Existing law requires all state and local public retirement systems to submit audited financial statements to the Controller at the earliest practicable opportunity within 6 months of the close of each fiscal year. Existing law requires the Controller to review these reports and to publish an annual report on the financial condition of all state and local public retirement systems, as specified.

This bill would require each state and local public retirement system governing body of a public agency that provides other postemployment benefits to, in its an annual audited financial statements statement submitted to the Controller, in a form prescribed by the Controller, show that the retirement system public agency has met met, or if it has not met, detail why it has not met and what the retirement system public agency is doing to meet, specified parameters related to the provision of other postemployment benefits.

Existing law requires all state and local public retirement systems to submit audited financial statements to the Controller at the earliest practicable opportunity within 6 months of the close of each fiscal year. Existing law requires the Controller to review these reports and to publish an annual report on the financial condition of all state and local public retirement systems, as specified.

This bill would require each state and local public retirement system to, in its annual audited financial statements submitted to the Controller, in a form prescribed by the Controller, show that the retirement system has met or if it has not met, detail why it has not met and what the retirement system is doing to meet, specified parameters related to the provision of other postemployment benefits.

Date of Hearing: May 2, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 3084

Author:(Levine) – As Amended Ver:April 10, 2018

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

SUMMARY:

This bill requires the governing body of a public agency to show it has achieved specified goals related to the provision of other postemployment benefits (OPEB) in its annual finance statements submitted to the State Controller’s Office (SCO). If the public agency has not met those goals, it must detail why and what it is doing to meet those goals.

FISCAL EFFECT:

1. One-time internet technology (IT) costs in excess of $150,000 for SCO to collect the additional information for an estimated 6,000 entities. These costs are a result of the requirement that a public agency details why it has not met certain goals and what it is doing to meet them.
2. Unknown but likely significant costs for state agencies to collect and report the data and information, as required.

COMMENTS:

1. Background. Historically, OPEB, like retiree health care, were funded on a “pay-as-you-go” basis. In the last decade, there has been a push for agencies to prefund OPEB. For example, the California Employers’ Benefit Trust (CERBT) Fund is a trust fund dedicated to prefunding OPEB. More than 500 public employers participate in CERBT. More recently, the Government Accounting Standards Board (GASB) updated their guidance on how public agencies report OPEB liabilities.
2. Purpose. According to the author, OPEB liability will be unpredictable and face major fiscal challenge in the coming decades. AB 3084 is intended to help agencies prepare for this challenge.
3. Reporting requirements. AB 3084 requires public agencies report on whether they are: making prefunding contributions on a timely basis; depositing contributions in a trust for the exclusive benefit of plan members; investing contributions in excess of any pay-as-you-go amounts in a diversified investment portfolio; and using a discounted rate that recognizes the expected return of the entire portfolio.

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

Date of Hearing: April 18, 2018

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY

Freddie Rodriguez, Chair

ABPCA Bill Id:AB 3084 (

Author:Levine) – As Amended Ver:April 10, 2018

SUBJECT: Public employees: other postemployment benefits: annual report

SUMMARY: Requires the governing body of a public agency to show that it has met, or if it has not met, detail why and what the public agency is doing to meet specified parameters related to the provision of other postemployment benefits (OPEB), in its annual finance statements submitted to the State Controller, as specified. Specifically, this bill:

1) Specifies the following parameters to be reported:

a) Making targeted prefunding contributions on a timely basis.

b) Depositing contributions in an irrevocable qualified trust for the exclusive benefit of plan members.

c) Investing contributions in excess of pay-as-you-go amounts in a diversified investment portfolio with a defined investment policy.

d) Ensuring that the discounted rate used to develop the actuarial account liability and normal cost recognizes the expected return of the entire portfolio.

EXISTING LAW:

1. Establishes the California Employers' Retiree Benefit Trust (CERBT) Fund administered by the California Public Employees' Retirement System (CalPERS) for the purpose of receiving contributions from all eligible California public agencies that will prefund health and other post-employment benefit costs for retirees and their beneficiaries. Public agencies that do not contract with CalPERS health benefits can prefund future retiree benefits.
2. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA) for the purposes of promoting increased economy and efficiency in state service; enabling the state to attract and retain qualified employees by providing health benefit plans similar to those commonly provided in private industry; and, recognizing and protecting the state’s investment in each permanent employee by promoting and preserving good health among state employees. The PEMHCA is under the administration of CalPERS.
3. Allows employers authorized by the board to elect to participate in the CERBT.
   

FISCAL EFFECT: Unknown. This bill has been flagged fiscal by Legislative Counsel.

COMMENTS: According to the author, “[a]s the State Controller has stated, the OPEB liability will be unpredictable and will remain a paramount fiscal challenge over the next three decades. This accountability bill is a step in the right direction to getting our fiscal house in order on this pressing issue, which we have to take more seriously in the near term.”

1) Prefunding OPEB

Prefunding OPEB allows public agencies to contribute to preserve a positive credit rating; generate investment income from employer controlled contributions to pay for future retiree benefits; reduce future employer cash flow requirements and budgetary dependency with investment income; and, reduce OPEB liabilities reported on employer annual financial statements.

2) Related/Prior Legislation

Chapter 318, Statutes of 2007 (Assembly Bill 554, Hernandez) authorizes all California public employers to join the CERBT to prefund OPEB obligations.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

Los Angeles County Professional Peace Officers Association (prior version)

United Public Employees (prior version)

Analysis Prepared by: Michael Bolden / P.E.,R., & S.S. / (916) 319-3957