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

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-Amended.html

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BILL NUMBER: AB 1987	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 15, 2010

INTRODUCED BY   Assembly Member  Hernandez   Ma

    (   Principal coauthor:   Assembly Member
  Buchanan   ) 
    (   Principal   coauthors:  
Senators   Correa   and Simitian   ) 

    (   Coauthor:   Senator  
DeSaulnier   ) 

                        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 amended,  Hernandez   Ma  .
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  , which applies to specified school employees,
 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  generally  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   180 days  .
   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. 
   This bill would, except as otherwise specified, provide that its
provisions would become operative on July 1, 2011. This bill would
further provide that its provisions would not become operative unless
SB 1425 is also enacted and takes effect on or before January 1,
2011. 
   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  
to participants  who dedicate their life's work to public
service  , and their beneficiaries  .
   (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
  that: 
    (1)     The  efficacy of the 
retirement  systems is threatened by the behavior of those who
seek to unfairly and unjustifiably enhance or "spike" their pensions.

   (c) 
    (2)  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) 
    (3)  It is the responsibility of the Legislature to
provide guidance to every retirement system so  they
  that each system  can determine the proper
elements that go into calculating a member's retirement benefit as
recognized by the laws governing  the   each
 retirement system. 
   (e) 
    (4)  Retirement systems must employ sound 
principals   principles  that provide consistent
treatment of compensation  earnable  throughout a member's
career and consistent treatment of compensation among  a
class   all classes  of employees. 
   (f) 
    (5)  In order to provide consistent treatment across the
 retirement  systems, the reporting  system between
the   procedures used by each  retirement system
and  each   its  participating 
employer   employers  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. 
   (c) The Legislature further finds and declares that consistent
administration of state and local public retirement systems is a
matter of statewide concern.  
   (d) The Legislature further finds and declares that the procedures
contained in this act provide the appropriate method for resolving
the inequitable application of compensation rules, and therefore,
provide for the consistent administration of state and local
retirement systems that is in the public's best interest. 

  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. 
   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
public retirement systems, assure prompt delivery of benefits and
related services to the participants and their beneficiaries, and
minimize employer expenses, state and local public retirement systems
shall administer retirement benefits in accordance with the
principles articulated in this section. Nothing in this section shall
be construed to limit the Legislature's authority to adopt more
restrictive benefit provisions applicable to a state or local public
retirement system.
   (b) The board of each state and local public retirement system
shall establish, by statute or regulation, accountability provisions
that shall include an audit process to ensure compliance with the
principles articulated in the provisions of this section. The
accountability provisions shall be enforceable by the imposition of
monetary penalties or fees, including, but not limited to, untimely
or inaccurate submissions of any information that 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 retirement benefits under that system shall not
be included in compensation earnable. Where the board of a state or
local public retirement system determines that payrate, salary,
special compensation, or other remuneration was paid for the
principal purpose of enhancing a member's benefit, the member or the
employer may present evidence to the contrary. Upon receipt of
sufficient evidence to the contrary, a board may reverse its
determination that payrate, salary, special compensation, or other
remuneration was paid for the principal purpose of enhancing a member'
s retirement benefits.
   (d) Cash conversions of accrued employee benefits in amounts that
exceed the amount that is both earned and payable to the member
during the member's applicable final compensation measurement period
shall not be credited to, or included in, compensation earnable by
any state or local public retirement system.
   (e) Final settlement or termination pay or any similar payment
that is received by a member in anticipation of retirement, or
separation from employment, or upon retirement, shall not be included
in compensation earnable by any state or local public retirement
system.
   (f) A retired person, who has not reinstated following retirement,
shall have a separation in service for a period of at least 180 days
before performing service for any employer covered by the state or
local retirement system from which he or she retired, whether as an
employee, through a third party, or as an independent contractor.
This requirement shall apply to all persons who retire on and after
January 1, 2011.
   (g) Any increase in 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 similarly situated members in
the closest related group or class of that same employer.
   (h) For the purposes of implementing this section, all state or
local public retirement systems shall have terms or definitions
consistent with the following:
   (1) "A group or class" 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 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, 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" includes a payment received for special
skills, knowledge, abilities, work assignment, workdays or hours, or
other work conditions.
   (5) "Compensation earnable" includes payrate, salary, special
compensation, or other remuneration, or any combination of the
foregoing, of the member. 
   SEC. 3.    Except as otherwise specifically provided,
the provisions of this act shall become operative on July 1, 2011.

   SEC. 4.    This bill shall become operative only if
Senate Bill 1425 of the 2009-10 Regular Session is enacted and takes
effect on or before January 1, 2011.