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6/26/2008
In
this Alert:
…CALPERS
PRIVATE SECTOR BILL STILL ALIVE
…CALPERS TOP EXECUTIVES
LEAVE
…STRS
TASKFORCE PITCHES UNIFORM RETIREE HEALTH BENEFITS
…POST-RETIREMENT
EARNINGS LIMITS UNDER SCRUTINY
…UPDATE ON
RETIREMENT-RELATED BILLS
…LEGISLATIVE CALENDAR
CALPERS PRIVATE SECTOR
BILL STILL ALIVE
As mentioned in a previous Alert, a new bill would put CalPERS in
the business of providing retirement benefits to private sector
workers in California. The system would offer Individual Retirement
Accounts (IRA) to workers whose employers do not offer retirement
savings plans. The accounts would benefit from CalPERS' investment
acumen, but would be separate from the traditional system available
to public employees.
AB 2940,
by Assemblyman Kevin De León, D-Los Angeles, passed the Assembly in
late May and will now be considered by the Senate.
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 program.
The legislation is sponsored by the liberal think-tank New America
Foundation as a way to help low- and middle-income workers save for
retirement and supplement Social Security benefits. The Foundation
estimates that approximately 6 million Californians work for
businesses without retirement plans such as 401(k) plans. Gov.
Arnold Schwarzenegger has said he supports the idea.
The CalPERS staff report recommends to the Board a “neutral if
amended” position, citing a number of problems with the bill.
CalPERS recommends that AB 2940 be amended to provide adequate
funding for start-up and that regulatory approval be sought to
provide government plan exemptions for the IRAs so that PERS does
not fall under jurisdiction of burdensome private sector rules and
regulatory bodies.
CALPERS TOP EXECUTIVES LEAVE
Last month the Chief Executive Officer of CaPERS, Fred Buenrostro,
stepped down after six years in that position to pursue other
opportunities. Ken Marzion was appointed by the Board to serve as
interim CEO. Many public agencies know Ken as the Assistant
Executive Officer of the Actuarial and Employer Services Division
where he serves as liaison to PERS contracting agencies.
The CEO’s announcement comes on the heels of Chief Investment
Officer Russell Read’s resignation. 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.
STRS
TASKFORCE PITCHES UNIFORM RETIREE HEALTH BENEFITS
STRS formed the Public
Education Health Benefits Task Force to recommend how STRS and PERS
could assist school agencies in addressing the affordability of
healthcare. The Task Force report, in its current form recommends a
program for retired members over age 65 that would provide:
·
monthly
health allowance of $400 if retired prior to 1999
·
monthly
health allowance of $300 if retired in 1999 or after
·
monthly
health allowance of $100 if retired after program implementation
·
base
monthly allowance based on years of service
·
benefit
increase based on medical care component of CPI or 5% compounded
(which ever is less)
·
option to
designated beneficiary to receive allowance
Benefits would be funded
by:
·
For those
retired prior to implementation, state contribution or redirection
of its contribution to the Supplemental Benefit Maintenance Account
·
For those
retired after implementation, employer contributions
Increase in
contributions as a percentage of payroll would be required: 1.717%
for retired members and 1.788% for active members.
POST-RETIREMENT
EARNINGS LIMITS UNDER SCRUTINY
STRS formed a Post-Retirement Earnings Limitations Working Group
this year to recommend legislative changes to post-retirement work
by teachers and administrators. Originally the taskforce discussed
amending current bill, AB 2390, to eliminate the earnings
limitation for retirees over the normal retirement age of 60, but
place additional restrictions on retirees under age 60 and for
retirees who return to work. The group could not reach consensus on
this issue. Instead, the bill will be moving forward with only the
year-long “status quo” extension of the current earnings limitation
exemptions.
Some of the issues being considered include:
·
Requiring
employers to contribute the “actuarially sound” cost of hiring
retired members
·
Requiring
employers to pay full 8.25% contribution for hiring retired STRS
members
·
Permit a
district to hire a retired employee only if the district pays 8.25%
of employee’s creditable compensation towards its OPEB liability
·
Change the
earning limit to 50% of final compensation per year as averaged over
a 3 to 5 year span
STRS hopes that the group will reach a consensus on a more permanent
solution
by the fall.
UPDATE ON
RETIREMENT-RELATED BILLS
PARS will be tracking these and all retirement-related bills for the
remainder of the 2007-2008 session and will be updating their status
in our monthly “Legislative Alert” e-mail publication. You can
subscribe to the Legislative Alert by sending an email to
subscribe@phase2systems.info or by calling this toll-free
number: 800-540-6369 x135.
AB
36 (Niello) Retirement Benefits Fraud
This bill makes it a crime 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. The bill would also make it a crime to knowingly accept
payments one knows they are not entitled to, with the intent to keep
them for personal benefit.
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 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 Jan 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.
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 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 to accept a
rollover from an annuity contract or custodial account offered by
the system.
AB 1844 (Hernandez) Commission Bill on Fraud and OPEB Reporting
This Governor’s Commission bill establishes penalties for fraud
related to STRS, PERS, and County retirement system benefits and
requires public agencies to report information on post-retirement
healthcare to the State Controller every year.
AB 1936 (Emmerson) PERS: Non-profit Mutual Water Companies
This bill would permit non-profit mutual water companies that meet
certain requirements to participate in PERS.
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 concurrent participation and credit for service in a defined
benefit plan supported by public funds provided by systems other
than PERS and a supplemental defined benefit plan offered by the
employer.
AB 2202 (Caballero) PERS Part-time, Seasonal, Temporary Employee
Information
AB 2202 would mandate that every state agency, school employer, or
contracting agency of PERS provide information and data regarding
its employees who are not members of PERS. Currently, PERS can only
require data on PERS members. There are no details in the bill about
what data PERS will require or the regulatory procedures it would
put in place, so costs and administrative burdens to local
government are difficult to gauge.
AB 2390 (Karnette) STRS Post-Retirement Earnings
This bill extends the post-retirement earnings limit exemption of
STRS members for one year until June 30, 2009. As stated in the
section above on this topic, there are several issues being
considered by the CalSTRS Post-Retirement Earnings Limitations
Working Group as possible amendments to this bill. However, the
issues being considered are unlikely to make it into the bill this
year.
AB 2673 (Feuer) ’37 Act County Retirement System Death Benefits
AB 2673 will conform the '37 Act statutes to be consistent with the
California Domestic Partnership Act by modifying the survivorship
payment to the domestic partner, which specifies domestic partners
have the same rights and responsibilities in survivorship as a widow
or widower. It will also provide prospective implementation of the
law.
AB 2940 (de Leon) PERS IRAs for Private Sector
This bill would create the California Employee Savings Program,
allowing PERS to offer individual retirement accounts (IRAs) to
employees of private sector companies.
AB 3041 (Comm. on Public Employees, Ret. and Soc. Sec.) PERS
Housekeeping Bill
This bill would provide that a PERS employee serving less than
full-time for 6 months be must join PERS at the time the person
completes 125 days or 1,000 hours of work, instead of current
language which vaguely states the person must join some time “after”
exceeding the threshold. A recent amendment also revises the
threshold to include in PERS any employee working 20 hours or more a
week for a period of over 1 year. PERS believes that these changes
will close up “loopholes” and clarify exactly when an employee is
mandated into PERS.
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. This bill was enacted into law on June 2nd as
Chapter 21, Statutes of 2008.
SB 1123 (Wiggins) Retiree Health Benefits and California Actuarial
Advisory Panel
This Governor’s Commission bill requires local entities to prepare
an actuarial study and make it public at least two weeks before
changes to postemployment benefits (and not on consent calendar). It
also creates the California Actuarial Advisory plan to provide
expert and independent information to encourage greater transparency
and understanding of actuarial methodologies and assumptions.
BILLS THAT HAVE DIED
AB 1967 (Torrico) PERS & STRS Investing
The bill would have prohibited PERS and STRS from investing in a
private equity company if any country affiliated with the sovereign
wealth fund is not party to certain international human rights
treaties. STRS and others opposed the bill due to its interference
with PERS/STRS investment authority.
AB 2024 (Houston) PERS Disability Retirement
This disability retirement reform bill would have discontinued the
retirement allowance of a PERS disability retiree if the retiree
refuses to submit to a medical examination. The provision would
apply to a retiree over the minimum retirement age who has been
receiving a disability retirement allowance for less than 36 months.
AB 2350 (Garrick) Prefunding Employee Benefits
This bill, sponsored by the Governor’s office, mandated that all
public agencies in PEHMCA (Public Employees’ Medical and Hospital
Care Act), the PERS health care program, pre-fund their retiree
healthcare liabilities through the PERS OPEB Trust program.
Opponents of the bill foresaw negative consequences, including that
many public agencies may drop out of PEHMCA as a result, and the
bill died a quick death.
SB 1095 (Vincent) Mandated Health Benefits for Teachers
SB 1095 mandated that school districts provide health benefits for
retired teachers and that those teachers contribute toward the
benefits. This bill was defeated in committee because of its
mandated costs on the state and teachers, estimated to be in the
billions.
SB 1488 (Calderon) STRS Golden Handshake
This bill provided that a retiree receiving a STRS Golden Handshake
would not forfeit his or her additional credit if he or she is,
after January 1, 2004, re-employed within 5 years after retirement
as a substitute teacher by a school district from which he or
she retired. Such bills have repeatedly died in the past due to
opposition from the Department of Finance.
SB 1514 (Margett) Public Employee Postretirement Benefits
This bill required the future annual costs of OPEB benefits to be
made public at a public meeting at least 2 weeks prior to adoption.
This bill died but the language was incorporated into another bill.
LEGISLATIVE CALENDAR
Following are some important dates/deadlines for the second half of
the 2008 Legislative year:
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
December 1 – New Legislature reconvenes for the 2009-2010 session.
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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