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4/24/2008
In
this Alert:
…STATE BUDGET DEFICIT
WORSENING
…CALPERS MAY EXPAND
ITS TERRITORY
…STRS POST-RETIREMENT EARNINGS LIMITATIONS WORKING GROUP
…UPDATE ON
RETIREMENT-RELATED BILLS
…STATE
BUDGET DEFICIT WORSENING
The legislature continues to be more
pre-occupied with the fiscal crisis than legislation. More bills
than usual are being held up for fiscal impacts. Governor
Schwarzenegger’s January budget plan assumed the deficit would be
$14.5 billion while the Legislative Analyst’s Office later projected
the deficit at $16 billion. While Lawmakers have made certain cuts
and used other tactics to close the gap to about $9 billion for this
fiscal year, the governor now says that the number has grown by at
least $1 billion.
…CALPERS
MAY EXPAND ITS TERRITORY
A new bill calls on CalPERS to offer
IRA accounts to workers whose employers don't offer retirement
savings plans. The accounts would benefit from CalPERS' investment
acumen, but would be separate from the traditional pensions offered
to public employees.
The proposal to open the retirement
system to private sector workers has prompted questions about
government competing with investment firms and the pension system's
ability to handle the unique program.
The proposal, Assembly Bill 2940 by
Assemblyman Kevin De León, D-Los Angeles, passed its first test this
month when a committee that deals with retirement issues approved it
on a 4-1 vote.
Supporters said the idea has been
percolating for years, both on the federal level and in statehouses.
It's being pushed by think tanks as a way to get low- and
middle-income Americans to start saving for retirement to supplement
Social Security payouts. As it is, about 6 million Californians work
for businesses that do not offer retirement savings plans such as
401(k) plans. Gov. Arnold Schwarzenegger has said he supports the
idea.
CalPERS has not yet taken a position
on the bill, and its board is not expected to consider it until its
May meeting, at the earliest.
In other CalPERS news, its Chief
Investment Officer, Russell Read, has announced that he will resign
effective June 30 to pursue other interests. Read was the primary
person responsible for managing PERS’ $244 billion in assets.
Read's position will be filled on an
interim basis by Anne Stausboll, currently the Chief Investment
Operating Officer of PERS. There has been no word on when Read’s
permanent replacement will be made.
…STRS
POST-RETIREMENT EARNINGS LIMITATIONS WORKING GROUP
STRS has formed a Post-Retirement
Earnings Limitations Working Group and is discussing amendments to a
current bill, AB 2390, that would extend exemptions to the STRS’
postretirement earnings limit. The proposed amendments would
eliminate the current limitations on postretirement earnings for
retired members who are 60 years of age or older as of July 1 of the
school year in which the retired member begins performing creditable
service. A person who turns 61 in the fiscal year in which he/she
retires would no longer be subject to an earnings limit.
As it stands, Assembly Bill 2390,
like similar bills in recent years, would extend certain exemptions
to the STRS’ postretirement earnings limit. Current law limits the
amount of postretirement income that may be earned by a retired STRS
member who returns to work in a STRS-covered position to $27,940 in
2007-08. The law also prohibits a STRS retiree from performing STRS-covered
employment for at least 12 consecutive months before returning to
work. However, there are exemptions to the earnings limitation that
allow certain certified employees in school districts and community
college districts to work after retirement and receive their full
STRS retirement allowance.
Another amendment being discussed is
requiring employers who employ a STRS retiree to contribute 8.25% of
the retired member’s creditable compensation. STRS is looking for
revenue sources since the system is underfunded and there are
concerns with unions about overuse of retirees in lieu of active
employees. There is some opposition to the employer contribution
proposal and STRS is evaluating the actuarial cost of such a
mandate.
…UPDATE
ON RETIREMENT-RELATED BILLS
The following retirement-related bills
either have new language than previously reported or have status updates
that have changed. It is important to remember, however, that bills can
still be amended with completely new language.
AB 1496
(Swanson) Part-Time Employee Classification
This bill would force general law
cities and counties to move all part-time employees into classified
positions within a three-month period. This bill has passed the
Assembly and is stuck in committee in the Senate.
AB 1844 (Hernandez) Public Employee
Benefits: Fraud
AB 1844 would make it a crime for a
person to make or present false material statements and
representations in connection with retirement systems' benefits and
applications or to aid or abet someone in this regard. AB 1844 also
requires agencies to report their GASB 45 actuarial valuation to the
State Controller. This bill has passed out of the retirement
committee but has been sent to the Appropriations Committee suspense
file.
AB 1936 (Emmerson) PERS: Nonprofit
Mutual Water Companies
This bill would permit a nonprofit
mutual water company that operates pursuant to specified provisions
of law and meets certain requirements to enter into a contract to
participate in PERS. This bill passed the Assembly and was referred
to the Senate on April 21st.
AB 1963 (Carter) Same Service Credit for
2 Retirement Systems
This bill would broaden the
exception to the prohibition on receiving credit for the same
service in two retirement systems to permit a participant in a
retirement system established under the County Employees Retirement
Law of 1937 to participate in individual account retirement plans
and be permitted to concurrently participate in, and to receive
credit for service in, a supplemental defined benefit program
meeting specific requirements maintained by his or her employer.
This bill is sponsored by the County of San Bernardino to make it
clearer that public agencies can establish various types of
supplemental defined contribution plans in addition to their pension
plan. This bill has passed the committee on retirement.
AB 1967 (Torrico) PERS & STRS Investing
The bill would prohibit PERS and
STRS from investing in a private equity company that is owned in
whole or in part by a sovereign wealth fund or in a fund managed by
a private equity company that is owned in whole or in part by a
sovereign wealth fund, if any country with which the sovereign
wealth fund is affiliated is not party to specified international
treaties. The hearing for this bill has been cancelled by the author
and the bill is currently being held from consideration.
AB 2191 (Mullin) STRS: 403(b)
This bill would eliminate the
authority of the State Controller to purchase annuity contracts for
employees of state entities, requiring the STRS Board to offer a
403(b) annuity contract and custodial account to eligible employees
of the entities formerly served by the Controller. This bill passed
the Appropriations Committee and can now be considered for vote.
AB 2202 (Caballero) PERS: Part-time
Employee Information
AB 2202 would require every state
agency, school employer, or contracting agency of PERS to provide
information to the PERS board regarding the service and compensation
earned by its part-time, seasonal, or temporary employees who do not
meet the requirements for mandatory coverage by the system. This
bill has passed out of the Appropriations Committee and can now be
considered for a vote by the Assembly.
AB 2350 (Garrick) Prefunding Employee
Benefits
This bill was amended on April 3rd
to require, on or before January 1, 2013, each employer governed by
the Public Employees Retirement Law that offers other postemployment
benefits and/or retiree healthcare to its employees to participate
in a prefunding plan to provide for those benefits.
AB 2390 (Karnette) STRS Post-retirement
Earnings
This bill extends the
post-retirement earnings limits of STRS members until June 30, 2009,
but in some cases only for those who retired prior to January 1,
2007. Changes to this bill are being discussed as noted in the
previous section of this Legislative Alert. The bill has passed out
of the Appropriations Committee.
AB 2940 (de Leon) PERS IRAs for Private
Sector
This bill was gutted and amended on
April 3rd and, as noted in the section above in this
Legislative Alert, the language would now create the California
Employee Savings Program, to be administered by PERS, offering
individual retirement accounts or individual retirement annuities to
employees of private sector employers. This bill has passed out of
committee and is currently under review in the Appropriations
Committee.
AB 3041 (Comm. on Public Employees, Ret.
and Soc. Sec.) PERS Housekeeping Bill
This bill would provide that a PERS
employee serving on a basis of less than full-time for 6 months be
excluded from the system unless that person comes within specified
exceptions. The bill would also revise an exception to the exclusion
described above to apply if the person completes 125 days or
1,000 hours of work, instead of exceeding that threshold.
This bill has passed the Appropriations Committee and can now be
considered for a vote in the Assembly.
SB 1095 (Vincent) STRS Retiree Health
Information
SB 1095 has been amended to require
each school district to establish, on or before January 1, 2011, a
health benefit plan for retired teachers. The bill would also
require each teacher to contribute to the health benefit plan for
retired teachers established by the school district in which he or
she is employed. This bill is being held in committee
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,
Maureen Toal
Vice President, Public Affairs
Public Agency Retirement Services (PARS)
mtoal@pars.org
(800) 540-6369 ext. 135
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