Bill Text: CA SB1297 | 2019-2020 | Regular Session | Introduced

California Senate Bill 1297 (Prior Session Legislation)

Introduced

Bill Title: Public employees’ retirement.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2020-03-05 - Referred to Com. on L., P.E. & R. [SB1297 Detail]

Download: California-2019-SB1297-Introduced.html

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill

No. 1297

Introduced by Senator Moorlach

February 21, 2020

An act to add Sections 7522.03 and 20792 to the Government Code, relating to public employees’ retirement.

LEGISLATIVE COUNSEL'S DIGEST

SB 1297, as introduced, Moorlach. Public employees’ retirement.

(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.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Section 7522.03 is added to the Government Code, to read:

7522.03.

(a) (1) Notwithstanding any other law, this section shall apply to all state or local public retirement systems and to their participating employers. Any exceptions otherwise provided by this article to a particular entity and its retirement system, including, but not limited to, entities described in Section 9 of Article IX of, and Sections 4 and 5 of Article XI of, the California Constitution, shall not apply.

(2) This section shall apply prospectively to any member of a state or local public retirement system that is employed upon the date of its enactment and to any person who may be employed and become a member thereafter.

(b) Any limit on a pension that prohibits the pension, whether or not in conjunction with other factors, such as a service retirement annuity or a prior service pension, from exceeding a percentage of final compensation is hereby void and shall not be applied in calculating the pension or function as a limitation on the pension.

(c) (1) A local entity shall not establish a deferred retirement option program as described in Article 11.5 (commencing with Section 31770) of Chapter 3 of Part 3 of Division 4 of Title 3, or any similar program, designed to provide members who elect to participate in the program access to a lump sum or monthly payments for a specified period in addition to a monthly retirement allowance.

(2) A local entity that has established a deferred retirement option program as described in paragraph (1), whether or not the program is closed to new participants, shall disenroll any participating employees and close the program.

(d) For any member, the final annual compensation used for purposes of ascertaining any pension or benefit shall be calculated as an average of the member’s three highest earning years.

(e) 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, the fractional percentage used as a multiplier shall not exceed 2.7 percent.

(f) The Legislature finds and declares that this section addresses a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, this section applies to all cities, including charter cities.

SEC. 2.

Section 20792 is added to the Government Code, to read:

20792.

(a) For purposes of this section:

(1) “Agency” means the state, the university, a school employer, or a contracting agency.

(2) “Causative agency” means an agency that employs or has employed a member who was previously employed by an agency and for which the condition described in subdivision (b) is met.

(3) “Impacted agency” means an agency that experiences an increase in actuarial liability, as described in subdivision (b), as a result of actions by a causative agency or agencies.

(b) If an agency increases the compensation of a member who was previously employed by a different agency, and that results in an increased actuarial liability for the previous employer agency beyond what would have been reasonably expected for the member, the agency increasing the member’s compensation shall be subject to subdivision (c). The increased liability shall 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. Reasonable compensation growth shall take into account both the increase in, and value of, compensation.

(c) A causative agency shall bear all actuarial liability for an action described in subdivision (b) that otherwise would otherwise be borne by an impacted agency. If there are multiple causative agencies, the liability shall be apportioned equitably among them.

(d) This section shall apply to an increase in actuarial liability, as described in subdivision (b), due to increased compensation paid to an employee on and after January 1, 2021.