SCA 18

Bill Subjects

Abstract

(1) 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 amount of 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. These pension systems are funded by employee and employer contributions and investment returns. Existing law provides that public employee pension benefits are a form of deferred compensation, the right to which vests in the employee on contractual principles and is protected from impairment by the California Constitution and the United States Constitution. This measure would require each public retirement system, as defined in statute, to provide one or more hybrid pension plans meeting the requirements of this measure to each public employer that provides its employees a defined benefit pension plan administered by the public retirement system. The measure would require that a hybrid pension plan consist of a defined benefit component and a defined contribution or alternative plan design component, as specified. The measure would require, among other things, that a hybrid pension plan be designed with a goal of providing annually during retirement, based on a full career in public service, as defined, replacement income of 75% of a public employee's final compensation. The measure would require the Director of Finance, on or before January 1, 2013, to establish initial criteria and requirements for one or more hybrid pension plans, as specified. The measure would require, on and after July 1, 2013, each public retirement system to administer, and make available to each public employer that provides a defined benefit pension plan, one or more hybrid pension plans, except as specified, for public employees hired in each member classification in the public retirement system. The measure would require, for public employees hired on and after January 1, 2013, that retirement benefits be limited as provided, with regard to a defined benefit that is calculated with reference to final compensation, as specified, that final compensation be calculated using at least a consecutive 36-month period of service. The measure would establish various other limitations on the retirement benefits offered by public employers to public employees, regardless of the date the employees are hired, to the fullest extent permissible under the United States Constitution. In this regard, the measure would require that any change to a formula or benefit resulting in an increase in a member's pension benefits shall apply only to service performed on and after the operative date of the change and would require that employers and employees make required payments to fund the normal cost of benefits, as specified. The measure would require public employees to contribute at least 12 of the normal costs of any defined benefit plan and would prohibit an employer from paying an employee's required contributions, except as specified. The measure would also prohibit retirement systems from granting any nonqualified service credit, as specified. The measure additionally would require that a public employee, who is convicted of any felony arising from his or her official duties, forfeit retirement benefits based on certain statutes. The measure would limit the amount of service that a retired public employee may perform for public employers. The measure would provide that neither its provisions nor any related statutory provisions apply to, or otherwise restrict, death, survivor, and disability benefits, except as specified. The measure would provide that labor contracts that are in effect on November 7, 2012, and that are in conflict with the measure's provisions remain in effect until the expiration of the contract, at which time the requirements of the measure would apply. The measure would specify that terms used in those provisions are to be defined in a specified statute and would permit the Legislature to amend specified statutes referenced in the measure's provisions by a 23 vote of the membership of each house by a statute that is consistent with and furthers its purposes. The measure would provide that the activities, programs, and levels of service associated with its provisions are not state-mandated local programs requiring a subvention of funds. (2) The California Constitution prohibits the Legislature from changing the composition of the retirement board of a public pension or retirement system that included elected employee members as of a specified date, including the number, terms, and method of selection and removal of members, unless the change 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 require the composition of the retirement board of a public pension or retirement system to be modified, in the manner provided for in a specified statute, and would exempt that modification from ratification by the electors. (3) The measure would require the state to defend the constitutionality of its provisions.