schneider |
||
Subject: City of San Juan Capistrano: public employee pension benefits
SOURCE: City of San Juan Capistrano
ASSEMBLY VOTES:
Assembly Floor: |
78 - 0 |
Assembly Public Employees, Retirement/Soc Sec Committee: |
7 - 0 |
DIGEST: This bill approves a specified optional defined benefit formula (Plan W) for the employees of the City of San Juan Capistrano (SJC) in lieu of the formula required to be provided for new employees under the Public Employees' Pension Reform Act of 2013 (PEPRA). Plan W has been certified as having no greater risk and no greater cost to the employer than the PEPRA formula.
ANALYSIS:
Existing law:
Creates comprehensive public employee pension reform through enactment of PEPRA (and related statutory changes) that apply to all public employers and public pension plans on and after January 1, 2013, excluding the University of California and charter cities and counties that do not participate in a retirement system governed by state statute.
Changed, under PEPRA, the retirement benefit plans that may be offered to new public employees, including:
Establishing uniform retirement formulas, including a 2% at age 62 formula for non-safety workers, which caps out at 2.5% at age 67;
Requiring a three-year final compensation period for determining a pension;
Requiring employee member contributions equal to 50% of the normal cost of the employee's benefit plan;
Capping the amount of compensation that can count toward a pension; and
Restricting the pay items that may be included in pensionable compensation.
Specifies, with some exceptions, that the PEPRA requirements are applicable to new retirement plan members who first become members on and after January 1, 2013.
Authorizes an employer, upon approval of the Legislature, to adopt a new, different retirement benefit plan or formula on or after January 1, 2013 if that formula or plan is determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the PEPRA formula or plan.
This bill:
Is uncodified. It provides legislative approval for SJC’s Plan W. This bill makes findings and declarations in regard to the following:
States the PEPRA requirement that alternative defined benefit plans must be approved by the Legislature and meet specified requirements.
States that SJC has negotiated memoranda of understanding with the SJC Management and Professional Employees Association and the SJC Classified Employees Association pursuant to which new employees may elect, instead of the plan required by PEPRA, a hybrid retirement plan (i.e., Plan W) which provides a lesser defined benefit plan than the plan required by PEPRA.
States that the hybrid plan has been certified and determined by the chief actuary of the Orange County Employees Retirement System as having no greater risk and no greater cost to the employer than the relevant defined benefit formula required by PEPRA.
States that the Legislature therefore approves the defined benefit formula described in this act.
Background
According to the author:
In 2014, the City of San Juan Capistrano negotiated a hybrid pension plan with the San Juan Capistrano Management and Professional Employees Association and the San Juan Capistrano Classified Employees Association for employees new to public service, hired on or after January 1, 2015.
This plan provides new, nonsafety hires the option to elect coverage under a PEPRA alternative defined benefit formula, “Plan W.” This option consists of a 1.62% at Age 65 benefit formula combined with a City match of up to a maximum of 1% to a defined contribution plan. New employees may choose the hybrid pension plan or the City’s existing “Plan U” 2.5% at Age 67 benefit pension plan that satisfies PEPRA.
The hybrid plan has been certified and determined by the chief actuary of the retirement system and the Board of Retirement of the Orange County Employees Retirement System (OCERS) as representing “no greater risk”
and “no greater cost” to the City than the benefit formula otherwise required by PEPRA.
Prior/Related Legislation
AB 340 (Furutani, Chapter 296, Statutes of 2012) enacted PEPRA, which became effective on January 1, 2013.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
According to OCERS:
The OCERS Board of Retirement met on December 15, 2014, and accepted a report from Segal Consulting, the OCERS Board’s chief actuary, dated December 5, 2014 indicating that the proposed alternative benefit formula of 1.62% at age 65 as proposed for new employees of the City of San Juan Capistrano did not provide for any greater risk, or any greater cost that the 2.5% at age 67 formula benefit formula established under PEPRA.
SUPPORT:
City of San Juan Capistrano (source)
Classified Employees Association of the City of San Juan Capistrano
Management and Professional Employees Association of the City of San Juan Capistrano
Orange County Employees Retirement System
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
According to the sponsor and supporters:
The plan provides employees new to public service the option of a PEPRA specified defined benefit formula or a hybrid pension plan with a lower cost defined benefit component and a defined contribution component. This plan is consistent with the PEPRA principle of reducing agency pension costs and is permissible as long as certain conditions are met.
Bill Author
Bill Co-Author(s):
