SB 1031: Public employees’ retirement: cost-of-living adjustments: prohibitions.

The Public Employees Retirement Law establishes the Public Employees Retirement System and the Teachers Retirement Law establishes the State Teachers Retirement System for the purpose of providing pension benefits to specified public employees and teachers. Existing law establishes the Judges Retirement System II, which provides pension benefits to elected judges, and the Legislators Retirement System, which provides pension benefits to elective officers of the state other than judges and to legislative statutory officers. The County Employees Retirement Law of 1937 authorizes counties to establish retirement systems pursuant to its provisions in order to provide pension benefits to county, city, and district employees. Existing law provides for the application of cost-of-living adjustments to allowances paid to persons retired under, or survivors or beneficiaries of persons retired under, various public retirement systems. The California Public Employees Pension Reform Act of 2013, on and after January 1, 2013, requires a public retirement system, as defined, to modify its plan or plans to comply with the act and, for its purposes, defines pensionable compensation, establishes limits on benefits, and requires the sharing of normal costs between members and employers for the pension systems to which it applies.

The bill would prohibit a public retirement system, as defined, from making a cost-of-living adjustment to any allowance payable to, or on behalf of, a person retired under the system, system who becomes a new member on or after January 1, 2019, or to any survivor or beneficiary of a that member or person retired under the system, for any year beginning on or after January 1, 2019, in which the unfunded actuarial liability of that system is greater than 20%. The bill would require that the determination of unfunded actuarial liability be based on a specified financial report and would apply the prohibition on cost-of-living adjustments, if any, to the calendar year following the fiscal year upon which the report is based.