California Senate Bill SB13 Introduced / Bill

 BILL NUMBER: SB 13INTRODUCED BILL TEXT INTRODUCED BY Senator Negrete McLeod DECEMBER 3, 2012 An act to amend Sections 7522.02, 7522.25, 7522.30, 7522.43, 20281.5, and 21400 of, and to repeal Section 7522.66 of, the Government Code, relating to public employees' retirement, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 13, as introduced, Negrete McLeod. Public employees' retirement benefits. (1) The Public Employees' Retirement Law (PERL) establishes the Public Employees' Retirement System (PERS) and the Teachers' Retirement Law establishes the State Teachers' Retirement System for the purpose of providing pension benefits to specified public employees. Existing law also establishes the Judges' Retirement System II which provides pension benefits to elected judges and the Legislators' Retirement System which provides pension benefits to elective officers of the state other than judges and to legislative statutory officers. The County Employees Retirement Law of 1937 authorizes counties to establish retirement systems pursuant to its provisions in order to provide pension benefits to county, city, and district employees. The California Public Employees' Pension Reform Act of 2013 (PEPRA), on and after January 1, 2013, requires a public retirement system, as defined, to modify its plan or plans to comply with the act and, among other provisions, establishes new retirement formulas that may not be exceeded by a public employer offering a defined benefit pension plan, setting the maximum benefit allowable for employees first hired on or after January 1, 2013, as a formula commonly known as 2.5% at age 67 for nonsafety members, one of 3 formulas for safety members, 2% at age 57, 2.5% at age 57, or 2.7% at age 57, and 1.25% at age 67 for new state miscellaneous or industrial members who elect to be in Tier 2. Under PEPRA, the Judges' Retirement System I and the Judges' Retirement System II are not required to adopt the defined benefit formula contained in certain other provisions. This bill would correct an erroneous cross-reference in the above provision and would instead specify that the Judges' Retirement System I and the Judges' Retirement System II are not required to adopt the defined benefit formula contained in other provisions for nonsafety and safety members. (2) PEPRA authorizes a public employer offering a retirement benefit plan consisting solely of a defined contribution plan prior to January 1, 2013, to continue to offer that plan instead of the defined benefit plan required pursuant to PEPRA. However, PEPRA requires an employer that adopts a new defined benefit pension plan or defined benefit formula on or after January 1, 2013, to conform the plan or formula to the requirements of PEPRA or be determined and certified by the retirement system's chief actuary and the system's board to have no greater risk and no greater cost to the employer than the defined benefit formula and to be approved by the Legislature. Under that law, new members of the employer's plan may only participate in the defined contribution plan that was in place before January 1, 2013, or a defined contribution plan or defined benefit formula that conforms to the requirements of PEPRA. This bill would specify that the above provisions are not to be construed to prohibit an employer from offering a defined contribution plan on or after January 1, 2013, either with or without a defined benefit plan, if the employer did not offer a defined contribution plan prior to that date. (3) On and after January 1, 2013, PEPRA requires each retirement system that offers a defined benefit plan for safety members of the system to use one or more of specified defined benefit formulas and requires an employer to offer one or more of those formulas to new employees who are safety employees eligible for membership in the program. This bill would instead require an employer to offer one or more of those formulas to new members who are safety employees. (4) On and after January 1, 2013, PEPRA requires new employees of specified public employers, the California State University, and the judicial branch who participate in a defined benefit plan to have an initial contribution rate of at least 50% of the normal cost rate for that defined benefit plan, rounded to the nearest 1/4 of 1%, or the current contribution rate of similarly situated employees, whichever is greater. This bill would make that provision applicable to new members employed by those entities and new members employed by the Legislature. The bill would also specify that this contribution rate for new members shall be the greater of the above 2 rates, if the greater, current contribution rate has been agreed to through the collective bargaining process. (5) On and after January 1, 2013, PEPRA prohibits a public employer from offering a plan of replacement benefits for members and any survivors or beneficiaries whose retirement benefits are limited by specified federal law. On and after January 1, 2013, PEPRA makes that prohibition and certain other provisions related to replacement benefits applicable to new employees. This bill would instead make those provisions applicable to new members. (6) PEPRA, until January 1, 2018, authorizes a safety member of a public retirement system who retires for industrial disability to receive a disability retirement equal to the greater of specified benefit amounts. This bill would repeal the above provision. (7) Under PERL, a person who becomes a state miscellaneous member or state industrial member of PERS after August 11, 2004, does not immediately make contributions or receive service credit for his or her service until after the first 24 months of employment, except in specified circumstances. This provision, as modified by PEPRA, does not apply to a person who first becomes a state miscellaneous member or state industrial member on or after July 1, 2013. This bill would instead specify that this provision does not apply to a person who first becomes a state miscellaneous member or state industrial member on or after January 1, 2013. (8) Under PEPRA, a state safety member of PERS who retires on or after January 1, 2013, for industrial disability receives a disability retirement benefit equal to the greater of certain benefits, including, among others, 50% of his or her final compensation, plus an annuity purchased with his or her accumulated contributions, if any. This bill would clarify that the portion of the industrial disability retirement benefit described above refers to an annuity purchased with the member's accumulated additional contributions. (9) This bill would declare that it is to take effect immediately as an urgency statute. Vote: 2/3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 7522.02 of the Government Code is amended to read: 7522.02. (a) (1) Notwithstanding any other law, except as provided in this article, on and after January 1, 2013, this article shall apply to all state and local public retirement systems and to their participating employers, including the Public Employees' Retirement System, the State Teachers' Retirement System, the Legislators' Retirement System, the Judges' Retirement System I, the Judges' Retirement System II, county and district retirement systems created pursuant to the County Employees Retirement Law of 1937, independent public retirement systems, and to individual retirement plans offered by public employers. However, this article shall be subject to the Internal Revenue Code and Section 17 of Article XVI of the California Constitution. The administration of the requirements of this article shall comply with applicable provisions of the Internal Revenue Code and the Revenue and Taxation Code. (2) Notwithstanding paragraph (1), this article shall not apply to the entities described in Section 9 of Article IX of, and Sections 4 and 5 of Article XI of, the California Constitution, except to the extent that these entities continue to be participating employers in any retirement system governed by state statute. Accordingly, any retirement plan approved before January 1, 2013, by the voters of any entity excluded from coverage by this section shall not be affected by this article. (b) The benefit plan required by this article shall apply to public employees who are new members as defined in Section 7522.04. (c) Individuals who were employed by any public employer before January 1, 2013, and who became employed by a subsequent public employer for the first time on or after January 1, 2013, shall be subject to the retirement plan that would have been available to employees of the subsequent employer who were first employed by the subsequent employer on or before December 31, 2012, if the individual was subject to reciprocity established under any of the following provisions: (1) Article 5 (commencing with Section 20350) of Chapter 3 of Part 3 of Division 5 of Title 2. (2) Chapter 3 (commencing with Section 31450) of Part 3 of Division 4 of Title 3. (3) Any agreement between public retirement systems to provide reciprocity to members of the systems. (d) If a public employer, before January 1, 2013, offers a defined benefit pension plan that provides a defined benefit formula with a lower benefit factor at normal retirement age and results in a lower normal cost than the defined benefit formula required by this article, that employer may continue to offer that defined benefit formula instead of the defined benefit formula required by this article, and shall not be subject to the requirements of Section 7522.10 for pensionable compensation subject to that formula. However, if the employer adopts a new defined benefit formula on or after January 1, 2013, that formula must conform to the requirements of this article or must be determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article and must be approved by the Legislature. New members of the defined benefit plan may only participate in the lower cost defined benefit formula that was in place before January 1, 2013, or a defined benefit formula that conforms to the requirements of this article or is approved by the Legislature as provided in this subdivision. (e) If a public employer, before January 1, 2013, offers a retirement benefit plan that consists solely of a defined contribution plan, that employer may continue to offer that plan instead of the defined benefit pension plan required by this article. However, if the employer adopts a new defined benefit pension plan or defined benefit formula on or after January 1, 2013, that plan or formula must conform to the requirements of this article or must be determined and certified by the retirement system's chief actuary and the system's board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article and must be approved by the Legislature. New members of the employer's plan may only participate in the defined contribution plan that was in place before January 1, 2013, or a defined contribution plan or defined benefit formula that conforms to the requirements of this article.  This subdivision shall not be construed to prohibit an employer from offering a defined contribution plan on or after January 1, 2013, either with or without a defined benefit plan, if the employer did not offer a defined contribution plan prior to that date.  (f) The Judges' Retirement System I and the Judges' Retirement System II shall not be required to adopt the defined benefit formula required by Section  7522.25 or 7522.30   7522.20 or 7522.25  or the compensation limitations defined in Section 7522.10. (g) This article shall not be construed to provide membership in any public retirement system for an individual who would not otherwise be eligible for membership under that system's applicable rules or laws. SEC. 2. Section 7522.25 of the Government Code is amended to read: 7522.25. (a) Each retirement system that offers a defined benefit plan for safety members of the system shall use one or more of the defined benefit formulas prescribed by this section. A member may retire for service under any of the formulas in this section after five years of service and upon reaching 50 years of age. (b) The Basic Safety Plan shall provide a pension at retirement for service equal to the percentage of the member's final compensation set forth opposite the member's age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member. Age at Retirement Fraction 50 ............................. 1.426 50 1/4.......................... 1.447 50 1/2.......................... 1.467 50 3/4.......................... 1.488 51 ............................. 1.508 51 1/4.......................... 1.529 51 1/2.......................... 1.549 51 3/4.......................... 1.570 52 ............................. 1.590 52 1/4.......................... 1.611 52 1/2.......................... 1.631 52 3/4.......................... 1.652 53 ............................. 1.672 53 1/4.......................... 1.693 53 1/2.......................... 1.713 53 3/4.......................... 1.734 54 ............................. 1.754 54 1/4.......................... 1.775 54 1/2.......................... 1.795 54 3/4.......................... 1.816 55 ............................. 1.836 55 1/4.......................... 1.857 55 1/2.......................... 1.877 55 3/4.......................... 1.898 56 ............................. 1.918 56 1/4.......................... 1.939 56 1/2.......................... 1.959 56 3/4.......................... 1.980 57 and over .................... 2.000 (c) The Safety Option Plan One shall provide a pension at retirement for service equal to the percentage of the member's final compensation set forth opposite the member's age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member. Age at Retirement Fraction 50 ............................... 2.000 50 1/4............................ 2.018 50 1/2............................ 2.036 50 3/4............................ 2.054 51 ............................... 2.071 51 1/4............................ 2.089 51 1/2............................ 2.107 51 3/4............................ 2.125 52 ............................... 2.143 52 1/4............................ 2.161 52 1/2............................ 2.179 52 3/4............................ 2.196 53 ............................... 2.214 53 1/4............................ 2.232 53 1/2............................ 2.250 53 3/4............................ 2.268 54 ............................... 2.286 54 1/4............................ 2.304 54 1/2............................ 2.321 54 3/4............................ 2.339 55................................ 2.357 55 1/4............................ 2.375 55 1/2............................ 2.393 55 3/4............................ 2.411 56................................ 2.429 56 1/4............................ 2.446 56 1/2............................ 2.464 56 3/4............................ 2.482 57 and over....................... 2.500 (d) The Safety Option Plan Two shall provide a pension at retirement for service equal to the percentage of the member's final compensation set forth opposite the member's age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member. Age at Retirement Fraction 50 ............................. 2.000 50 1/4.......................... 2.025 50 1/2.......................... 2.050 50 3/4.......................... 2.075 51 ............................. 2.100 51 1/4.......................... 2.125 51 1/2.......................... 2.150 51 3/4.......................... 2.175 52 ............................. 2.200 52 1/4.......................... 2.225 52 1/2.......................... 2.250 52 3/4.......................... 2.275 53 ............................. 2.300 53 1/4.......................... 2.325 53 1/2.......................... 2.350 53 3/4.......................... 2.375 54 ............................. 2.400 54 1/4.......................... 2.425 54 1/2.......................... 2.450 54 3/4.......................... 2.475 55 ............................. 2.500 55 1/4.......................... 2.525 55 1/2.......................... 2.550 55 3/4.......................... 2.575 56 ............................. 2.600 56 1/4.......................... 2.625 56 1/2.......................... 2.650 56 3/4.......................... 2.675 57 and over .................... 2.700 (e) On and after January 1, 2013, an employer shall offer one or more of the safety formulas prescribed by this section to new  employees   members  who are safety employees  eligible for membership in the system  . The formula offered shall be the formula that is closest to, and provides a lower benefit at 55 years of age than, the formula provided to members in the same retirement classification offered by the employer on December 31, 2012. (f) On and after January 1, 2013, an employer and its employees subject to Safety Option Plan One or Safety Option Plan Two may agree in a memorandum of understanding to be subject to Safety Option Plan One or the Basic Safety Plan, subject to the following: (1) The lower plan shall apply to members first employed on or after the effective date of the lower plan, and shall be agreed to in a memorandum of understanding that has been collectively bargained in accordance with applicable laws. (2) A retirement plan contract amendment with a public retirement system to alter a retirement formula pursuant to this subdivision shall not be implemented by the employer in the absence of a memorandum of understanding that has been collectively bargained in accordance with applicable laws. (3) An employer shall not use impasse procedures to impose the lower plan. (4) An employer shall not provide a different defined benefit for nonrepresented, managerial, or supervisory employees than the employer provides for other public employees, including represented employees, of the same employer who are in the same membership classifications. (g) Pensionable compensation used to calculate the defined benefit shall be limited as described in Section 7522.10. SEC. 3. Section 7522.30 of the Government Code is amended to read: 7522.30. (a) This section shall apply to all public employers and to all new members. Equal sharing of normal costs between public employers and public employees shall be the standard. The standard shall be that employees pay at least 50 percent of normal costs and that employers not pay any of the required employee contribution. (b) The "normal cost rate" shall mean the annual actuarially determined normal cost for the defined benefit plan of an employer expressed as a percentage of payroll. (c) New  employees employed on and after January 1, 2013,   members employed  by those public employers defined in paragraphs (2) and (3) of subdivision (i) of Section 7522.04, the  Legislature, the  California State University, and the judicial branch who participate in a defined benefit plan shall have an initial contribution rate of at least 50 percent of the normal cost rate for that defined benefit plan, rounded to the nearest quarter of 1 percent, or the current contribution rate of similarly situated employees, whichever is greater  , if the greater current contribution rate has been agreed to pursuant to the requirements in subdivision (e)  . This contribution shall not be paid by the employer on the employee's behalf. (d) Notwithstanding subdivision (c), once established, the employee contribution rate described in subdivision (c) shall not be adjusted on account of a change to the normal cost rate unless the normal cost rate increases or decreases by more than 1 percent of payroll above or below the normal cost rate in effect at the time the employee contribution rate is first established or, if later, the normal cost rate in effect at the time of the last adjustment to the employee contribution rate under this section. (e) Notwithstanding subdivision (c), employee contributions may be more than one-half of the normal cost rate if the increase has been agreed to through the collective bargaining process, subject to the following conditions: (1) The employer shall not contribute at a greater rate to the plan for nonrepresented, managerial, or supervisory employees than the employer contributes for other public employees, including represented employees, of the same employer who are in related retirement membership classifications. (2) The employer shall not increase an employee contribution rate in the absence of a memorandum of understanding that has been collectively bargained in accordance with applicable laws. (3) The employer shall not use impasse procedures to increase an employee contribution rate above the rate required by this section. (f) If the terms of a contract, including a memorandum of understanding, between a public employer and its public employees, that is in effect on January 1, 2013, would be impaired by any provision of this section, that provision shall not apply to the public employer and public employees subject to that contract until the expiration of that contract. A renewal, amendment, or any other extension of that contract shall be subject to the requirements of this section. SEC. 4. Section 7522.43 of the Government Code is amended to read: 7522.43. (a) A public employer shall not offer a plan of replacement benefits for members and any survivors or beneficiaries whose retirement benefits are limited by Section 415 of Title 26 of the United States Code. This section shall apply to new  employees   members  . (b) A public retirement system may continue to administer a plan of replacement benefits for employees first hired prior to January 1, 2013. (c) A public employer that does not offer a plan of replacement benefits prior to January 1, 2013, shall not offer such a plan for any employee on or after January 1, 2013. (d) A public employer that offers a plan of replacement benefits prior to January 1, 2013, shall not offer such a plan to any additional employee group to which the plan was not provided prior to January 1, 2013. SEC. 5. Section 7522.66 of the Government Code is repealed.  7522.66. (a) A safety member of a public retirement system who retires for industrial disability shall receive an industrial disability retirement benefit equal to the greater of the following: (1) Fifty percent of his or her final compensation attributable to the defined benefit plan, plus an annuity purchased with his or her accumulated contributions, if any. (2) A service retirement allowance, if he or she is qualified for service retirement. (3) An actuarially reduced factor, as determined by the actuary, for each quarter year that his or her service age is less than 50 years of age, multiplied by the number of years of safety service subject to the applicable formula, if he or she is not qualified for service retirement. (b) This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date.  SEC. 6. Section 20281.5 of the Government Code is amended to read: 20281.5. (a) Notwithstanding Section 20281, a person who becomes a state miscellaneous member or state industrial member of the system on or after the effective date of this section because the person is first employed by the state and qualifies for membership shall be subject to the provisions of this section. (b) Members subject to this section shall not accrue credit for service in the system and shall not make employee contributions to the system, including the contributions set forth in Section 20677.4, for employment with the state until the first day of the first pay period commencing 24 months after becoming a member of the system. (c) Notwithstanding subdivision (a), this section shall not apply to any of the following: (1) Persons who are already members or annuitants of the system at the time they are first employed by the state. (2) Employees of the California State University, or the legislative or judicial branch of state government. (3) Members of the Judges' Retirement System, the Judges' Retirement System II, the Legislators' Retirement System, the State Teachers' Retirement System, or the University of California Retirement Plan. (4) Persons who are members of a reciprocal retirement system and whose employment was subject to a reciprocal retirement system within the six months prior to membership in this system. (5) Persons whose service is not included in the federal system. (6) Persons who are employed by the Department of the California Highway Patrol as students at the department's training school established pursuant to Section 2262 of the Vehicle Code. (7) Persons who had ceased to be members pursuant to Section 20340 or 21075. (8) Persons who are National Guard members pursuant to Section 20380.5. (d) A separation of employment does not alter the 24-month period described by subdivision (b). A member who separates from state employment shall remain subject to this section if he or she returns to state employment as a state miscellaneous or state industrial member within that 24-month period. (e) Any regulations adopted by the board to implement the requirements of this section shall not be subject to the review and approval of the Office of Administrative Law, pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3. The regulations shall become effective immediately upon filing with the Secretary of State. (f) This section shall not apply to any person who first becomes a state miscellaneous member or a state industrial member on or after  July   January  1, 2013. SEC. 7. Section 21400 of the Government Code is amended to read: 21400. (a) A safety member who retires on or after January 1, 2013, for industrial disability shall receive a disability retirement benefit equal to the greater of the following: (1) Fifty percent of his or her final compensation, plus an annuity purchased with his or her accumulated  additional  contributions, if any. (2) A service retirement allowance, if he or she is qualified for service retirement. (3) An actuarially reduced factor, as determined by the actuary, for each quarter year that his or her service age is less than 50 years, multiplied by the number of years of safety service subject to the applicable formula, if he or she is not qualified for service retirement. (4) Nothing in this section shall require a member to receive a lower benefit than he or she would have received prior to January 1, 2013, as the law provided prior to that date. (b) This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date. SEC. 8. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to address technical problems and avoid costly and unnecessary changes to retirement systems in implementing the California Public Employees' Pension Reform Act of 2013 (Chapter 296 of the Statutes of 2012), it is necessary for this act to take effect immediately.