PARS
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6/29/2007
…RICHMAN FILES ANOTHER PUBLIC RETIREMENT REFORM INITIATIVE A foundation led by former Assemblyman Keith Richman and less than a handful of others filed an initiative in late June that would drastically reduce California's state and local government pension benefits by cutting retirement allowance to new employees and raising the age at which they qualify for full benefits. Richman, who claims significant cost savings for government employers under the plan, is hoping to gain enough signatures for the initiative to be placed on the next ballot. Recent rumors have estimated that Richman has $80 million set aside to aid in gathering those qualifying signatures. The initiative will face strong opposition from public employee unions, which in 2005 quickly subdued another proposed initiative by Richman before it got to the voters. Richman's 2005 proposal, championed by Governor Schwarzenegger and Howard Jarvis’ organization, would have done away with “defined benefit” pension plans for new employees in favor of 401(k)-style “defined contribution” retirement plans. This new proposal preserves the traditional pension plan, but cuts the formulas that determine pensions and extends the years an employee would have to work to get them. Under the initiative, peace officers and firefighters would go from a 3% at age 50 formula to 2.2% at age 55. Other safety employees would drop from 3% at 55 to 1.8% at age 60. Non-safety employees who do not qualify for Social Security will drop from a 2.7% at age 55 formula to 1.5% at a Social Security age (currently 65 to 67). Non-safety employees eligible to receive Social Security would have their formula rolled back from 2% at age 55 to 1% at Social Security age. Further complicating (and potentially reducing) the new formulas is the fact that retirement age is linked to Social Security retirement eligibility in this initiative. Social Security reforms have pushed back the age at which a person can collect Social Security. If further changes to Social Security retirement age are implemented in the future, then non-safety California public employees will have to wait even longer to retire. Another change would base the pension payout on the highest consecutive five years of pay, instead of the one year or three years now in use. That move would tend to reduce retirement allowances, because a five-year average is normally lower than the highest year of pay or a three-year average. The new initiative would apply to state and local government workers hired after July 1, 2009. It is unclear so far where the Governor’s office stands on this initiative. However, Dave Low, an appointee to the Governor’s Public Employee Post-Employment Benefits Commission and Assistant Director of Governmental Relations for the California School Employees Association, has recently commented that the Richman initiative is poorly-crafted and poorly-timed, considering that the Commission is now in the middle of its considerations of California pensions and post-retirement healthcare benefits. The Commission is due to submit a report of its findings, along with recommendations, to the Legislature and Governor at the beginning of 2008.
…UPDATE ON RETIREMENT-RELATED BILLS In the last Alert, we updated the public employee retirement-related bills that passed their house of origin and those that died for the year. Following is an update of the bills that are still moving this session as the Legislature leaves for summer recess. As previously mentioned, the retirement committees have held until next year 19 bills that were deemed under the purview of the Governor’s Pension and Benefits Commission. However there are approximately 60 bills related to public employee retirement or employee relations still circulating, including the following: AB 221 (Anderson) Divestment from Iran This bill would prohibit PERS and STRS from investing public employee retirement funds in a company with business operations in Iran. The bill would also require PERS and STRS to sell or transfer any investments in a company with business operations in Iran. This bill has garnered a great deal of support, even though introduced by a freshman Republican, likely due to the “fighting terrorism”-associated theme. However, PERS is concerned that this bill will lead to more bills of the same that constrain the retirement systems’ ability to make decisions about how they invest their assets. 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. AB 554 (Hernandez) PERS Retiree Healthcare Pre-funding This bill would allow PERS to offer its retiree healthcare pre-funding program to all public entities, including those that do not participate in PEMHCA. This bill was recently amended to ensure no vesting rights are implied by the bill, the concern of the Governor stated in his veto message from last year. This bill was also amended to give it urgency status meaning that it now needs a two-thirds vote to pass the Senate and, if it does and is signed by the Governor, it will take effect immediately. AB 591 (Dymally) Non Tenure-Track Community College Faculty – Comparable Benefits This bill would require that temporary and part-time faculty receive pay and benefits equal to that of tenured and tenure-track faculty (with comparable qualifications doing comparable work). AB 757 (Comm. on Public Emp., Retirement, & Social Security) STRS Housekeeping Bill This bill would make technical changes to the Teachers’ Retirement Law, including clarifying:
This bill was recently amended and a hearing on this bill was subsequently postponed. AB 775 (Niello) County Post-Retirement Employment Prohibitions The County Employees Retirement Law of 1937 authorizes a county to employ a retired member in a position requiring special skills or knowledge without reinstating them from retirement. Under the law, a retired member may not work more than 90 days in any 12-month period. The law authorizes a board of supervisors to extend that re-employment period up to 120 days in any 12-month period. This bill would prohibit the re-employment of a retiree who was employed within the prior 12 months and who received unemployment insurance compensation following the termination of an appointment with the same employer. AB 789 (Mullin) STRS Purchase Power Payments This bill requires that 2.5% of creditable compensation be credited to the Supplemental Benefit Maintenance Account (SBMA) each year for 4 years commencing July 1, 2008 to fund “purchase power protection” payments to STRS retirees as an inflation protection. AB 1124 (Karnette) County Post-Employment Benefits This bill fine-tunes ‘37 Act County retirement systems’ ability to establish post-employment benefits trust accounts, which they were given authority to establish in 2006. AB 1296 (Torrico) PERS PEMHCA Housekeeping Bill This bill would require a health benefit plan or contract to disclose to the PERS Board the cost, utilization, and actual provider claim payments on behalf of each member for all healthcare services rendered. The bill would deem this information confidential and exempt from the California Public Records Act. AB 1307 (Krekorian) PERS Supplemental Contribution Program This bill allows PERS to significantly expand its supplemental defined contribution program. AB 1316 (Bass) State Teachers' Retirement: Disability This bill would allow STRS members who apply for a disability benefit, who are eligible to retire for service, to receive a retirement allowance pending determination of their disability claim. Upon approval of the disability application, the member’s service retirement application will be cancelled, the disability benefit will begin, and any service retirement benefit overpayment will be recovered. AB 1432 (Soto) State teachers' retirement: credit for teaching abroad This bill would allow non-retired members of STRS to purchase service credit for time spent teaching in U.S. State Department schools and in foreign public K-12 schools that received a portion of their funding from public revenues. The bill also deletes current prohibitions of domestic partners from rolling over a benefit distribution. SB 134 (Cedillo) Mandatory Retirement for Los Angeles County The bill would exclude the County of Los Angeles, upon approval by the Board of Supervisors, from the County Employees Retirement Law that permits a county to require sheriffs, under-sheriffs, and marshals who are safety members to be retired at 60 or 70 years of age. 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. This bill passed the Assembly Retirement Committee and has been referred to Assembly Appropriations. SB 608 (Wiggins) PERS Housekeeping Bill This bill makes various PERS law changes including:
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. 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 (800) 540-6369 ext. 135 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. |
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