SCA 13

Bill Subjects

Abstract

(1) The California Constitution provides that the retirement board of a public pension or retirement system has plenary authority and fiduciary responsibility for investment of moneys and administration of the system. Existing law establishes various public agency retirement systems, including the Public Employees' Retirement System (PERS) , the State Teachers' Retirement System (STRS) , the Judges' Retirement System II, and various county retirement systems pursuant to the County Employees Retirement Law of 1937, among others, and these systems provide defined pension benefits to public employees based on age, service credit, and final compensation. The California Constitution permits a city or county to adopt a charter for purposes of its governance that supersedes general laws of the state in regard to specified subjects, including compensation of city or county employees. The California Constitution also establishes the University of California as a public trust with full powers of organization and government, subject only to specified limitations. Charter cities and the University of California may establish pension plans under their respective independent constitutional authority. This measure would provide that any change to the formula used to calculate the pension benefits of a member of a public retirement system, as defined, that results in an increase in the member's pension benefits shall apply only to service performed on and after the operative date of the change, and would prohibit the retroactive application of that change. The measure also would require any retirement plan for public employees hired on and after January 1, 2013, to expressly provide that the public employer retains the right to prospectively change retirement benefits, as specified. The measure would require, with respect to public employees first hired on and after January 1, 2013, the governing body of a public retirement system to annually set an actuarially sound contribution rate for any defined benefit plan based on the recommendations of an independent plan actuary. The measure would permit a public employer to offer those employees a defined benefit plan only as part of a uniform hybrid retirement plan, as specified, and only if the Legislature has established the hybrid retirement plan and the defined pension benefits that may be provided, as specified. The measure would require the employer and employee to share equally the defined benefit plan costs. Any benefits under a defined benefit plan would be based on a member's highest annual base pay averaged over any consecutive 36-month period. The measure would increase, beginning 30 days after its effective date, employee contribution rates for members of defined benefit plans by at least an additional 5% of current salary until the pension fund of the plan is 90% funded, as determined by an independent plan actuary. The bill would require the funded status of a defined benefit plan to be calculated annually, as specified. (2) Existing state and local public employee retirement systems are funded by investment returns and employer and employee contributions. The California Constitution provides that the retirement board of a public pension or retirement system has the exclusive power to provide for actuarial services in order to assure the competency of the assets of the system. Existing law, with respect to PERS, requires the Governor to include in the annual Budget Act the contribution rates submitted by the system actuary of the liability on account of employees of the state. This measure would permit an actuary to authorize a reduction or suspension of employer contributions to a defined benefit plan for a fiscal year only if the actuary determines that the plan has a surplus of actuarially determined plan assets sufficient to fund 120% of the employer's share of estimated plan normal costs for the next 30 years. The measure would also prohibit an employer from paying the employee contribution to a defined benefit plan for any employee, would require that an employee's rate of contributions represent a reasonable percentage of the normal costs of the plan, and would prohibit that rate from being less than the contribution rate applicable to his or her membership classification on July 1, 2012. This measure would also require STRS to set an actuarially sound contribution rate to be paid annually to the system, to be used as a basis for increasing the state's contribution to that system. (3) Existing law permits members of PERS, STRS, and county, city, and district retirement systems that have adopted specified provisions, to purchase up to 5 years of additional retirement service credit by contributing an amount that, at the time of purchase, provides for the resulting increase in employer liability. This measure would prohibit a public employer or public retirement system from offering, or entering into, a contract by which a member may make contributions to receive additional retirement service credit, as described above. (4) Existing law generally prohibits any person who has retired from being employed in any capacity with the same public employer unless he or she is first reinstated from retirement, except as authorized. This measure would, on or after January 1, 2013, prohibit a person from being employed by, or providing personal services as a contractor for, a public employer while he or she is receiving pension payments from a public retirement system. (5) Existing law provides that any elected public officer who takes public office, or is reelected to public office, on or after January 1, 2006, who is convicted of any specified felony arising directly out of his or her official duties, forfeits all rights and benefits under, and membership in, any public retirement system in which he or she is a member, effective on the date of final conviction, as specified. This measure would require that a public employee, as defined, who is convicted of any felony for conduct related to his or her office or employment on or after the effective date of this measure forfeit that portion of the rights and benefits to which he or she is entitled in any public retirement system in which he or she is a member that accrued on or after the date of commission of the crime, and not accrue further benefits, as specified. (6) The Public Employees' Medical and Hospital Care Act, which is administered by the Board of Administration of PERS, establishes various percentages for employer contributions for health care benefits provided under the approved health benefit plan in which the employee or annuitant is enrolled. This measure would require public employees to pay an increased amount, that is proportional to employee base pay, as specified, for employee health care benefits. The measure would also require a public employee hired on and after January 1, 2013, to contribute to the cost of postretirement health care benefits, in proportion to the employee's base pay and years of service, as specified, if the public employer provides those benefits. The bill would prohibit employees hired on and after January 1, 2013, from being eligible for full postretirement health care benefits until the employee has 25 years of service. The measure would provide that these provisions shall not impair existing collective bargaining agreements, but would apply upon expiration of those agreements. (7) The measure would declare that the above-described provisions are self-executing and would require any bill, ordinance, resolution, or other measure enacted to implement any of those provisions to be approved by a 23 vote of the membership of each house of the Legislature, the Regents of the University of California, or the governing body of the public employer. The measure would also require any bill enacted to change public employee retirement benefits or health care benefits to be approved by a 23 vote of the membership of each house of the Legislature. The measure would declare that the above-described provisions would not limit any disability, death, or survivor benefits. (8) The California Constitution requires that the moneys to be applied by the state for the support of school districts and community college districts be not less than the greatest of 3 amounts computed pursuant to specified tests. The Constitution provides that the first of those tests is the amount which, as a percentage of General Fund revenues which may be appropriated pursuant to Article XIIIB, equals the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in fiscal year 1986–87. The Constitution provides that the 2nd and 3rd tests are the amount required to ensure that the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIIIB and allocated local proceeds of taxes shall not be less than the total amount from these sources in the prior fiscal year, excluding specified revenues, and adjusted for specified factors. Existing law requires the state to appropriate a sum equal to 8% of creditable compensation, as specified, to be deposited in the Teachers' Retirement Fund, for the initial purpose of financing the Defined Benefit Program of the State Teacher's Retirement System. Existing law does not count these appropriations toward meeting the state's constitutional obligation to annually provide funding for the support of school districts and community college districts, as described above. This measure would specify, for purposes of the first test, that the "General Fund revenues appropriated for school districts and community college districts, respectively, in the 1986–87 fiscal year" excludes General Fund revenues appropriated to the Controller for transfer to the Teachers' Retirement Fund. The measure would specify, for the 2013–14 fiscal year, for purposes of the 2nd and 3rd tests, that "total allocations from General Fund proceeds of taxes appropriated pursuant to Article XIIIB and allocated local proceeds of taxes" for the prior fiscal year excludes General Fund revenues appropriated for purposes of the State Teachers' Retirement System. (9) The California Constitution provides that the retirement board of a public pension or retirement system has the exclusive power to provide for actuarial services in order to assure the competency of the assets of the system. This measure would delete those provisions and would instead require that the retirement board of a public pension or retirement system select an independent plan actuary, to serve for a term of not less than 12 years, from a specified list to be established by the California Actuarial Advisory Panel. The measure would permit, following the initial term of service, the independent actuary to be appointed by the retirement board to subsequent terms. The measure would prohibit the reduction of the independent plan actuary's salary and benefits during his or her term of office, and would require his or her salary agreement to provide for annual increases in pay, except as specified. The measure would limit the circumstances under which the independent plan actuary may be removed from office. The measure would grant an independent plan actuary exclusive authority to provide actuarial services and would require a retirement board to adopt the actuary's recommendations without amendment. The measure would require the actuary to be guided by prevailing actuarial standards, any applicable governmental accounting standards that are consistent with prevailing actuarial standards, and any contracts related to the required funding of the system, and to seek to maximize retirement security and minimize the employer's long-term cost. The measure would provide for the removal of plan actuaries who were not chosen pursuant to its requirements, and would require the retirement board of a public pension or retirement system to ensure that the independent plan actuary has sufficient staff and budgetary resources to perform all of his or her required duties. (10) The California Constitution prohibits the number, terms, and method of selection or removal of members of the retirement board of a public pension or retirement system, which includes in its composition elected employee members, from being changed, amended, or modified by the Legislature from those that were required by law or otherwise in effect on July 1, 1991, unless the change, amendment, or modification enacted by the Legislature is ratified by a majority vote of the electors of the jurisdiction in which the participants of the system are or were, prior to retirement, employed. This measure would additionally require 23 of the elected or appointed members of the retirement board of a public pension or retirement system to have demonstrated expertise in the financial, legal, accounting, or health care fields and would prohibit them from being members of that system or from having immediate family members who are members of that system. The measure would authorize the Legislature to prescribe the criteria and process for selecting those elected or appointed members by a statute enacted by a 23 vote of the membership of each house. (11) The measure would provide that if the Attorney General fails to defend the constitutionality of its provisions, following its approval by the voters, a taxpayer may intervene and participate for that purpose in any court action challenging its constitutionality, and the fees and costs of defending the action would be a charge on funds appropriated to the Attorney General.