SB 1297

Bill Subjects

Abstract

(1) Existing law creates various public employee retirement systems in the state, including the Public Employees' Retirement System, the State Teachers' Retirement System, the Judges' Retirement System, the Judges' Retirement System II, county and district retirement systems created pursuant to the County Employees Retirement Law of 1937, the University of California Retirement Plan, various transit district retirement systems, and other independent public retirement systems. These systems, which are supported by member and employer contributions and investment earnings, may provide defined benefits to their members based on final compensation, credited service, and age at retirement, subject to certain variations. This bill would revise the provision of pension and other benefits to members of all state or local public retirement systems. The bill would apply its provisions prospectively to any member of a state or local public retirement system who is employed upon the date of its enactment and to any person who may be employed and become a member thereafter. The bill would void any limit on a pension that prohibits the pension from exceeding a percentage of final compensation, as specified. The bill would prohibit a local entity from establishing a deferred retirement option program, as described, and if a local entity has established a deferred retirement option program, whether or not the program is closed to new participants, it would be required to disenroll any participating employees and close the program. With regard to any member of a state or local public retirement system, the bill would require that final annual compensation used for purposes of ascertaining any pension or benefit be calculated as an average of the member's 3 highest earning years. The bill would prohibit, for any method of calculating a pension that is based on fractional percentage of final compensation multiplied by years of service with respect to a particular age at retirement, that fractional percentage from exceeding 2.7%. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities. (2) Existing law, the Public Employees' Retirement Law (PERL) , creates the Public Employees' Retirement System (PERS) and authorizes local entities to join PERS as contracting agencies for the provision of benefits to their employees. Existing law authorizes retirement systems to enter into agreements to provide certain reciprocal benefits to employees who are employed by other agencies that are parties to the agreement if the employees meet specified requirements, a practice commonly referred to as reciprocity. Reciprocity provides for the application of the final compensation paid by a subsequent employer to service provided to a prior employer. PERL provides that a public agency that has agreed to reciprocity with PERS also has reciprocity with all other agencies that have entered into those agreements with PERS, among others. PERL requires the Board of Administration of PERS to ensure that a contracting agency that creates a significant increase in actuarial liability as a result of increased compensation paid to a nonrepresented employee bears the associated liability, except as specified, including a portion that would otherwise be borne by another contracting agency. PERL requires the system actuary to assess an increase in liability, in this regard, to the employer that created it at the time the increase is determined and to make adjustments to that employer's contribution rates to account for the increased liability. This bill would require that an agency participating in PERS that increases the compensation of a member who was previously employed by a different agency to bear all actuarial liability for the action, if it results in an increased actuarial liability beyond what would have been reasonably expected for the member. The bill would require, in this context, that the increased actuarial liability be in addition to reasonable compensation growth that is anticipated for a member who works for an employer or multiple employers over an extended time. The bill would require, if multiple employers cause increased liability, that the liability be apportioned equitably among them. The bill would apply to an increase in actuarial liability, as specified, due to increased compensation paid to an employee on and after January 1, 2021.