PARS
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4/30/07
…BILLS PUSHED BACK TO 2008 DUE TO GOVERNOR’S COMMISSION
This bill prohibiting PERS and STRS from investing public employee retirement funds in a company with business operations in Iran passed the Committee on Public Employees Retirement and Social Security, but was referred to the Judiciary committee. AB 246 (Torrico) County Retirement Board Assets This bill would prohibit a member or employee of a county retirement board or board of investments from selling or providing any investment product that would be considered an asset of the retirement fund. It quickly passed the Assembly and has moved on to the Senate. AB 554 (Hernandez) PERS Retiree Healthcare Pre-funding This bill, which would allow PERS to offer its retiree healthcare pre-funding program to public entities that do not participate in PEMHCA, passed out of committee and was referred to the Appropriations Committee suspense file. This bill is definitely “reform-related” but the Legislature is not deferring it to the Governor’s Commission.
AB 591 (Dymally) Non Tenure-Track Community
College Faculty – Comparable Pay and Benefits AB 757 (Committee on Public Employees, Retirement, and Social Security) STRS Housekeeping Bill This bill makes technical changes to the Teachers’ Retirement Law, including clarifying:
This bill has passed through both the Retirement and Appropriations committees. AB 1124 (Karnette) County Post-Employment Benefits This bill, which fine tunes ‘37 Act County retirement systems’ ability to establish post-employment benefits trust accounts, has a policy committee hearing scheduled for May 2nd. AB 1307 (Krekorian) PERS Supplemental Contribution Program This bill allows PERS to significantly expand its defined contribution program. It passed the retirement committee and was referred to the Appropriations committee. AB 1567 (Garrick) School District Retiree Health Benefits This bill, requiring school districts to develop a long-term plan identifying how they will l fund retiree health and welfare benefits, has a hearing scheduled in the Higher Education Committee. SB 579 (Wiggins) PERS Public Safety Member Certification SB 579 requires PERS to certify to the Internal Revenue Service and health insurance plan providers that a member is a retired public safety officer when the member retires. It has passed out of the Retirement committee but has been referred to the Appropriations Committee. SB 608 (Wiggins) PERS Housekeeping Bill This bill makes various PERS law changes including:
This bill passed out of the Retirement committee and is scheduled for a hearing in the Appropriations committee on May 7th. SB 853 (Ridley-Thomas) Los Angeles Community College District – Retiree Healthcare Pre-funding This bill, allowing the Los Angeles Community College District to participate in the PERS retiree healthcare pre-funding program, passed out of the Retirement Committee and into Appropriations. SB 901 (Padilla) STRS Post-retirement Earnings This bill would extend the STRS post-retirement earnings requirements and exemptions, which were scheduled to sunset at the end of the year. It passed out of Senate retirement committee to Appropriations. PUSHED TO 2008 – These bills are being held this year in the Retirement Committee. AB 36 (Niello) Public Employees' Retirement Fraud This bill would make it a crime to make false material statements in connection with retirement systems' benefits, to aid or abet someone in this regard, or to knowingly accept payments one knows they are not entitled to. AB 219 (Jeffries) PERS Disability Retirement This bill would allow PERS to discontinue retirement allowances for disability retirees who refuse to submit to a medical examination. AB 275 (Soto) Local Safety Member Industrial Disability Retirement This bill would provide PERS with a third option for calculating the industrial disability retirement allowance of local safety members not eligible to retire, but having earned enough service to exceed the 50% of final compensation provided in current law. AB 376 (Nava) Airport Police Officers: Safety Designation The bill would allow PERS contracting agencies to include their airport law enforcement officers as local safety members through an optional contract amendment. AB 1377 (Nakanishi) PERS: Health Savings Accounts AB 1377 would require PERS to offer a high-deductible health plan and a health savings account (HSA) option to public employees and annuitants. SB 369 (Vincent) School District Retiree Health Benefits This bill would require the STRS board to file an annual study of school districts that do not provide health benefits for retired teachers with the Legislature. SB 1032 (McClintock) Disability Retirement: Medical Examinations McClintock’s bill would permit PERS to request a medical re-evaluation of a member who is retired for disability. who is over the minimum age for voluntary retirement. and who has been retired for 36 months or less.
…GOVERNOR’S PENSION COMMISSION MEETS AGAIN The Public Employee Post-Employment Benefits Commission, established by Governor Arnold Schwarzenegger, held its second meeting on April 26, 2007 in Orange County to frame the issue of post-employment benefits for public employees. At the hearing, many state and local government retirees from Orange County spoke about the importance of honoring benefits promised to retirees, since they can no longer bargain. Various local government executives followed, describing their experiences and their attempts to deal with their unfunded liabilities. Suggestions and ideas included changing benefits for new hires, moving from defined benefit to defined contribution, or designing hybrid structures of the two. The primary theme and consensus was that of retaining “local control” over benefits. The Commission has launched a website at www.pebc.ca.gov to serve as a resource for people interested in the issue of post-employment benefits for public employees. Materials from presentations to the commission can be found there. In addition to providing input to the Commission during the public comment portions of Commission meetings, members of public can contact the Commission via email or in writing. The Commission has asked members of the public to include their name and address when they communicate. Furthermore, all electronic attachments sent to the Commission should be in PDF Format. You can contact the Commission here:
Public Employees Post-Employment Benefits
Commission
…DEPARTMENT OF EDUCATION FISCAL SOLVENCY PLANS Due to legislation enacted last year (Assembly Bill 1802, Chap. 79, Senate Bill 1131), the California Department of Education (CDE) is granting school districts and charter schools that have completed plans to meet their outstanding long-term fiscal obligations for “other post-employment benefits” (OPEB) up to $15,000 as a reimbursement for the costs of developing such plans. County offices of education can also receive funding to review the district plans for financing other post-employment benefits as part of the budget review process. School districts and charter schools that have long-term fiscal obligations for OPEB are eligible if they submit a Management Plan for Financing OPEB to their county office of education or authorizing agency. County offices of education and authorizing agencies must certify to the CDE that a complete Management Plan has been submitted. The applications are due by May 15th, 2007. Additional information, including applications, can be found on the Department of Education website at the following web addresses:
…FEDERAL LEGISLATIVE UPDATE In the winter Agency Watch, we reported that the IRS was due to issue new Internal Revenue Code section 409(a) final regulations that could have an impact on public agencies. The IRS proposed regulations that may impact public agencies deferring compensation or cash benefits to employees into future years, including severance, sabbatical, accumulated leave, early retirement incentives, and salary or bonus deferral arrangements. The IRS issued the final regulations on April 10th and those final regulations are not substantively different from the proposed regulations. The new regulations/law arose in the aftermath of Enron and other corporate scandals as Congress turned its attention toward possible abuses in non-qualified deferred compensation arrangements (not to be confused with 457 deferred compensation plans). Congress was concerned about funding arrangements that allow employees and retirees to avoid immediate taxation of compensation by deferring it. It passed the American Jobs Creation Act of 2004 that, in part, created restrictive tax rules governing “nonqualified deferred compensation” and imposed significant taxes on individuals who violate them. The 409(a) regulations very broadly define deferred compensation as any arrangement under which services are performed in one taxable year, but compensation is received in a later year. Despite its broad reach, the regulations do not apply to benefits provided through retirement programs such as 401(a), 457, and 403b plans. Some public agencies, however, may inadvertently be violating this provision by, as an example, paying out compensation post-employment over a period of years rather than immediately at termination. Agencies that believe they may have “ineligible” deferred compensation arrangements for their employees should check with an employee benefits attorney or consultant. PARS is available to provide assistance and design remedies including conversions to retirement plans to avoid penalties. PARS has always used retirement plan vehicles to avoid these potential problems with its early retirement incentives and other programs.
Feel free to contact PARS with any question or requests for further information. Additional news and an archive of past Legislative Alerts are available on the PARS website at www.pars.org. Thank you,
Maureen Toal PARS HAS ESTABLISHED TWO INNOVATIVE MULTIPLE-EMPLOYER TRUSTS TO ASSIST PUBLIC AGENCIES WITH PRE-FUNDING THEIR OPEB (POST-RETIREMENT HEALTHCARE) OBLIGATIONS UNDER GASB 45. FOR MORE INFORMATION, CONTACT:
Maureen Toal The contents of this publication reflect PARS’ understanding of the facts. Before taking any action based on this information, consult professional advisors regarding your agency’s specific objectives and circumstances. For further information, contact PARS. |
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