Bill Text: CA SCA13 | 2011-2012 | Regular Session | Amended
Bill Title: Public employees' retirement.
Spectrum: Partisan Bill (Republican 4-0)
Status: (Introduced - Dead) 2012-01-11 - From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS. [SCA13 Detail]
Download: California-2011-SCA13-Amended.html
BILL NUMBER: SCA 13 AMENDED
BILL TEXT
AMENDED IN SENATE JANUARY 11, 2012
INTRODUCED BY Senators Cannella, Berryhill, Emmerson, and Harman
JUNE 28, 2011
A resolution to propose to the people of the State of California
an amendment to the Constitution of the State, by adding Section 12
to Article VII thereof, and by amending subdivision (b) of Section 8
of, amending subdivisions (b) and (f) of Section 17 of, and repealing
and adding subdivision (e) of Section 17 of, Article XVI thereof,
relating to public employees' benefits.
LEGISLATIVE COUNSEL'S DIGEST
SCA 13, as amended, Cannella. Public employees' retirement.
(1) The California Constitution provides that the retirement board
of a public pension or retirement system has plenary authority and
fiduciary responsibility for investment of moneys and administration
of the system. Existing law establishes various public agency
retirement systems, including the Public Employees' Retirement System
(PERS), the State Teachers' Retirement System (STRS), the Judges'
Retirement System II, and various county retirement systems pursuant
to the County Employees Retirement Law of 1937, among others, and
these systems provide defined pension benefits to public employees
based on age, service credit, and final compensation. The California
Constitution permits a city or county to adopt a charter for purposes
of its governance that supersedes general laws of the state in
regard to specified subjects, including compensation of city or
county employees. The California Constitution also establishes the
University of California as a public trust with full powers of
organization and government, subject only to specified limitations.
Charter cities and the University of California may establish pension
plans under their respective independent constitutional authority.
This measure would provide that any change to the formula used to
calculate the pension benefits of a member of a public retirement
system, as defined, that results in an increase in the member's
pension benefits shall apply only to service performed on and after
the operative date of the change, and would prohibit the retroactive
application of that change.
The measure also would require any retirement plan for public
employees hired on and after July 1, 2012
January 1, 2013 , to expressly provide that the
public employer retains the right to prospectively change retirement
benefits, as specified.
The measure would require, with respect to public employees first
hired on and after July 1, 2012 January 1,
2013 , the governing body of a public retirement system to
annually set an actuarially sound contribution rate for any defined
benefit plan based on the recommendations of an independent plan
actuary. The measure would permit a public employer to offer those
employees a defined benefit plan only as part of a uniform hybrid
retirement plan, as specified, and only if the Legislature has
established the hybrid retirement plan and the defined pension
benefits that may be provided, as specified. The measure would
require the employer and employee to share equally the
hybrid defined benefit plan costs. Any benefits
under a defined benefit plan would be based on a member's
highest annual base pay averaged over the
any consecutive 5-year 36-month
period immediately preceding his or her retirement or
last separation from state service if earlier .
The measure would increase, beginning 30 days after its effective
date, employee contribution rates for members of defined benefit
plans by at least an additional 5% of current salary until the
pension fund of the plan is 90% funded, as determined by an
independent plan actuary. The bill would require the funded status of
a defined benefit plan to be calculated annually, as specified.
(2) Existing state and local public employee retirement systems
are funded by investment returns and employer and employee
contributions. The California Constitution provides that the
retirement board of a public pension or retirement system has the
exclusive power to provide for actuarial services in order to assure
the competency of the assets of the system. Existing law, with
respect to PERS, requires the Governor to include in the annual
Budget Act the contribution rates submitted by the system actuary of
the liability on account of employees of the state.
This measure would permit an actuary to authorize a reduction
or suspension of employer contributions to a defined benefit
plan for a fiscal year only if the actuary determines that the plan
has a surplus of actuarially determined plan assets sufficient to
fund 120% of the employer's share of estimated plan normal
costs for the next 30 years.
The measure would also prohibit an employer from paying the
employee contribution to a defined benefit plan for any employee,
would require that an employee's rate of contributions represent a
reasonable percentage of the normal costs of the plan, and would
prohibit that rate from being less than the contribution rate
applicable to his or her membership classification on
January July 1, 2012.
This measure would also require STRS to set an actuarially sound
contribution rate to be paid annually to the system, to be used as a
basis for increasing the state's contribution to that system.
(3) Existing law permits members of PERS, STRS, and county, city,
and district retirement systems that have adopted specified
provisions, to purchase up to 5 years of additional retirement
service credit by contributing an amount that, at the time of
purchase, provides for the resulting increase in employer liability.
This measure would prohibit a public employer or public
retirement system from allowing the purchase of
offering, or entering into, a contract by which a member may
make contributions to receive additional retirement service
credit, as described above.
(4) Existing law generally prohibits any person who has retired
from being employed in any capacity with the same public
employer unless he or she is first reinstated from retirement, except
as authorized.
This measure would, on or after July 1, 2012
January 1, 2013 , prohibit a person from being employed
by, or providing personal services as a contractor for, a public
employer while he or she is receiving pension payments from a public
retirement system.
(5) Existing law provides that any elected public officer who
takes public office, or is reelected to public office, on or after
January 1, 2006, who is convicted of any specified felony arising
directly out of his or her official duties, forfeits all rights and
benefits under, and membership in, any public retirement system in
which he or she is a member, effective on the date of final
conviction, as specified.
This measure would require that a public employee, as defined, who
is convicted of any felony for conduct related to his or her office
or employment on or after the effective date of this measure forfeit
that portion of the rights and benefits to which he or she
is entitled in any public retirement system in which he or she is a
member that accrued on or after the date of commission of the
crime, and not accrue further benefits , as specified.
(6) The Public Employees' Medical and Hospital Care Act, which is
administered by the Board of Administration of PERS, establishes
various percentages for employer contributions for health care
benefits provided under the approved health benefit plan in which the
employee or annuitant is enrolled.
This measure would require public employees to pay an increased
amount, that is proportional to employee base pay, as specified, for
employee health care benefits. The measure would also require a
public employee hired on and after July 1, 2012
January 1, 2013 , to contribute to the cost of
postretirement health care benefits, in proportion to the employee's
base pay and years of service, as specified, if the public employer
provides those benefits. The bill would prohibit employees hired on
and after July 1, 2012 January 1, 2013 ,
from being eligible for full postretirement health care benefits
until the employee has 25 years of service. The measure would provide
that these provisions shall not impair existing collective
bargaining agreements, but would apply upon expiration of those
agreements.
(7) The measure would declare that the above-described provisions
are self-executing and would require any bill, ordinance, resolution,
or other measure enacted to implement any of those provisions to be
approved by a 2/3 vote of the membership of each house of the
Legislature, the Regents of the University of California, or the
governing body of the public employer. The measure would also require
any bill enacted to change public employee retirement benefits or
health care benefits to be approved by a 2/3 vote of the membership
of each house of the Legislature. The measure would declare that the
above-described provisions would not limit any disability, death, or
survivor benefits.
(8) The California Constitution requires that the moneys to be
applied by the state for the support of school districts and
community college districts be not less than the greater
greatest of 3 amounts computed pursuant to
specified tests. The Constitution provides that the first of those
tests is the amount which, as a percentage of General Fund revenues
which may be appropriated pursuant to Article XIII B, equals the
percentage of General Fund revenues appropriated for school districts
and community college districts, respectively, in fiscal year
1986-87. The Constitution provides that the 2nd and 3rd tests are the
amount required to ensure that the total allocations to school
districts and community college districts from General Fund proceeds
of taxes appropriated pursuant to Article XIII B and allocated local
proceeds of taxes shall not be less than the total amount from these
sources in the prior fiscal year, excluding specified revenues, and
adjusted for specified factors.
Existing law requires the state to appropriate a sum equal to 8%
of creditable compensation, as specified, to be deposited in the
Teachers' Retirement Fund, for the initial purpose of financing the
Defined Benefit Program of the State Teacher's Retirement System.
Existing law does not count these appropriations toward meeting the
state's constitutional obligation to annually provide funding for the
support of school districts and community college districts, as
described above.
This measure would specify, for purposes of the first test, that
the "General Fund revenues appropriated for school districts and
community college districts, respectively, in fiscal year
the 1986-87 fiscal year " excludes
General Fund revenues appropriated for purposes of the State
Teachers' Retirement System to the Controller for
transfer to the Teachers' Retirement Fund . The measure would
specify, for the 2012-13 201 3-14
fiscal year, and for purposes of the 2nd and
3rd tests, that "total allocations from General Fund proceeds of
taxes appropriated pursuant to Article XIII B and allocated local
proceeds of taxes" for the prior fiscal year excludes General Fund
revenues appropriated for purposes of the State Teachers' Retirement
System.
(9) The California Constitution provides that the retirement board
of a public pension or retirement system has the exclusive power to
provide for actuarial services in order to assure the competency of
the assets of the system.
This measure would delete those provisions and would instead
require that the retirement board of a public pension or retirement
system select an independent plan actuary, to serve for a term of not
less than 12 years, from a specified list to be established by the
California Actuarial Advisory Panel. The measure would permit,
following the initial term of service, the independent actuary to be
appointed by the retirement board to subsequent terms. The measure
would prohibit the reduction of the independent plan actuary's salary
and benefits during his or her term of office, and would require his
or her salary agreement to provide for annual increases in pay,
except as specified. The measure would limit the circumstances under
which the independent plan actuary may be removed from office.
The measure would grant an independent plan actuary exclusive
authority to provide actuarial services and would require a
retirement board to adopt the actuary's recommendations without
amendment. The measure would require the actuary to be guided by
prevailing actuarial standards, any applicable governmental
accounting standards that are consistent with prevailing actuarial
standards, and any contracts related to the required funding of the
system, and to seek to maximize retirement security and minimize the
employer's long-term cost. The measure would provide for the removal
of plan actuaries who were not chosen pursuant to its requirements,
and would require the retirement board of a public pension or
retirement system to ensure that the independent plan actuary has
sufficient staff and budgetary resources to perform all of his or her
required duties.
(10) The California Constitution prohibits the number, terms, and
method of selection or removal of members of the retirement board of
a public pension or retirement system, which includes in its
composition elected employee members, from being changed, amended, or
modified by the Legislature from those that were required by law or
otherwise in effect on July 1, 1991, unless the change, amendment, or
modification enacted by the Legislature is ratified by a majority
vote of the electors of the jurisdiction in which the participants of
the system are or were, prior to retirement, employed.
This measure would additionally require 2/3 of the elected or
appointed members of the retirement board of a public pension
or retirement system to have demonstrated expertise in the financial,
legal, accounting, or health care fields and would prohibit them
from being members of that system or from having immediate family
members who are members of that system. The measure would authorize
the Legislature to prescribe the criteria and process for selecting
those elected or appointed members by a statute enacted by
a 2/3 vote of the membership of each house.
(11) The measure would provide that if the Attorney General fails
to defend the constitutionality of its provisions, following its
approval by the voters, a taxpayer may intervene and participate for
that purpose in any court action challenging its constitutionality,
and the fees and costs of defending the action would be a charge on
funds appropriated to the Attorney General.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
WHEREAS, The bipartisan Milton Marks "Little Hoover" Commission on
California State Government reports that the 10 largest public
pension systems in California have a combined unfunded accrued
actuarial liability of two hundred forty billion dollars
($240,000,000,000); and
WHEREAS, The Little Hoover Commission has determined that public
pensions in California are unsustainably expensive; and
WHEREAS, Projections show that the combined costs to the state's
General Fund of the Public Employees' Retirement System, the State
Teachers' Retirement System, and retiree health care will grow from 5
percent of the state's annual budget to 10 percent over the next 30
years; and the Little Hoover Commission reports that the situation
with many local governments is even worse; and
WHEREAS, As dire as these figures are, they are based on the
optimistic assumptions of most public pension governing boards
regarding the rates of return that they expect to earn on their
investments and, therefore, may actually understate the magnitude of
the problem severalfold; and
WHEREAS, The rising cost of public employee retirement benefits
threatens the ability of government agencies to deliver the vital
services upon which the public depends and, therefore, the
Legislature intends to exercise the police powers of the state to
make reasonable modifications to public pension systems while
protecting employees' earned, vested rights; now, therefore, be it
Resolved by the Senate, the Assembly concurring, That the
Legislature of the State of California at its 2011-12 Regular Session
commencing on the sixth day of December 2010, two-thirds of the
membership of each house concurring, hereby proposes to the people of
the State of California that the Constitution of the State be
amended as follows:
First-- That Section 12 is added to Article VII thereof, to read:
SEC. 12. (a) As used in this section, the following
definitions shall apply:
(1) "Employee contribution" means the contributions to a public
retirement system required to be paid by a member of the system as
fixed by law, contract, or contract amendment.
(2) "Independent plan actuary" or "actuary of a public retirement
system" or any other similar term in this Constitution, or in state
or local law, means the independent plan actuary appointed pursuant
to Section 17 of Article XVI.
(3) "Member" means a public employee who is a member of a public
retirement system.
(4) "Public employee" means an officer or employee of a public
employer.
(5) "Public employer" means the following:
(A) The State, including the Legislature, the courts, and the
University of California.
(B) Any political subdivision of the State, including a charter
city, charter county, charter city and county, school district, any
special district, any public board or commission, any public
agency, and the California State University.
(6) "Public retirement system" means all state and local public
pension or retirement systems, including, but not limited to, the
Public Employees' Retirement System, the State Teachers' Retirement
System, the Judges' Retirement System II, the Legislators' Retirement
System, the University of California Retirement System, county and
district retirement systems created pursuant to the County Employees
Retirement Law of 1937, and any other entity that provides retirement
benefits to public employees on behalf of a public employer.
(7) "Retirement benefits" includes pension benefits and defined
contribution plan benefits.
(b) The following shall apply to all public employees, regardless
of the date first hired, who are members of a public retirement
system:
(1) Any change, adopted on or after the effective date of this
section, to the formula used to calculate the pension benefits of a
member that results in an increase in the member's pension benefits
shall apply only to service performed on and after the operative date
of the change, and shall not be applied to any service performed
prior to the operative date of the change.
(2) On and after the effective date of this section, a
member shall not public employer or public retirement
system shall not offer, or enter into, a contract by which
a member may make contributions to receive additional
retirement service credit for any time that does not qualify as
public service or military service by the pension or retirement
system.
(3) Notwithstanding Section 17 of Article XVI or any other
provision of law, if the independent plan actuary of a public
retirement system determines, in any fiscal year, that a defined
benefit plan has a surplus of actuarially determined plan assets
sufficient to fund 120 percent of the employer's share of
the estimated plan normal costs for the next 30 years, then
the actuary may authorize a reduction or
suspension of employer contributions to the plan for that fiscal
year. Under no other circumstances shall a suspension or
reduction of employer contributions to a defined benefit plan
be authorized.
(4) The public employer shall be prohibited from paying on behalf
of a member any of the member's required employee contributions to a
defined benefit plan , except that a public employer may pay
employee contributions by reducing employee salaries as permitted by
Section 414 (h) of Title 26 of the United States Code, as
amended . The rate of required employee contributions shall
represent a reasonable percentage of the estimated plan
normal costs of the plan and shall not be less
than the employee contribution rate applicable to his or her
membership classification on January July
1, 2012.
(5) (A) Beginning 30 days after the effective date of this
section, and notwithstanding paragraph (4) or any other provision of
this Constitution, including Section 9 of Article I, contribution
rates for public employees who are members of a defined benefit plan
shall be increased by at least an additional 5 percent of current
salary and shall remain at that level until the pension fund
of the defined benefit plan is 90 percent funded, as
determined pursuant to subparagraph (B) by an independent plan
actuary.
(B) The funded status of a defined benefit plan shall be
calculated annually, as the ratio of the market value of assets of
the plan to the actuarial liabilities, including any outstanding
balance of any pension obligation bonds after January 1,
2011 2012 , using the actuarial
standards methods and assumptions established
under federal law by the federal Employee Retirement Income Security
Act of 1974 (ERISA), or any successor to that act, for private sector
pension funds.
(c) For public employees first hired on and after July 1,
2012 January 1, 2013 , a public employer shall
comply with all of the following:
(1) A public employer shall not offer any new or existing
retirement plan that fails to conform with this subdivision.
(2) Any retirement plan offered by a public employer shall
expressly provide that the public employer retains the right to
prospectively change any retirement benefits that accrue with respect
to service performed on and after the operative date of the change
for any member prior to retirement, subject to this section.
(3) (A) A public employer may offer, and a public retirement
system may provide, a defined benefit plan only as part of a uniform
hybrid retirement plan that includes a defined contribution plan and
only if a statute, enacted by a two-thirds vote of the membership of
each house of the Legislature, has established the uniform hybrid
retirement plan and the pension benefits that may be provided by the
defined benefit plan in accordance with this section .
section.
(B) The hybrid retirement plan shall be designed to provide, upon
retirement for a full career in public service, replacement income as
prescribed in this subparagraph:
(i) The service retirement formula applicable for the calculation
of a defined pension benefit of any safety member classification
shall provide a benefit upon retirement for a full career in public
service at 57 years of age that, when combined with anticipated
defined contribution plan benefits and any benefit payments under the
federal Social Security Act, shall not exceed 75 percent of the
member's final compensation. For purposes of this clause, a "full
career in public service" means 30 years of public service.
(ii) The service retirement formula applicable for the calculation
of a defined pension benefit for any member in a nonsafety
classification shall provide a benefit upon retirement for a full
career in public service at 65 years of age that, when combined with
anticipated defined contribution plan benefits and any benefit
payments under the federal Social Security Act, shall not exceed 75
percent of the member's final compensation. For purposes of this
clause, a "full career in public service" means 35 years of public
service.
(C) (i) A public employer and a public employee shall share
equally the hybrid retirement defined benefit
plan costs, including payments for any unfunded liabilities
. The public employer may provide a matching contribution for the
defined contribution plan up to 5 percent of the public
employee's salary .
(ii) The governing body of a public retirement system shall
annually set an actuarially sound contribution rate for the defined
benefit plan, which rate shall be based on the recommendations of an
independent plan actuary.
(iii) The pension benefits provided under any defined benefit plan
shall be based on a member's final compensation. "Final compensation"
shall mean the highest average annual compensation earned
by the member during the consecutive 5-year
36-month period immediately preceding his or her retirement or
last separation from public service, if earlier , or during any
other period of 36 consecutive months during his or her public
retirement system membership that the member designates on the
application for retirement . For the purposes of this
subparagraph, "final compensation" shall not include any compensation
for accrued leave of any form or compensation for overtime work or
special compensation and shall only include the member's rate of base
pay.
(D) The pension benefits provided under any defined benefit plan
shall not exceed the contribution and benefit base, as calculated for
purposes of determining federal Old-Age, Survivors, and Disability
Insurance benefits, pursuant to Section 430(b) of Article
Title 42 of the United States Code, or its
successor. If the formula contained in Section 430(b) of
Article Title 42 of the United States Code, or
its successor, is altered, then the maximum permissible amount of the
pension benefit described in this subparagraph shall be determined
by using the contribution and benefit base in the year prior to the
alteration, as adjusted annually by the consumer price index.
(d) On and after July 1, 2012 January 1,
2013 , a person shall not be employed by, or provide personal
services as a contractor for, a public employer while he or she is
receiving pension payments from a public retirement system.
(e) (1) If a public employee is convicted of any felony for
conduct related to his or her office or employment on or after the
effective date of this section, he or she shall forfeit all
that portion of the rights and
benefits to which he or she is entitled in any public retirement
system in which he or she is a member that accrued on or after
the date of commission of the crime, and shall not accrue further
benefits .
(2) Any contributions to the public retirement system made by the
public employee described in paragraph (1) shall be returned, without
interest, to the public employee.
(f) This section shall not limit any disability, death, or
survivor benefits that may be provided by a public employer.
(g) Beginning within 30 days after the effective date of this
section, the actuary for the State Teachers' Retirement System, or
its successor, shall set an actuarially sound contribution rate to be
paid annually to the State Teachers' Retirement System, or its
successor, which rate shall be used as a basis for increasing the
State's contribution to the system and shall not be used as a basis
for increasing employer or employee contributions.
(h) (1) On or before July 1, 2012 July 1,
2013 , the Legislature, by statute, the Regents of the
University of California, and the governing body of each local public
employer that provides employee health care benefits shall increase
the amount that public employees contribute to the cost of their
employee health care benefits and shall provide for a contribution
amount that is proportional to the base pay of the employee but does
not exceed the cost of the health care benefits provided to the
employee.
(2) (A) A public employer that provides postretirement health care
benefits shall require employees who are first hired on or after
July 1, 2012 January 1, 2013 , and who
are members of a public retirement system, to make contributions to
fund their postretirement health care benefits, which contributions
shall be in an amount that is proportional to the base pay of the
employee and his or her years of creditable service but does not
exceed the actuarial cost of the postretirement health care benefits
to be provided to the employee. An employee shall not be eligible for
full postretirement health care benefits until the employee has
attained 25 years of creditable service. Those public employers shall
also require that those employees continue to pay a contribution for
health care benefits after retirement.
(B) The public employer shall not pay on behalf of a member any of
the member's share of the cost of postretirement health care
benefits.
(C) The public employer shall retain the right to prospectively
modify postretirement health care benefits for any member prior to
retirement.
(3) This subdivision shall not impair any collective bargaining
agreement or memorandum of understanding that is in effect on the
effective date of this section, but shall apply upon the expiration
of any such agreement or memorandum of understanding.
(i) (1) This section shall be self-executing.
(2) Any bill, ordinance, resolution, or other measure enacted to
implement any provision of this section shall require for passage a
two-thirds vote of the membership of each house of the Legislature,
the Regents of the University of California, or the governing body of
a local public employer. Any bill enacted to change public employee
retirement benefits or health care benefits shall require for passage
a two-thirds vote of the membership of each house of the
Legislature.
Second-- That subdivision (b) of Section 8 of Article XVI thereof,
is amended to read:
(b) Commencing with the 1990-91 fiscal year, the moneys to be
applied by the State for the support of school districts and
community college districts shall be not less than the
greater greatest of the following amounts
(1) The amount which, as a percentage of General Fund revenues
which may be appropriated pursuant to Article XIII B, equals the
percentage of General Fund revenues appropriated for school districts
and community college districts, respectively, in fiscal
year the 1986-87 fiscal year . For
the purposes of this paragraph, "General Fund revenues appropriated
for school districts and community college districts, respectively,
in fiscal year the 1986-87 fiscal year "
excludes General Fund revenues appropriated to the Controller for
transfer to the Teachers' Retirement Fund.
(2) The amount required to ensure that the total allocations to
school districts and community college districts from General Fund
proceeds of taxes appropriated pursuant to Article XIII B and
allocated local proceeds of taxes shall not be less than the total
amount from these sources in the prior fiscal year, excluding any
revenues allocated pursuant to subdivision (a) of Section 8.5,
adjusted for changes in enrollment and adjusted for the change in the
cost of living pursuant to paragraph (1) of subdivision (e) of
Section 8 of Article XIII B. This paragraph shall be operative only
in a fiscal year in which the percentage growth in California per
capita personal income is less than or equal to the percentage growth
in per capita General Fund revenues plus one-half of 1 percent.
(3) (A) The amount required to ensure that the total allocations
to school districts and community college districts from General Fund
proceeds of taxes appropriated pursuant to Article XIII B and
allocated local proceeds of taxes shall equal the total amount from
these sources in the prior fiscal year, excluding any revenues
allocated pursuant to subdivision (a) of Section 8.5, adjusted for
changes in enrollment and adjusted for the change in per capita
General Fund revenues.
(B) In addition, an amount equal to one-half of 1 percent times
the prior year total allocations to school districts and community
colleges from General Fund proceeds of taxes appropriated pursuant to
Article XIII B and allocated local proceeds of taxes, excluding any
revenues allocated pursuant to subdivision (a) of Section 8.5,
adjusted for changes in enrollment.
(C) This paragraph (3) shall be operative only in a fiscal year in
which the percentage growth in California per capita personal income
in a fiscal year is greater than the percentage growth in per capita
General Fund revenues plus one-half of 1 percent.
(4) For the 2012-13 201 3-14
fiscal year, for the purposes of paragraphs (2) and (3), "total
allocations from General Fund proceeds of taxes appropriated
pursuant to Article XIII B and allocated local proceeds of taxes" for
the prior fiscal year shall exclude General Fund revenues
appropriated for purposes of the State Teachers' Retirement System.
Third-- That subdivision (b) of Section 17 of Article XVI thereof,
is amended to read:
(b) The members of the retirement board of a public pension or
retirement system shall discharge their duties with respect to the
system solely in the interest of, and for the exclusive purposes of
providing benefits to, participants and their beneficiaries,
minimizing employer contributions thereto, to the extent allowed by
prevailing actuarial and, if applicable, governmental accounting
standards and contractual provisions, and defraying reasonable
expenses of administering the system. A retirement board's duty to
ensure prompt delivery of required benefits to the system's
its participants and their beneficiaries shall
take precedence over any other duty.
Fourth-- That subdivision (e) of Section 17 of Article XVI thereof
is repealed.
Fifth-- That subdivision (e) is added to Section 17 of Article XVI
thereof, to read:
(e) (1) Consistent with its duties described in subdivision
(b), the retirement board of a public pension or retirement system
shall select an independent plan actuary who shall serve for a term
of not less than 12 years. An independent plan actuary shall be
selected from a list of three to five qualified actuaries who are
willing to serve in the position, and that list shall be developed by
the California Actuarial Advisory Panel or a successor entity
described in a statute approved by a vote of two-thirds of the
membership of each house of the Legislature. If practicable, at least
two of the actuaries on that list shall be residents of the county
in which a single-county retirement system is located and at least
one of the actuaries on that list shall be a current resident of
another state. Following his or her initial term of service, an
independent actuary may be appointed by the retirement board to one
or more subsequent terms of service. The independent plan actuary's
salary and benefits shall not be reduced during the actuary's term of
office except with his or her consent, and his or her salary
agreement shall provide for annual increases in pay equal to, or
greater than, increases in an applicable consumer price index, except
in fiscal years in which the Governor issues a proclamation
declaring a fiscal emergency pursuant to subdivision (f) of Section
10 of Article IV.
(2) The office of the independent plan actuary shall become vacant
only upon the expiration of the actuary's term of service; his or
her death, imprisonment following a felony conviction, or voluntary
resignation; or upon his or her removal for cause as permitted by
this paragraph. The independent plan actuary may be removed from
office for cause only upon both of the following:
(A) A resolution to remove the actuary passed by four-fifths of
the membership of the retirement board.
(B) In the case of a local retirement or pension system, a
resolution to remove the actuary passed by all members present and
voting of the county board of supervisors or the governing board of
the public employer or, in the case of a state retirement or pension
system, including the State Teachers' Retirement System, but
excluding the University of California Retirement System, a
resolution to remove the actuary passed by four-fifths of the
membership of each house of the Legislature.
(3) The independent plan actuary shall have the exclusive power to
provide for actuarial services in order to ensure the competency of
the assets of a public pension or retirement system. A retirement
board shall adopt the independent plan actuary's recommendations
without amendment. The independent plan actuary, in making actuarial
determinations, setting required contribution rates, and developing
actuarial assumptions, shall be guided by prevailing actuarial
standards, any applicable governmental accounting standards, provided
that the governmental accounting standards are consistent with
prevailing actuarial standards, and any contracts permitted by this
Constitution related to the required funding of the system by
members, the State, or public employers. In making those
recommendations, the independent actuary shall also seek to maximize
the beneficiaries' retirement security and minimize the employer's
long-term cost.
(4) Within six months after the effective date of the measure that
adds this subdivision, plan actuaries of public pension or
retirement systems who were not selected pursuant to the requirements
of this subdivision shall be replaced by independent plan actuaries
selected pursuant to this subdivision. The independent plan actuaries
shall perform all duties previously specified in law or contract for
the replaced plan actuaries consistent with this subdivision.
(5) The retirement board of a public pension or retirement system
shall ensure that the independent plan actuary has sufficient staff
and budgetary resources to perform all of his or her required duties.
Sixth-- That subdivision (f) of Section 17 of Article XVI thereof
is amended to read:
(f) (1) With regard to the retirement board of a public
pension or retirement system which includes in its composition
elected employee members, the number, terms, and method of selection
or removal of members of the retirement board which were required by
law or otherwise in effect on July 1, 1991, shall not be changed,
amended, or modified by the Legislature unless the change, amendment,
or modification enacted by the Legislature is ratified by a majority
vote of the electors of the jurisdiction in which the participants
of the system are or were, prior to retirement, employed.
(2) At least two-thirds of the elected or appointed
members of the retirement board of a public pension or retirement
system, who are elected or appointed on or after the effective date
of the measure adding this paragraph, shall have demonstrated
expertise in the financial, legal, accounting, or health care fields,
shall not be members of that system, and shall not have any
immediate family members who are members of that system. The criteria
and process for selecting those elected or appointed
members may be prescribed by a statute enacted by a two-thirds vote
of the membership of each house of the Legislature. This
paragraph shall not apply to any individual who holds an office whose
incumbent is designated as a member of that board.
Seventh-- That, notwithstanding any other provision of law,
including the Constitution, if the Attorney General fails to defend
the constitutionality of this act, following its approval by the
voters, a taxpayer of this State shall have the authority to
intervene and participate for that purpose in any court action
challenging the constitutionality of this act and the fees and costs
of defending the action shall be a charge on funds appropriated to
the Attorney General, which shall be satisfied promptly.
Eighth-- That the provisions of this measure are severable. If any
provision of this measure or its application is held invalid, that
finding shall not affect other provisions or applications that can be
given effect without the invalid provision or application.
