PARS
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02/26/2008
…GOVERNOR’S PUBLIC EMPLOYEE BENEFITS COMMISSION REPORTS At the end of 2006, Governor Schwarzenegger established the Public Employee Post-Employment Benefits Commission to study California’s growing liabilities for pensions and other post-employment benefits (OPEB) - primarily retiree healthcare benefits. On January 7th of this year, the Commission released a final report of its findings, including recommendations to the legislature on how to effectively address this increasingly important issue. The Commission surveyed California’s public pension systems and nearly 1,200 public agency employers throughout the state to get a clear idea of pension funding status and retiree healthcare liabilities. According to the Commission, the total unfunded liability for pensions is around $63.5 billion whereas the unfunded liability for OPEB is around $118 billion, $48 billion of which is the liability of the State. Of the responding agencies, 78% reported that they do not pre-fund their OPEB liability. Instead, they continue to fund the benefit on a pay-as-you-go basis. Agencies that are pre-funding the benefits are setting aside a total of $3.5 billion annually. The Commission made 34 recommendations, including these major areas:
…UPDATE ON RETIREMENT-RELATED BILLS The following is a list of some key bills that are still alive this session. New bills can still be introduced until February 22nd and we will report on them in the March Alert. It is also important to remember that bills can still be amended with completely new language. BILLS THAT ARE STILL ALIVE These bills have passed their house of origin and are still moving through the legislative process. AB 36 (Niello) Public employees' retirement: fraud. This bill makes it a crime to make or present false material statements and representations in connection with retirement system benefits and applications, or to aid or abet someone in this regard. The bill would also make it a crime to knowingly accept payments one knows one is not entitled to, with the intent to keep it for personal benefit. AB 376 (Nava) Airport Police Officers: Local Safety Members This bill allows contracting agencies to include their airport law enforcement officers as local safety members through an optional contract amendment. The bill was amended to exclude such designated airport law enforcement officers from federal Social Security. AB 591 (Dymally) Community Colleges: Part-Time Temporary Faculty This bill would have required that temporary faculty receive pay and benefits equal to that of tenured and tenure track faculty with comparable qualifications doing comparable work and required that non-tenure track faculty members teaching at least 40% of a full load be eligible for the same healthcare benefits as tenured and tenure-track faculty. However, the bill was amended January 14 to remove the necessity to pay non-tenure track faculty equal pay and benefits. A January 28th amendment also provides that any such faculty working less than 67% of full time assignment hours be classified as temporary. 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. The SBMA is in place to ensure at least 80% purchasing power of retiree pensions, lessening the erosion impact of inflation on benefits. This bill was introduced to protect the state contribution to the SBMA. The Governor’s budget proposal attempts to make an “unconditional guarantee” of the 80%-of-purchasing-power benefit in exchange for lowering the current state contribution to the SBMA from 2.5% to 2.2% as a budgetary savings device. Fearing a situation similar to the state’s withholding of the contribution in 2003-2004, this bill counters the Governor’s proposal and guarantee that the account will be funded at its current rate. AB 1480 (Mendoza) STRS: Roth IRA This bill would permit STRS to administer a Roth IRA for the purpose of accepting a rollover from an annuity contract or custodial account offered by the system to the extent the rollover complies with the federal tax law. The bill would permit the system to provide for the administration of the Roth IRA by a qualified 3rd-party administrator who would provide custodial, investment, recordkeeping, or administrative services. 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 will enable those retired safety members to elect to direct up to $3,000 of their pension before taxes to pay health or long-term care insurance premiums in accordance with the federal Pension Protection Act of 2006. SB 608 (Wiggins) PERS Housekeeping Bill
Following are some important dates/deadlines for the 2008 Legislative year – the 2nd year of the two-year session: January 7 – Legislators return to Sacramento from the interim recess. Policy committees begin hearing legislative measures introduced during 2007. January 10 – Governor releases his proposal for the 2008-2009 State Budget. The Legislative Analysts Office then releases its analysis of the Budget in late February. January 31 – Last day for each house to pass bills introduced in that house during 2007. February 22 – Last day for legislators to introduce bills. Bills can still be amended into something completely different, but no new bills may be introduced. March 13 – Spring legislative recess is scheduled to begin. Legislators return to work on March 24. March, April, and May – Legislative Budget Subcommittees in both houses will hold hearings on the Governor’s budget proposals. May 15 – Governor’s May Revision is required to be released, updating state revenue forecasts and expenditure estimates to the January Budget Proposal. June 15 – 2008-2009 Budget Bill must be passed by the Legislature by midnight according to the California Constitution. June 27 – Last day for policy committees to meet. June 30 – State Constitution requires that the Budget Bill be enacted by the Governor. July 3 – Legislative summer recess begins if the Budget Bill has been enacted. August 4 – Legislature is scheduled to return from recess. August 31 – Last day for the Legislature to pass bills and send to the Governor. September 30 – Last day for the Governor to sign or veto legislation. November 4 – Statewide General Election Feel free to contact PARS with any question or requests for further information. Additional news and an archive of past Legislative Alerts is available on the PARS website at www.pars.org. Thank you, PARS HAS ESTABLISHED TWO INNOVATIVE MULTIPLE-EMPLOYER TRUSTS TO ASSIST PUBLIC AGENCIES WITH PRE-FUNDING THEIR OPEB (POST RETIREMENT HEALTH CARE) 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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