California Assembly Bill AB1320 Amended / Bill

 BILL NUMBER: AB 1320AMENDED BILL TEXT AMENDED IN SENATE SEPTEMBER 2, 2011 AMENDED IN SENATE AUGUST 30, 2011 AMENDED IN SENATE JUNE 23, 2011 AMENDED IN ASSEMBLY MAY 27, 2011 INTRODUCED BY Assembly Member Allen (Coauthors: Assembly Members Furutani and Ma) FEBRUARY 18, 2011 An act to add  Sections 20814.5 and 31453.7 to   Section 31453.7 to, and to add Chapter 10 (commencing with Section 20860) to Part 3 of Division 5 of Title 2 of,  the Government Code, relating to public employees' retirement, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 1320, as amended, Allen. Public employees' retirement: employer contribution rates. (1) The Public Employees' Retirement Law prescribes employer rates for contribution to the retirement fund for the Public Employees' Retirement System (PERS). Existing law requires that the state's contribution rate be adjusted in the Budget Act based on rates established by the system's actuary. Existing law provides that the employer contribution rate for an employer other than the state shall be determined on an annual basis by the actuary, as specified. Existing law requires that the rate at which a public employer contributes to the system shall be based upon its experience, and not the experience of public agency employers generally. Existing law requires that all assets of an employer in the system be used to determine the employer's contribution rate. This bill, on and after July 1, 2013, would establish for each employer a Rate Stabilization Account in the Employer Rate Stabilization Fund, which this bill would create and which would be continuously appropriated to the Board of Administration of PERS for the purpose of stabilizing employer retirement contributions. By creating a continuously appropriated fund and authorizing the expenditure of employer payments, this bill would make an appropriation. The bill would provide that the board has sole and exclusive control over the administration of the fund and would require that the investment of fund assets be according to strategies established by the board.  The bill would authorize the board, in its discretion, to establish administrative terms and conditions governing the Rate Stabilization Fund.  The bill would provide that the Rate Stabilization Account is an employer asset, but it would not be counted as an asset for the purpose of determining the employer's contribution rate. The bill would require employers to make payments to the account when the actuarial value of assets exceeds the accrued liability, as specified, which would be calculated based on the employer normal cost of benefits and which would be credited to each employer's Rate Stabilization Account. Payments by the state would be made in the annual Budget Act. The bill would provide that the assets of the account be drawn upon  , subject to procedures adopted by the board,  to pay a portion of the employer contribution when the employer contribution rate is greater than the employer normal cost of benefits, as specified. The bill would provide that the employer is not required to make that additional contribution when the employer's Rate Stabilization Account exceeds an amount equal to 50% of the employer's assets, exclusive of the assets in the Rate Stabilization Account. The bill would provide that assets in an account would be invested according to investment strategies established by the Board of Administration of PERS. (2) The County Employees Retirement Law of 1937 authorizes the board of retirement to determine county or district contributions on the basis of a normal contribution rate, which is computed as a level percentage of compensation which, when applied to future compensation of the average new member entering the system, together with member contributions, is sufficient to provide for the payment of all prospective benefits of a member. This bill, on and after July 1, 2013, would establish in each county or district's retirement fund a Rate Stabilization Account. The bill would provide that the account is an employer asset, for that county or district, but it would not be counted as an asset for the purpose of determining the employer's contribution rate. The bill would require employers to make payments when the actuarial value of assets exceeds the accrued liability, as specified, which would be calculated based on the employer normal cost of benefits and which would be credited to each employer's Rate Stabilization Account. The bill would provide that the assets of the account be drawn upon to pay a portion of the employer contribution when the employer contribution rate is greater than the normal cost of benefits, as specified. The bill would provide that the employer is not required to make that additional contribution when the employer's Rate Stabilization Account exceeds an amount equal to 50% of the employer' s assets, exclusive of the assets in a Rate Stabilization Account. The bill would require that assets in an account be invested according to investment strategies established by the board of retirement. Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:  SECTION 1.   Chapter 10 (commencing with Section 20860) is added to Part 3 of Division 5 of Title 2 of the   Government Code   , to read:   CHAPTER 10. EMPLOYER RATE STABILIZATION 20860. For the purposes of this chapter, the following definitions apply: (a) "Employer contribution rate" means a rate for payment of the total employer contribution, as determined by the actuary pursuant to Chapter 9 (commencing with Section 20790). (b) "Employer normal cost of benefits" means a rate for payment of normal cost of benefits, as determined by the actuary according to the most recently completed valuation less the employee contribution rate. 20861. (a) There is hereby created in the State Treasury the Employer Rate Stabilization Fund for the purpose of receiving employer payments made pursuant to subdivision (b) of Section 20862 and stabilizing state and contracting agency employer retirement contributions pursuant to this section. Notwithstanding Section 13340, all moneys in the fund are continuously appropriated without regard to fiscal years to the board for expenditure pursuant to this section. The board has sole and exclusive control over the administration of the fund and the investment of its assets shall be according to strategies established by the board. Payments by the state pursuant to subdivision (b) of Section 20862 shall be made in the annual Budget Act. A separate account shall be established for each employer in the fund to be known as a Rate Stabilization Account. (1) A Rate Stabilization Account is an employer asset, but shall not be counted as part of employer assets for purposes of determining the employer contribution rate. (2) Deposits to a Rate Stabilization Account shall be made when the actuarial value of assets exceeds the accrued liability as determined by the chief actuary, according to the most recently completed annual valuation and pursuant to subdivision (b) of Section 20862. (3) A Rate Stabilization Account shall be drawn from, subject to procedures adopted by the board, to pay for that portion of the employer contribution rate that exceeds the employer normal cost of benefits, pursuant to subdivision (a) of Section 20862. (4) The board may, in its discretion, establish administrative terms and conditions governing the Rate Stabilization Fund, including the method of payments to the employer's Rate Stabilization Account, the method of disbursements from the employer's Rate Stabilization Account, the frequency and content of the reports from or to employers, the allocation of investment income, and the allocation of assets upon termination of participation of an employer. (b) Notwithstanding subdivision (b) of Section 20862, when an employer's Rate Stabilization Account exceeds an amount equal to 50 percent of the employer assets, other than the assets in the Rate Stabilization Account, that employer is not required to make an additional contribution as specified in subdivision (b) of Section 20862. 20862. (a) If the employer contribution rate, as determined by the actuary, is greater than the employer normal cost of benefits, then the employer shall remit an amount, not less than the employer normal cost of benefits that is sufficient, as determined by the actuary, when combined with assets transferred from the Rate Stabilization Account established pursuant to subdivision (c), to equal the employer contribution rate. (b) Except as provided in subdivision (b) of Section 20861, if the employer contribution rate is less than the employer normal cost of benefits, the employer shall remit the employer contribution rate amount and make an additional contribution equal to the difference between the employer contribution rate and the employer normal cost of benefits. That additional contribution amount shall be credited to the employer's Rate Stabilization Account. 20863. Nothing in this chapter shall be construed to interfere with a public retirement board's authority and fiduciary responsibility as set forth in Section 17 of Article XVI of the California Constitution. If, and to the extent that, the board of a public retirement system determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility set forth in Section 17 of Article XVI of the California Constitution, the board may refuse to receive those contributions.   SECTION 1.   Section 20814.5 is added to the Government Code, to read: 20814.5. (a) For the purposes of this section, the following definitions apply: (1) "Employer contribution rate" means a rate for payment of the total employer contribution, as determined by the actuary according to the most recently completed valuation of the total liability for the benefits on the account of the employees of the employer. (2) "Employer normal cost of benefits" means a rate for payment of normal cost of benefits, as determined by the actuary according to the most recently completed valuation less the employee contribution rate. (b) Notwithstanding any other provision of law, the employer contribution rate shall be adjusted according to the following: (1) If the employer contribution rate, as determined by the actuary, is greater than the employer normal cost of benefits, then the employer shall remit an amount, not less than the employer normal cost of benefits that is sufficient, as determined by the actuary, when combined with assets transferred from the Rate Stabilization Account established pursuant to subdivision (c), to equal the employer contribution rate. (2) Except as provided in subdivision (d), if the employer contribution rate is less than the employer normal cost of benefits, the employer shall remit the employer contribution rate amount and make an additional contribution equal to the difference between the employer contribution rate and the employer normal cost of benefits. That additional contribution amount shall be credited to the employer' s Rate Stabilization Account. (c) There is hereby created in the State Treasury the Employer Rate Stabilization Fund for the purpose of receiving employer payments made pursuant to paragraph (2) of subdivision (b) and stabilizing state and contracting agency employer retirement contributions pursuant to this section. Notwithstanding Section 13340, all moneys in the fund are continuously appropriated without regard to fiscal years to the board for expenditure pursuant to this section. The board has sole and exclusive control over the administration of the fund and the investment of its assets shall be according to strategies established by the board. Payments by the state pursuant to paragraph (2) of subdivision (b) shall be made in the annual Budget Act. A separate account shall be established for each employer in the fund to be known as a Rate Stabilization Account. (1) A Rate Stabilization Account is an employer asset, but shall not be counted as part of employer assets for purposes of determining the employer contribution rate. (2) Deposits to a Rate Stabilization Account shall be made when the actuarial value of assets exceeds the accrued liability as determined by the chief actuary, according to the most recently completed annual valuation. (3) A Rate Stabilization Account shall be drawn from to pay for that portion of the employer contribution rate that exceeds the employer normal cost of benefits, pursuant to paragraph (1) of subdivision (b). (d) Notwithstanding paragraph (2) of subdivision (b), when an employer's Rate Stabilization Account exceeds an amount equal to 50 percent of the employer assets, other than the assets in the Rate Stabilization Account, that employer is not required to make an additional contribution as specified in paragraph (2) of subdivision (b). (e) Nothing in this section shall be construed to interfere with a public retirement board's authority and fiduciary responsibility as set forth in Section 17 of Article XVI of the California Constitution. If, and to the extent that, the board of a public retirement system determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility set forth in Section 17 of Article XVI of the California Constitution, the board may refuse to receive those contributions.  SEC. 2. Section 31453.7 is added to the Government Code, to read: 31453.7. (a) For the purposes of this section, the following definitions apply: (1) "Employer" means the applicable county or district. (2) "Employer contribution rate" means a rate for payment of the total employer contribution, as determined by the system's actuary according to the most recently completed valuation of the total liability for the benefits on the account of the employees of the employer. (3) "Employer normal cost of benefits" means a rate for payment of normal cost of benefits, as determined by the system's actuary according to the most recently completed valuation, less the employee contribution. (b) Notwithstanding any other provision of law, the employer contribution rate of the county or district shall be adjusted according to the following: (1) If the employer contribution rate, as determined by the actuary, is greater than the employer normal cost of benefits, then the employer shall remit an amount, not less than the employer normal cost of benefits that is sufficient as determined by the actuary, when combined with assets transferred from the Rate Stabilization Account established pursuant to subdivision (c), to equal the employer contribution rate. (2) Except as provided in subdivision (d), if the employer contribution rate is less than the normal cost of benefits, the employer shall remit the employer contribution rate amount and make an additional contribution equal to the difference between the employer contribution rate and the employer normal cost of benefits. That additional contribution amount shall be credited to the employer' s Rate Stabilization Account. (c) For the purposes of subdivision (b), a separate account shall be established for each employer in the retirement system to be known as a Rate Stabilization Account. (1) A Rate Stabilization Account is an employer asset, but shall not be counted as part of employer assets for purposes of determining the employer contribution rate. (2) Deposits to a Rate Stabilization Account shall be made when the actuarial value of assets exceeds the accrued liability as determined by the system's actuary, according to the most recently completed annual valuation. (3) A Rate Stabilization Account shall be drawn from to pay for that portion of the employer contribution rate that exceeds the employer normal cost of benefits, pursuant to paragraph (1) of subdivision (b). (4) The funds in Rate Stabilization Accounts shall be invested according to investment strategies established by the board. (d) Notwithstanding paragraph (2) of subdivision (b), when an employer's Rate Stabilization Account exceeds an amount equal to 50 percent of the employer assets, other than the assets in the Rate Stabilization Account, that employer is not required to make an additional contribution as specified in paragraph (2) of subdivision (b). (e) Nothing in this section shall be construed to interfere with a public retirement board's authority and fiduciary responsibility as set forth in Section 17 of Article XVI of the California Constitution. If, and to the extent that, the board of a public retirement system determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility set forth in Section 17 of Article XVI of the California Constitution, the board may refuse to receive those contributions. SEC. 3. This act shall become operative July 1, 2013.