SB 454: Public employees' health benefits.
- Session Year: 2017-2018
- House: Senate
- Latest Version Date: 2017-04-06
The Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, prescribes methods for calculating the state employer contribution for postemployment health care benefits for eligible retired public employees and their families and for the vesting of these benefits. PEMHCA requires the employer contribution for an employee or annuitant who is in the employment of employed by the state or retired from state service to be adjusted by the Legislature in the annual Budget Act, as specified. PEMHCA prescribes different ways of calculating the employer contributions for employees and annuitants depending on date of hire, years of service, and bargaining unit.
This bill, for state employees who are first employed and become members of the retirement system on or after January 1, 2018, would limit the employer contribution for annuitants to 80% of the weighted average of the health benefit plan premiums for an active employee enrolled for self-alone, self alone, during the benefit year to which the formula is applied, for the 4 health benefit plans with the largest state civil service enrollment, as specified. The bill would similarly limit the employer contribution for an enrolled family member of an annuitant to 80% of the weighted average of the additional premiums required for enrollment of those family members during the benefit year to which the formula is applied and would provide the same limit on employer contributions for annuitants enrolled in Medicare health benefit plans. The bill would provide that if its provisions are in conflict with regard to an employee covered by a memorandum of understanding, the memorandum of understanding would control until it expires. The bill would prescribe the percentage of the employer contribution payable for postemployment health benefits based on the number of completed years of credited state service at retirement, with 50% after 15 credited years of service and 100% after 25 or more years of service, for an employee of the state, the California State University, and the Legislature, who is employed by the state for the first time and who becomes a state member of the Public Employees Retirement System on or after January 1, 2018.
PEMHCA establishes the Public Employees Contingency Reserve Fund for the purpose of funding health benefits and funding administrative expenses. PEMHCA establishes the Annuitants Health Care Coverage Fund, which is continuously appropriated, for the purpose of prefunding health care coverage for annuitants, including administrative costs. PEMHCA defines prefunding for these purposes. Existing law requires the state and employees of State Bargaining Unit 2, 7, 9, 10, or 12 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2019, and prescribes schedules of contribution percentages in this regard. For the state and employees of State Bargaining Unit 6, the date for reaching the goal is July 1, 2018.
This bill would require the state, on and after January 1, 2018, to assume all responsibility for prefunding retiree health care. The bill would require the state to prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100% of the actuarially determined normal costs by July 1, 2019. The bill would require the state to pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller, as specified, with the goal of paying 50% of the actuarially determined cost of these liabilities by January 1, 2022, and 100% of the actuarially determined cost of these liabilities by January 1, 2026. The bill would require the Controller, by January 10 of each year, to provide a report to specified committees of the Legislature that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described above.
The Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, prescribes methods for calculating the state employer contribution for postemployment health care benefits for eligible retired public employees and their families and for the vesting of these benefits. PEMHCA requires the employer contribution for an employee or annuitant who is in the employment of or retired from state service to be adjusted by the Legislature in the annual Budget Act, as specified. PEMHCA prescribes different ways of calculating the employer contributions for employees and annuitants depending on date of hire, years of service, and bargaining unit.
This bill, for state employees who are first employed and become members of the retirement system on or after January 1, 2018, would limit the employer contribution for annuitants to 80% of the weighted average of the health benefit plan premiums for an active employee enrolled for self-alone, during the benefit year to which the formula is applied, for the 4 health benefit plans with the largest state civil service enrollment, as specified. The bill would similarly limit the employer contribution for an enrolled family member of an annuitant to 80% of the weighted average of the additional premiums required for enrollment of those family members during the benefit year to which the formula is applied and would provide the same limit on employer contributions for annuitants enrolled in Medicare health benefit plans. The bill would provide that if its provisions are in conflict with regard to an employee covered by a memorandum of understanding, the memorandum of understanding would control until it expires.
PEMHCA establishes the Public Employees Contingency Reserve Fund for the purpose of funding health benefits and funding administrative expenses. PEMHCA establishes the Annuitants Health Care Coverage Fund, which is continuously appropriated, for the purpose of prefunding health care coverage for annuitants, including administrative costs. PEMHCA defines prefunding for these purposes. Existing law requires the state and employees of State Bargaining Unit 2, 7, 9, 10, or 12 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2019, and prescribes schedules of contribution percentages in this regard. For the state and employees of State Bargaining Unit 6, the date for reaching the goal is July 1, 2018.
This bill would require the state, on and after January 1, 2018, to assume all responsibility for prefunding retiree health care. The bill would require the state to prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100% of the actuarially determined normal costs by July 1, 2019. The bill would require the state to pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller, as specified, with the goal of paying 50% of the actuarially determined cost of these liabilities by January 1, 2022, and 100% of the actuarially determined cost of these liabilities by January 1, 2026. The bill would require the Controller, by January 10 of each year, to provide a report to specified committees of the Legislature that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described above.
(a)Notwithstanding any other law, the employer contribution for employees hired on and or after January 1, 2018, shall be as described in subdivision (b). This section shall not be construed to create eligibility for an employee who otherwise does not receive a state contribution for postemployment health care.
(b)Effective January 1, 2018, the employer contribution for each employee shall be an amount equal to 80 percent of the weighted average of the basic health benefit plan premiums for an active state civil service employee enrolled for self-alone, during the benefit year to which the formula is applied, for the four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year. For each employee with enrolled family members, the employer shall contribute an additional 80 percent of the weighted average of the additional premiums required for enrollment of those family members, during the benefit year to which the formula is applied, in the four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year.
(c)The employer contribution provided under this section is not applicable unless and until the effective date of the employees enrollment in an approved health benefit plan.
(d)If the provisions of this section are in conflict with regard to an employee covered by a memorandum of understanding reached pursuant to Section 3517.5 or Chapter 12 (commencing with Section 3560) of Division 4 of Title 1, the memorandum of understanding shall be controlling until it expires.
SEC. 2.Section 22944.5 of the Government Code is amended to read:22944.5.(a) (1) The state and employees in State Bargaining Unit 2, 7, 9, 10, or 12 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019.(2)The state and employees in State Bargaining Unit 6 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2018.(3)The state and employees in the judicial branch shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017.(b)(1)The employees in State Bargaining Unit 9 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2017, 0.5 percent of pensionable compensation.(B)Effective July 1, 2018, an additional 0.5 percent for a total employee contribution of 1.0 percent of pensionable compensation.(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.(2)The employees in State Bargaining Unit 10 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.(B)Effective July 1, 2018, an additional 0.7 percent for a total employee contribution of 1.4 percent of pensionable compensation.(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 2.8 percent of pensionable compensation.(3)The employees in State Bargaining Unit 6 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2016, 1.3 percent of pensionable compensation.(B)Effective July 1, 2017, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.(C)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.(4)The state employees in the judicial branch shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2016, 1.5 percent of pensionable compensation.(B)Effective July 1, 2017, up to an additional 1.5 percent for a total employee contribution of up to 3.0 percent of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation.(C)This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8.(5)The employees in State Bargaining Unit 12 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2017, 1.9 percent of pensionable compensation.(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 3.3 percent of pensionable compensation.(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.6 percent of pensionable compensation.(6)The employees in State Bargaining Unit 2 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.(B)Effective July 1, 2018, an additional 0.6 percent for a total employee contribution of 1.3 percent of pensionable compensation.(C)Effective July 1, 2019, an additional 0.7 percent for a total employee contribution of 2.0 percent of pensionable compensation.(7)The employees in State Bargaining Unit 7 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 2.7 percent of pensionable compensation.(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.0 percent of pensionable compensation.(c)This section only applies to employees who are eligible for health benefits, including permanent intermittent employees.(d)Contributions paid pursuant to this section shall be deposited in the Annuitants Health Care Coverage Fund and shall not be refundable under any circumstances to an employee or his or her beneficiary or survivor.(e)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.(f)This section shall also apply to a state employee related to a bargaining unit described in subdivision (a) who is excepted from the definition of state employee in subdivision (c) of Section 3513.(g)On and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state pursuant to Section 22944.7.SEC. 2.Section 22874.5 is added to the Government Code, to read:22874.5.(a)Notwithstanding Sections 22870, 22871, 22873, and 22874, a state employee, defined by subdivision (c) of Section 3513, an employee of the California State University, or an employee of the Legislature, who is employed by the state for the first time, and who becomes a state member of the system on or after January 1, 2018, shall not receive any portion of the employer contribution payable for annuitants unless the person is credited with 15 years of state service at the time of retirement.
(b)The percentage of the employer contribution payable for postemployment health benefits for an employee subject to this section shall be based on the completed years of credited state service at retirement as shown in the following table:
Years of Service Contribution | Credited Years Percentage |
15 | 50 |
16 | 55 |
17 | 60 |
18 | 65 |
19 | 70 |
20 | 75 |
21 | 80 |
22 | 85 |
23 | 90 |
24 | 95 |
25 or more | 100 |
(c)This section shall apply only to state employees who retire for service. For purposes of this section, state service means service rendered as an employee of the state or an appointed or elected officer of the state for compensation.
SEC. 3.Section 22944.5 of the Government Code is amended to read:22944.5.(a)(1)The state and employees in State Bargaining Unit 2, 7, 8, 9, 10, 13, 18, or 19 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019.
(2)The state and employees in State Bargaining Unit 6 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2018.
(3)The state and employees in the judicial branch shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017.
(4)The state and employees in State Bargaining Unit 1, 3, 4, 11, 12, 14, 15, 17, 20, or 21 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2020.
(b)(1)The employees in State Bargaining Unit 9 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.5 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.5 percent for a total employee contribution of 1.0 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(2)The employees in State Bargaining Unit 10 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.7 percent for a total employee contribution of 1.4 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 2.8 percent of pensionable compensation.
(3)The employees in State Bargaining Unit 6 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2016, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2017, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(4)The state employees in the judicial branch shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2016, 1.5 percent of pensionable compensation.
(B)Effective July 1, 2017, up to an additional 1.5 percent for a total employee contribution of up to 3.0 percent of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation.
(C)This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8.
(5)The employees in State Bargaining Unit 12 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.5 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.0 percent for a total employee contribution of 2.5 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 3.5 percent of pensionable compensation.
(D)Effective July 1, 2020, an additional 1.1 percent for a total employee contribution of 4.6 percent of pensionable compensation.
(6)The employees in State Bargaining Unit 2 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.6 percent for a total employee contribution of 1.3 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 0.7 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(7)The employees in State Bargaining Unit 7 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 2.7 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(8)The employees in State Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, or 21 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2018, 1.2 percent of pensionable compensation.
(B)Effective July 1, 2019, an additional 1.1 percent for a total employee contribution of 2.3 percent of pensionable compensation.
(C)Effective July 1, 2020, an additional 1.2 percent for a total employee contribution of 3.5 percent of pensionable compensation.
(9)The employees in State Bargaining Unit 8 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.5 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.5 percent for a total employee contribution of 3.0 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 4.4 percent of pensionable compensation.
(10)The employees in State Bargaining Unit 13 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 3.9 percent of pensionable compensation.
(11)The employees in State Bargaining Unit 18 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(12)The employees in State Bargaining Unit 19 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.0 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 3.0 percent of pensionable compensation.
(c)This section only applies to employees who are eligible for health benefits, including permanent intermittent employees.
(d)Contributions paid pursuant to this section shall be deposited in the Annuitants Health Care Coverage Fund and shall not be refundable under any circumstances to an employee or his or her beneficiary or survivor.
(e)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(f)This section shall also apply to a state employee related to a bargaining unit described in subdivision (a) who is excepted from the definition of state employee in subdivision (c) of Section 3513.
(g)On and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state pursuant to Section 22944.7.
SEC. 3.SEC. 4.Section 22944.7 is added to the Government Code, to read:22944.7.(a)Notwithstanding Section 22944.5 or any other law, on and after January 1, 2018, the state shall assume all responsibility for prefunding retiree health care.
(b)The state shall prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100 percent of the actuarially determined normal costs by July 1, 2019.
(c)The state shall pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller in subdivision (d) with the goal of paying 50 percent of the actuarially determined cost of these liabilities by January 1, 2022, and 100 percent of the actuarially determined cost of these liabilities by January 1, 2026.
(d)(1)On or before January 10 each year, the Controller shall provide to the Assembly Committee on Budget and the Senate Committee on Budget and Fiscal Review a report that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described in subdivisions (b) and (c).
(2)The report provided pursuant to this subdivision shall be submitted in compliance with Section 9795.
(a)Notwithstanding any other law, the employer contribution for employees hired on and after January 1, 2018, shall be as described in subdivision (b). This section shall not be construed to create eligibility for an employee who otherwise does not receive a state contribution for postemployment health care.
(b)Effective January 1, 2018, the employer contribution for each employee shall be an amount equal to 80 percent of the weighted average of the basic health benefit plan premiums for an active state civil service employee enrolled for self alone, during the benefit year to which the formula is applied, for the four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year. For each employee with enrolled family members, the employer shall contribute an additional 80 percent of the weighted average of the additional premiums required for enrollment of those family members, during the benefit year to which the formula is applied, in the four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year.
(c)The employer contribution provided under this section is not applicable unless and until the effective date of the employees enrollment in an approved health benefit plan.
(d)If the provisions of this section are in conflict with regard to an employee covered by a memorandum of understanding reached pursuant to Section 3517.5 or Chapter 12 (commencing with Section 3560) of Division 4 of Title 1, the memorandum of understanding shall be controlling until it expires.
SEC. 2.Section 22944.5 of the Government Code is amended to read:22944.5.(a) (1) The state and employees in State Bargaining Unit 2, 7, 9, 10, or 12 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019.
(2)The state and employees in State Bargaining Unit 6 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2018.
(3)The state and employees in the judicial branch shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017.
(b)(1)The employees in State Bargaining Unit 9 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.5 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.5 percent for a total employee contribution of 1.0 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(2)The employees in State Bargaining Unit 10 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.7 percent for a total employee contribution of 1.4 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 2.8 percent of pensionable compensation.
(3)The employees in State Bargaining Unit 6 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2016, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2017, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(4)The state employees in the judicial branch shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2016, 1.5 percent of pensionable compensation.
(B)Effective July 1, 2017, up to an additional 1.5 percent for a total employee contribution of up to 3.0 percent of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation.
(C)This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8.
(5)The employees in State Bargaining Unit 12 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.9 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 3.3 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.6 percent of pensionable compensation.
(6)The employees in State Bargaining Unit 2 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 0.6 percent for a total employee contribution of 1.3 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 0.7 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(7)The employees in State Bargaining Unit 7 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 2.7 percent of pensionable compensation.
(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(c)This section only applies to employees who are eligible for health benefits, including permanent intermittent employees.
(d)Contributions paid pursuant to this section shall be deposited in the Annuitants Health Care Coverage Fund and shall not be refundable under any circumstances to an employee or his or her beneficiary or survivor.
(e)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(f)This section shall also apply to a state employee related to a bargaining unit described in subdivision (a) who is excepted from the definition of state employee in subdivision (c) of Section 3513.
(g)On and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state pursuant to Section 22944.7.
SEC. 3.Section 22944.7 is added to the Government Code, to read:22944.7.(a)Notwithstanding Section 22944.5 or any other law, on and after January 1, 2018, the state shall assume all responsibility for prefunding retiree health care.
(b)The state shall prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100 percent of the actuarially determined normal costs by July 1, 2019.
(c)The state shall pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller in subdivision (d) with the goal of paying 50 percent of the actuarially determined cost of these liabilities by January 1, 2022, and 100 percent of the actuarially determined cost of these liabilities by January 1, 2026.
(d)(1)On or before January 10 each year, the Controller shall provide to the Assembly Committee on Budget and the Senate Committee on Budget and Fiscal Review a report that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described in subdivisions (b) and (c).
(2)The report provided pursuant to this subdivision shall be submitted in compliance with Section 9795.
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Date
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Status
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| Feb 1, 2018 | Returned to Secretary of Senate pursuant to Joint Rule 56. |
| Apr 25, 2017 | April 24 set for first hearing. Failed passage in committee. (Ayes 2. Noes 3. Page 829.) Reconsideration granted. |
| Apr 6, 2017 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on P.E. & R. |
| Mar 17, 2017 | Set for hearing April 24. |
| Mar 2, 2017 | Referred to Com. on P.E. & R. |
| Feb 17, 2017 | From printer. May be acted upon on or after March 19. |
| Feb 16, 2017 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
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Description
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Location
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Votes
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| Apr 24, 2017 | [First] hearing set for [04-24-2017]: Failed passage in Committee. Reconsideration granted | Senate Standing Committee on Public Employment and Retirement |
Passed |
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| Apr 24, 2017 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Public Employment and Retirement |
Failed |
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.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Cal Fire Local 2881 | ** Against | Apr 19, 2017 |
| California Association Of Highway Patrolmen | ** Against | Apr 19, 2017 |
| California Association Of Professional Scientists | ** Against | Apr 19, 2017 |
| California Nurses Association | ** Against | Apr 19, 2017 |
| California Professional Firefighters | ** Against | Apr 19, 2017 |
| California School Employees Association | ** Against | Apr 19, 2017 |
| City of Costa Mesa | ** Support | Apr 19, 2017 |
| Peace Officers Research Association Of California | ** Against | Apr 19, 2017 |
| Professional Engineers In California Government | ** Against | Apr 19, 2017 |
| Retired Public Employees Association | ** Against | Apr 19, 2017 |
| Service Employees International Union, Local 1000 | ** Against | Apr 19, 2017 |
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2017 - 2018 Regular
Bill No: SB 454 Hearing Date: 4/24/17
Author: | Moorlach | ||
Version: | 4/6/17 As amended | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Glenn Miles | ||
Subject: Public employee’s health benefits
SOURCE: Author
DIGEST: This bill requires the employer contribution for retiree health benefits for state employees first hired on or after January 1, 2018, to be based on the 80/80 formula; provides that state employees who first become a CalPERS member on or after that date are subject to the 15/25 vesting requirement in order to receive retiree health benefits; makes the state responsible for 100 percent prefunding of the benefit; sets goals for the state to pay the unfunded liability already accrued for state employee retiree health benefits; and requires the Controller to make a report regarding the benefit’s cost, as specified.
ANALYSIS:
Existing law:
- Establishes the California Public Employees' Retirement System (CalPERS), which provides health care coverage through the Public Employees’ Medical and Hospital Care Act (PEMHCA) to state and California State University employees (CSU) and retirees (annuitants) who meet specific vesting requirements.
- Requires the state and each employee or annuitant to contribute to the employee or annuitant’s health plan premium cost such that the combined employer-employee/annuitant contribution shall equal the total cost per month for the premium.
- Establishes the 100/90 employer health contribution formula, which provides fully vested state retirees (e.g., with 20 or more years of state employment) and their dependents an employer contribution for retiree health care equal to 100 percent and 90 percent, respectively, of the weighted average premium of the four health plans most highly utilized by all members.
- Establishes the 10/20-year health vesting schedule, which provides that most current state employees (those hired after 1985 or 1989, depending on class) must work for 10 years to receive an employer retiree health benefit contribution, which starts at 50 percent of the 100/90 formula, with an additional 5 percent per additional year of service until, after 20 years, they are vested to receive 100 percent of the 100/90 formula.
- Provides, under recently approved MOUs between the state and most of its bargaining units, that future active employees covered in those state bargaining units will receive an employer retiree health contribution based on the 80/80 formula (i.e., for active employees and annuitants enrolled in Basic plans, 80 percent of the weighted average premium of the four health plans most highly utilized by active members; for annuitants enrolled in Medicare plans, 80 percent of the weighted average premium of the four Medicare health plans most utilized by annuitants).
- Provides that all employees in specified bargaining units first hired by the state on or after January 1, 2017, will be subject to an extended 15/25-year health vesting schedule providing 50 percent of the employer contribution upon completion of 15 years of state service, increasing 5 percent for each additional year of service, until the employee is 100 percent vested after 25 years of state serivce.
- Requires Medicare-eligible retirees to enroll in Medicare and choose a Medicare-coordinated health plan. Since these plans may be cheaper than Basic plans, thus resulting in some portion of the employer contribution going unused, current law requires that any unused portion of the 100/90 formula contributions may be applied to reimburse retirees for the costs of Medicare Part B premiums. These reimbursements are made in the form of an additional payment to the retiree on the retirement warrant up to the cost of the Part B premium. Whether or not a retiree receives the Medicare Part B reimbursement in full or in part depends upon the cost of that retiree's health plan.
- Provides that all employees in specified bargaining units first hired on or after January 1, 2017, will no longer be eligible to use the employer contribution for a retiree health benefit plan for Medicare Part B premiums.
- Determines the state employee contributions, by bargaining unit and as a percentage of pensionable compensation, required to prefund employees’ retiree health benefits with a goal of requiring the state and state employees to share equally in the cost of prefunding the benefits.
This bill:
- Sets, the employer contribution toward the Basic health premium effective January 1, 2018, at 80 percent of the premium weighted average for the four Basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year.
- Requires, the employer to contribute an additional 80 percent of the premium weighted average for dependent family members, for the four Basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year.
- Provides that rank and file, CSU, and Legislative state employees, employed by the state for the first time, and who becomes a state member of the system on or after January 1, 2018, shall not receive any portion of the employer contribution payable for annuitants unless the person is credited with 15 years of state service at the time of retirement.
- Provides that all rank and file, CSU, and Legislative employees employed by the state for the first time, and who become a state member of the system on or after January 1, 2018, shall be subject to the 15/25 health vesting schedule.
- Requires that on and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state and the state shall do the following:
- Prefund state employee retiree health care costs with the goal of paying 100 percent of the benefit’s actuarial determined normal costs by July 1, 2019.
- Pay unfunded liabilities for accrued retiree health benefits, as specified, with the goal of pay 50 percent by January 1, 2022, and 100 percent by January 1, 2026.
- Requires the Controller to provide to the Assembly Committee on Budget and the Senate Committee on Budget and Fiscal Review a report on the unfunded liability of retiree health care, as specified, on or before January 10 each year.
Background
According to information from the author, the primary purpose of this bill is to prevent recently negotiated retiree health care cost-sharing provisions from creating future pressure to increase state employee compensation. Presumably, by requiring the state to pay the entire cost of prefunding the retiree health care benefit the state would avoid future salary augmentation concessions to employees.
This bill runs counter to the Governor’s stated goal of requiring state employees to share in retiree health care benefit costs so that those costs are transparent to the employees and to the public.
Moreover, by imposing conditions that are generally regarded as the subject of bargaining the bill conflicts with the state’s public policy of supporting collective bargaining with state employees to ensure an effective system of managing labor relations.
Finally, much of the bills requirements have already been implemented through MOUs negotiated between the Administration and the state employee bargaining units.
Related/Prior Legislation
SB 28 (Pan, Chapter 1, Statutes of 2017), ratified 6 MOUs covering approximately 126,000 state employees and included provisions to provide that all employees first hired by the state on or after January, 1, 2017, in Bargaining Units 8, 12, 13, 18, and 19 will receive an employer retiree health contribution based on the 80/80 formula.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
SUPPORT:
City of Costa Mesa
OPPOSITION:
American Federation of State, County and Municipal Employees, AFL-CIO
CAL FIRE Local 2881
California Association of Highway Patrolmen
California Association of Professional Scientists
California Nurses Association
California Professional Firefighters
California School Employees Association
Peace Officers Research Association of California
Professional Engineers in California Government
Retired Public Employees Association
Service Employees International Union, Local 1000
ARGUMENTS IN SUPPORT: According to the author, prefunding retiree health care is “currently funded through a 50/50 premium contribution split between the state (employer) and the participant (employee). The intentions for the cost sharing split were good in seeking to get employees responsible for these costs. Over time, it developed into a broken system because the split is not even. The state pays its 50 percent, and technically, so does the employee. Because of union negotiations, state employees often receive pay raises to cover the cost of their share. Being compensated for their share not only completely negates the point of the cost sharing program, but ends up costing the state more money.”
ARGUMENTS IN OPPOSITION: According to Service Employees International Union, Local 1000, this bill “circumvents the collective bargaining process and threatens the retirement security of millions of retired Californians that dedicated their career to helping the most vulnerable in the state.”
Several safety member employee associations, including the Peace Officers Research Association of California, state that “employee healthcare is a subject of collective bargaining and should be negotiated between the employer and employee organizations. What works for one may not work for the other. Also, recently, all state employee groups and many contracting agencies have negotiated the prefunding of retiree healthcare. Over time, this prefunding will reduce the overall cost of retiree healthcare.”
According to the California School Employees Association, “the bill’s stated goal of pre-funding retiree health in one year is unrealistic, incredibly expensive, and is just another attack on retiree health care.”
Bill Author
Bill Co-Author(s):