Public retirement systems: defined benefit plans: funding.
The primary impact of AB 739 is on the financial management of public retirement plans. By raising the funding threshold required for suspending contributions, the bill is aimed at strengthening the fiscal health of defined benefit plans. Supporters may argue that this change protects the long-term sustainability of public pensions, ensuring that these systems do not risk becoming underfunded. However, it may also generate pushback from those who view the stricter funding requirements as potentially hindering the flexibility of public retirement boards in managing contributions and addressing surplus funding situations effectively.
Assembly Bill 739, introduced by Assembly Member Lackey, amends Section 7522.52 of the Government Code concerning public employee retirement systems. The bill aims to modify the existing regulations established under the California Public Employees Pension Reform Act of 2013 (PEPRA), specifically addressing how contributions to defined benefit plans are managed by public employers. Under current law, public employers' contributions, combined with employee contributions, must meet at least the normal cost rate for these plans in any fiscal year. This legislation proposes to revise the conditions under which contributions may be suspended, increasing the threshold funding level from over 120% to over 130% to allow for such suspensions.
A notable point of contention surrounding AB 739 lies in its implications for public retirement system governance. By altering the conditions for contribution suspension, critics might contend this bill could unnecessarily restrict pension boards’ ability to act in the best interests of their beneficiaries during times of surplus funding. Additionally, the prospective increase in required funding levels may spark debates on how best to balance fiscal responsibility with the immediate financial pressures faced by public employers, particularly in budget-capped environments.