Bill Text: CA AB1987 | 2009-2010 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Public retirement: final compensation: computation:

Spectrum: Moderate Partisan Bill (Democrat 8-1)

Status: (Vetoed) 2010-09-30 - Vetoed by Governor. [AB1987 Detail]

Download: California-2009-AB1987-Introduced.html

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BILL NUMBER: AB 1987	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Hernandez

                        FEBRUARY 17, 2010

   An act to add Section 7500.5 to the Government Code, relating to
public retirement systems.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1987, as introduced, Hernandez. Public retirement: final
compensation: computation: retirees.
   The Public Employees' Retirement Law (PERL) creates the Public
Employees' Retirement System (PERS), which provides a defined benefit
to its members based on age at retirement, service credit, and final
compensation. PERL defines "final compensation" for purposes of
calculating a member's retirement allowance. The State Teachers'
Retirement Law and the retirement laws for county employees and city
employees also provide for a defined benefit based on age at
retirement, service credit, and final compensation.
   This bill would provide, effective July 1, 2011, that any change
in salary, compensation, or remuneration principally for the purpose
of enhancing a member's benefits would not be included in the
calculation of a member's final compensation for purposes of
determining that member's defined benefit. The bill would require the
board of each state and local public retirement system to establish,
by regulation, accountability provisions that would include an
ongoing audit process to ensure that a change in a member's salary,
compensation, or remuneration is not made principally for the purpose
of enhancing a member's retirement benefits. This bill would limit
the calculation of a member's final compensation to an amount not to
exceed the average increase in compensation received within the final
compensation period and the 2 preceding years by employees in the
same or a related group as that member. This bill would also require
a board of each state and local public retirement system to
establish, by regulation, a requirement that a retired person may not
perform services for any employer covered by a state or local
retirement system until that person has been separated from service
for a period of at least 6 months.
   This bill includes Legislative findings expressing the public
purpose that would be served by the enactment of this bill and
expresses the Legislature's intent to enact legislation that would
ensure that these provisions are implemented by all state and local
public retirement systems.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  (a) The Legislature finds and declares that:
   (1) State and local public retirement boards have been authorized
under the law to administer retirement systems that provide adequate,
secure retirement benefits for beneficiaries who dedicate their life'
s work to public service.
   (2) Employees partner with their public agency employers to fund
this benefit.
   (3) Any manipulation of those benefits creates harm for the
employees, beneficiaries, employers, and taxpayers and should not be
permitted.
   (b) The Legislature further finds and declares that the efficacy
of the systems is threatened by the behavior of those who seek to
unfairly and unjustifiably enhance or "spike" their pensions.
   (c) Neither the Legislature nor the courts ever anticipated a
circumstance where the application of the retirement law would result
in a method that permits inequitable application of compensation
rules in order to enhance an individual's retirement allowance.
   (d) It is the responsibility of the Legislature to provide
guidance to every retirement system so they can determine the proper
elements that go into calculating a member's retirement benefit as
recognized by the laws governing the retirement system.
   (e) Retirement systems must employ sound principals that provide
consistent treatment of compensation throughout a member's career and
consistent treatment of compensation among a class of employees.
   (f) In order to provide consistent treatment across the systems,
the reporting system between the retirement system and each
participating employer must be sufficiently precise so as to enable
the retirement system to distinguish between items of remuneration
that are and are not properly included in a member's final
compensation.
  SEC. 2.  Section 7500.5 is added to the Government Code, to read:
   7500.5.  (a) In order to safeguard the integrity and soundness of
all public retirement systems, assure prompt delivery of benefits and
related services to the participants and their beneficiaries, and
minimize employer expenses, all state and local public retirement
systems shall, at a minimum, administer their systems in compliance
with the provisions of this section. Nothing in this section shall be
construed to limit the Legislature's authority to adopt more
restrictive provisions applicable to a state or local public
retirement system.
   (b) The board of each state and local public retirement system
shall establish, by regulation, accountability provisions applicable
to participating employers. Those accountability provisions shall
include an ongoing audit process to validate compliance with the
provisions of this section and penalty provisions for noncompliance
with the provisions of this section, including, but not limited to,
untimely or inaccurate submissions of any information the board may
require in the administration of the system.
   (c) Any payrate, salary special compensation, or other
remuneration determined by the board of a state or local public
retirement system to have been paid for the principal purpose of
enhancing a member's benefits under that system shall not be included
in any calculation of compensation earnable. Any presumption by the
board that salary or other remuneration was paid for the principle
purpose of enhancing a member's benefit under the system may be
rebutted by the member or by the employer on behalf of the member.
Upon receipt of sufficient evidence to the contrary, a presumption by
the board that salary or other remuneration was paid for the
principal purpose of enhancing a member's benefits under that system
may be reversed.
   (d) Cash conversions of accrued employee benefits in amounts that
exceed the amount that is both earned and payable to the member
during a pay period shall not be credited to or included in any
calculation of compensation earnable by any state or local public
retirement system.
   (e) Final settlement or termination pay or similar payment that is
received by a member in anticipation of retirement, upon retirement,
or separation from employment, shall not be credited to or included
in any calculation of compensation earnable by any state or local
public retirement system.
   (f) A retired person, who has not reinstated following retirement,
whether or not he or she has attained the normal retirement age,
shall have a bona fide separation in service before performing
service for any employer covered by a state or local retirement
system as an employee, through a third party, or as an independent
contractor. A board of a state or local retirement system shall
establish, by regulation, the criteria under which a bona fide
separation is satisfied. A bona fide separation established by the
system shall not be less than six months.
   (g) Compensation credited to, or included in, any calculation of
compensation earnable for an employee who is not in a group or class
shall not exceed, during the final compensation period as well as two
years immediately preceding the final compensation period, the
average increase in compensation earnable during the same period for
all employees of that same employer who are in the closest related
group or class.
   (h) For the purposes of this section, the following definitions
shall apply:
   (1) "A group or class of employees" means a number of employees of
the same employer considered together because they share job
similarities, work location, collective bargaining unit, or other
logical work grouping. Under no circumstance shall one employee be
considered a group or class.
   (2) "Payrate or salary" means the normal monthly rate of pay or
monthly base pay of the member paid in cash and pursuant to publicly
available pay schedules to similarly situated members of the same
group or class of employment for services rendered on a full-time
basis during normal working hours.
   (3) "Payrate or salary for a member who is not in a group or class"
means the monthly rate of pay or monthly base pay or salary of the
member, paid in cash and pursuant to publicly available pay
schedules, for services rendered on a full-time basis during normal
working hours, subject to the limitations of subdivision (g).
   (4) "Special compensation" means a payment received for special
skills, knowledge, abilities, work assignment, workdays or hours, or
other work conditions.
   (5) "Compensation earnable" means the salary or payrate, special
compensation, or other remuneration of the member used in the
determination of final compensation for the purposes of calculation
of a member's retirement benefit.
  SEC. 3.  (a) It is the intent of the Legislature to enact changes
in the Education Code applicable to the State Teachers' Retirement
System (Part 13 (commencing with Section 22000) of Title 1 of the
Education Code) to implement the provisions established in Section
7500.5 of the Government Code.
   (b) It is the intent of the Legislature to enact changes in the
Public Employee's Retirement Law (Part 3 (commencing with Section
20000) of Division 5 of Title 2 of the Government Code) to implement
the provisions established in Section 7500.5 of the Government Code.
   (c) It is the intent of the Legislature to enact changes in the
County Employees Retirement Law (Part 3 (commencing with Section
31200) of Division 4 of Title 3 of the Government Code) to implement
the provisions established in Section 7500.5 of the Government Code.
   (d) It is the intent of the Legislature to enact changes to
Chapter 2 (commencing with Section 45300) of Division 5 of Title 4 of
the Government Code, governing retirement plans established by
cities, to implement the provisions established in Section 7500.5 of
the Government Code.
   (e) It is the intent of the Legislature to enact changes to
Chapter 4 (commencing with Section 50800) of Part 1 of Division 1 of
Title 5 of the Government Code, governing police officers' pension
fund laws and firemen's pension fund laws, to implement the
provisions established in Section 7500.5 of the Government Code.
  SEC. 4.  The provisions of this act shall be operative for all
active and future members of the applicable retirement systems
commencing on July 1, 2011.