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7/28/2008
In
this Alert:
…CALPERS
AND CALSTRS POST
INVESTMENT LOSSES
…BILL WOULD MANDATE SICK LEAVE
FOR ALL EMPLOYEES
…PENSION PROTECTION TECHNICAL
CORRECTIONS ACT BILL
…UPDATE ON
RETIREMENT-RELATED BILLS
…LEGISLATIVE CALENDAR
CALPERS AND CALSTRS POST INVESTMENT
LOSSES
CalPERS has announced that it posted a 2.4% loss for the fiscal year
that ended June 30, while CalSTRS lost 3.7%. A CalSTRS press release
cited a 5% average loss for public pensions. Both systems touted
their longer-term performance histories, four straight years of
double-digit investment growth. A recent Merrill Lynch report found
that public pension funds on average have lost 5% in the past year.
CalPERS' fiscal 2007-08 loss breaks a four-year streak of
double-digit investment gains.
A
bill that would force employers to provide paid sick leave to
part-time employees has passed on the Assembly and is now making its
way through the Senate. While employers’ policies on paid sick leave
can vary widely based on the needs of the local government, the bill
mandates that all California employers – including public employers
– provide paid sick leave for any employee who works seven or more
days in a calendar year. The days would accrue at a rate of one hour
for every 30 hours worked, and sick time would carry over from year
to year though medium-to-large employers could limit annual paid
sick days to nine, small employers to five.
The author has identified more than 6 million workers who have not
provided paid sick leave; however, the author has not cited any
specific abuser of the current system. AB 2716 has passed out of the
Senate Labor Committee and is currently under review by Senate
Appropriations.
PENSION PROTECTION TECHNICAL CORRECTIONS
ACT BILL
The Pension Protection Technical Corrections Act of 2008, which as
the title explains, makes technical corrections to the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal
Revenue Code to conform to the Pension Protection Act of 2006 (PPA),
recently passed through the House of Representatives. It seems there
are only 3 provisions that apply to government plans:
1.
The allowance of $3,000 of tax-free distributions for public safety
officers for medical expenses is amended to allow the deduction to
apply to those in self-funded or self-insured plans.
2.
An amendment exempting governmental plans from the interest rate
"cap" the bill uses to limit the amount of interest that can be paid
to participants who receive refunds of contributions. For government
plans, the amendment will define "market rate" as whatever the
normal federal, state or local rate is in the case where the rate is
in excess of the new federal limitation under the PPA.
3.
Medical reimbursements from a 115 trust for a deceased plan
participant's beneficiary may be excluded from taxable income.
UPDATE ON
RETIREMENT-RELATED BILLS
BILL THAT ARE STILL ALIVE OR THAT HAVE BEEN ENACTED INTO LAW
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 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: Nonprofit Mutual Water Companies
This bill would permit non-profit mutual water companies that meet
certain requirements to participate in PERS. This bill was signed
into law on July 22 as Chapter 191 of the Statutes of 2008.
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.
This bill will make it more flexible for public agencies’ defined
benefit plans that supplement the benefits provided by PERS. This
bill was enrolled and sent to the Governor on July 21.
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. This bill was enrolled and sent
to the Governor on July 22.
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. AB 2673 was signed into law on July 22 as Chapter 197
of the Statutes of 2008.
AB 2716 (Ma) Mandated Sick Leave
This bill mandates that all California employers – including public
employers – provide paid sick leave for any employee who works seven
or more days in a calendar year. The days are set to accrue at a
rate of at least one hour for every 30 hours worked. Sick time would
carry over from year to year but medium-to-large employers could
limit annual paid sick days to nine, small employers to five.
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 post-employment 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
LEGISLATIVE CALENDAR
Following are important dates/deadlines for the rest of the 2008
legislative year:
August 4 – Legislature is scheduled to return from recess
August 15 – Last day for fiscal committees to meet and report bills
to the floor
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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