SB 454

Bill Subjects

Abstract

The Public Employees' Medical and Hospital Care Act (PEMHCA) , which is administered by the Board of Administration of the Public Employees' Retirement System, prescribes methods for calculating the state employer contribution for postemployment health care benefits for eligible retired public employees and their families and for the vesting of these benefits. PEMHCA requires the employer contribution for an employee or annuitant who is employed by the state or retired from state service to be adjusted by the Legislature in the annual Budget Act, as specified. PEMHCA prescribes different ways of calculating the employer contributions for employees and annuitants depending on date of hire, years of service, and bargaining unit. This bill, for state employees who are first employed and become members of the retirement system on or after January 1, 2018, would limit the employer contribution for annuitants to 80% of the weighted average of the health benefit plan premiums for an active employee enrolled for self alone, during the benefit year to which the formula is applied, for the 4 health benefit plans with the largest state civil service enrollment, as specified. The bill would similarly limit the employer contribution for an enrolled family member of an annuitant to 80% of the weighted average of the additional premiums required for enrollment of those family members during the benefit year to which the formula is applied and would provide the same limit on employer contributions for annuitants enrolled in Medicare health benefit plans. The bill would provide that if its provisions are in conflict with regard to an employee covered by a memorandum of understanding, the memorandum of understanding would control until it expires. The bill would prescribe the percentage of the employer contribution payable for postemployment health benefits based on the number of completed years of credited state service at retirement, with 50% after 15 credited years of service and 100% after 25 or more years of service, for an employee of the state, the California State University, and the Legislature, who is employed by the state for the first time and who becomes a state member of the Public Employees' Retirement System on or after January 1, 2018. PEMHCA establishes the Public Employees' Contingency Reserve Fund for the purpose of funding health benefits and funding administrative expenses. PEMHCA establishes the Annuitants' Health Care Coverage Fund, which is continuously appropriated, for the purpose of prefunding health care coverage for annuitants, including administrative costs. PEMHCA defines "prefunding" for these purposes. Existing law requires the state and employees of State Bargaining Unit 2, 7, 9, 10, or 12 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2019, and prescribes schedules of contribution percentages in this regard. For the state and employees of State Bargaining Unit 6, the date for reaching the goal is July 1, 2018. This bill would require the state, on and after January 1, 2018, to assume all responsibility for prefunding retiree health care. The bill would require the state to prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100% of the actuarially determined normal costs by July 1, 2019. The bill would require the state to pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller, as specified, with the goal of paying 50% of the actuarially determined cost of these liabilities by January 1, 2022, and 100% of the actuarially determined cost of these liabilities by January 1, 2026. The bill would require the Controller, by January 10 of each year, to provide a report to specified committees of the Legislature that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described above.