AB 2310: Public Employees’ Retirement System: contracting members.

Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system, based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes a public agency to contract to make its employees members of PERS, and prescribes a process for this. Under PERL, a contracting agency and its employees may agree in writing to share the costs of the employer contribution in accordance with specified procedures. Existing law requires, in these circumstances, the collective bargaining agreement for a contracting agency and its employees to specify the exact percentage of member compensation that is to be paid toward the current service costs of the benefits by members.

This bill would revise that provision to also refer to a memorandum of understanding ratified by the employee bargaining unit and the governing body of the contracting agency. The bill would require these agreements, as an alternative to specifying the exact percentage of member compensation to be paid toward the current service cost of the benefit by members, to specify the methodology for calculating that cost-sharing rate.

Under PERL, the above-described provision regarding cost sharing does not apply to a contracting agency or its employees until the agency elects to be subject to this provision by contract or contract amendment. Existing law further specifies that contributions are withheld from member compensation or otherwise collected when the contract amendment becomes effective.

This bill would specify that once a contracting agency elects to be subject to the cost-sharing provision, contract amendments are not required to effectuate cost sharing in subsequent collective bargaining agreements or memoranda of understanding ratified by the employee bargaining unit and the governing body of the agency. The bill would, however, further require the contracting agency, if a collective bargaining agreement or memorandum of understanding sets forth a methodology for calculating the cost-sharing rate instead of an exact percentage, to provide the retirement system with a signed side letter ratified by the employee bargaining unit and the agency indicating the exact percentage at least 90 days prior to the effective date of the cost-sharing rate as set forth in the signed side letter.