Retirement Benefits

SB 27 (Simitian) - Oppose Unless Amended
As amended on March 3, 2011

SB 27, by Senator Joseph Simitian, amends the Public Employees Retirement Law and the State Teacher’s Retirement System law to limit those items that can be included in the calculation of final compensation for the purpose of prohibiting pension spiking; the bill also prohibits members who retire from public pension systems on or after January 1, 2013 from providing services to an employer covered by a state or local retirement system until the retiree has had a bona fide separation from service for at least six months. 

CSAC has an “Oppose Unless Amended” position on SB 27, and has requested that the author delete the section of the bill requiring a six-month separation from service prior to a retiree returning to work.

SB 27 will be heard in the Senate Public Employment and Retirement Committee on Monday, March 21.

SB 322 (Negrete McLeod) – Watch
As Introduced on February 14, 2011

SB 322, by Senator Gloria Negrete McLeod, would prohibit a member who receives pension benefits based on credited service with multiple employers from exceeding federal limits regard to his or her annual retirement benefits. 

Existing federal law limits the amount a defined benefit plan may pay a participant annually (this limit is currently $195,000), and requires that this limitation be adjusted annually by regulation to account for increases in the cost of living. 

SB 322 will be heard in the Senate Public Employment and Retirement Committee on Monday, March 21.

SB 350 (Negrete McLeod) – Watch
As introduced on February 15, 2011

SB 350, by Senator Gloria Negrete McLeod, is sponsored by the California Public Employees’ Retirement System (CalPERS) and will merge the first and second levels of the CalPERS 1959 Survivor Benefit Program (Program) into the third level of the Program.

The program was created to provide a continuous pre-retirement death benefit for members of CalPERS who are not covered by Social Security. Employers and employees pay a share into the pool, which consists of five benefit levels that cover about 145,000 active members and 1,970 existing recipients. The first level benefit has been closed to new contractors since 1994, and the second level has been closed since 2001. The employee’s share is two dollars per month and the employer’s share is dependent upon the funding level of the pool (the employer pays nothing if the pool is funded at or over 100 percent).

There are currently large surpluses in the first and second levels of the program, which are expected to continue. Since the assets in the program cannot be used for anything except benefit payouts, CalPERS is proposing a merge of the first three levels of the program in order to provide benefits at third level amounts to all participants. In addition to this merge, SB 350 eliminates the two-dollar employee fee until the program is less than 100 percent funded. While this results in a higher benefit for members in the first and second levels, CalPERS recommends using the surpluses in these pools to lessen the probability of future employer contributions into the third level pool.

SB 350 will be heard in the Senate Public Employment and Retirement Committee on Monday, March 21.

Employee Rights

AB 22 (Mendoza) - Oppose Unless Amended
As Amended on March 8, 2011

AB 22, by Assembly Member Tony Mendoza, would prohibit prospective employers from using consumer credit reports for employment purposes unless the following criteria are met:

• the information in the credit report is substanitally job-related (i.e., the applicant has access to money, trade secrets or confidential information.
• the position is managerial, a position in the state Department of Justice, a sworn peace officer or other law enforcement position.
• the credit report is required by law.

The previous version of AB 22 exempted positions in a city or county, but recent amendments removed this exemption. CSAC has taken an Oppose Unless Amended position and has requested the author place the exemption back into the bill.

AB 22 will be heard on Tuesday, March 22 in the Assembly Judiciary Committee.

CalPERS’ Discount Rate Will Remain the Same

The California Public Employees’ Retirement System (CalPERS) Board of Administration on Tuesday voted to keep the discount rate assumption at 7.75 percent for actuarial valuations, not accepting CalPERS’ Chief Actuary’s recommendation to lower the rate to 7.5 percent.

Actuarial valuations are performed annually to determine plans’ liabilities and contribution rates necessary to fund them. The discount rate is comprised of the real return assumption and an inflation assumption.

CalPERS conducted an Asset Liability Management Workshop in November as a part of its top to bottom review of how its five asset classes (real estate, global fixed income, inflation-linked, global equity and alternative investment management) are allocated as well as the liability of the fund. In December, CalPERS changed the asset allocation structure to better reflect market conditions. These actions culminated into the Board’s Wednesday vote on the discount rate.

CalPERS Adopts New Asset Allocation Model for Retiree Benefit Trust

CalPERS on Wednesday aproved a new asset allocation model for its California Employers’ Retiree Benefit Trust (CERBT). CERBT allows contracting public agencies to make periodic contributions into the trust fund and use the investment earnings to pay for retiree benefits and other post-employment benefits (OPEB).

The new model will provide employers that prefund their employees’ retiree health benefits and OPEB with three new investment portfolios to maximize returns:

• inflation-linked bonds and commodities
• global equities
• real estate investment trusts

CERBT earned a 13.4 percent investment return in 2010.

Federal Unemployment Benefits Extended

President Obama has signed a bill to reauthorize federal unemployment extension benefits for another 13 months. While the extension does not add any further time to the current maximum of 99 weeks, it does add time for eligible, unemployed individuals to collect those maximum benefits. 

For more information and a list of filing deadlines, please click here.

CCPOA Reaches Tentative Labor Agreement

The California Correctional Peace Officers Association (CCPOA) has reached a tentative agreement with Governor Jerry Brown to increase members’ pension contributions and includes a roughly five percent reduction of pay and hours through one unpaid day per month for a year. 

The agreement also includes an increase in what the state pays toward members’ health insurance, an expense that will be offset by an agreement to suspend state payments into the 401 (k)-style plan that supplements the members’ defined benefit CalPERS pension.