CalPERS issues Pension Reform Implementation Update

The California Public Employees’ Retirement System (CalPERS) issued a Circular Letter on December 3 to all CalPERS employers that provides updated information on the implementation of the Public Employees’ Pension Reform Act of 2013. Among other things, the letter states that CalPERS will provide employers this month with the benefit formula and contribution rates that are effective January 1, 2013 for new members. The full text of the letter can be viewed here. Additionally the letter announced a series of teleconferences to address questions you may have relating to information provided. Two dates are available for public agencies: December 10 from 9:30 to 11:30 am and December 12 from 9:30 to 11:30 am. Register online via the Pension Reform Impacts page.
Pension Reform Clean-Up Legislation Introduced

On December 3, the first day of the Legislature’s 2013-2014 session, Senator Negrete-McLeod introduced Senate Bill 13, pension reform clean-up legislation. Counties will recall that AB 340 and AB 197 were passed in 2012 and established statewide pension reform. SB 13 will be the vehicle for making technical clarifications and correcting drafting errors. SB 13 is an urgency measure requiring a 2/3 vote and will take effect immediately upon approval. 

Pension Reform Implementation Workshop Materials Available

This year’s CSAC Annual Meeting included a well-attended workshop focused on the implementation of Assembly Bills 197 and 340, the pension reform legislation signed by Governor Brown in September. The workshop emphasized issues surrounding the legal, administrative and actuarial aspects of implementing the reforms and discussion included the requirement that new employees pay 50 percent of the normal cost of their pensions, cost sharing agreements with existing employees, pension compensation caps for new employees and limits on retirees returning to work. CSAC thanks David Lamoreaux (Deputy Chief Actuary for the California Public Employees’ Retirement System), Bob Blum (Partner, Hanson Bridgett, LLP) and Matt Hymel (County Administrative Officer, Marin County) for their invaluable participation in the workshop panel. Their presentations have been posted to the CSAC website:

CalPERS’ Update on the Impacts of AB 340 (David Lamoreaux)
PEPRA: Some Specific Issues (Bob Blum)

Employee Rights

AB 25 (Campos) – Request for Comment
As Introduced December 3, 2012

Assembly Bill 25, by Assembly Member Nora Campos, will apply certain employee rights regarding social media access to public employers.

Counties will recall that AB 1844 (Chapter 618, Statutes of 2012) was signed into law and prohibits a private employer from requiring or requesting an employee or applicant for employment to disclose a user name or password for the purpose of accessing personal social media, to access personal social media in the presence of the employer, or to divulge any personal social media. AB 1844, as signed, also prohibits a private employer from discharging, disciplining, threatening to discharge or discipline, or otherwise retaliating against an employee or applicant for not complying with a request or demand by the employer that violates these provisions. The bill defined “social media” as an electronic service or account, or electronic content, including, but not limited to, videos, still photography, blogs, video blogs, podcasts, instant and text messages, email, online services or accounts, or Internet Web site profiles or locations.

The provisions of AB 25 would make the above requirements applicable to public employers. The bill awaits assignment to a policy committee.

CalPERS to Offer Replacement Benefit Fund Credit

Beginning with fiscal year 2013-14, the California Public Employees’ Retirement System (CalPERS) will not allow employers’ payments to its Replacement Benefit Fund (RBF) as credit against what annual contributions they owe to the Public Employees Retirement Fund (PERF).

The CalPERS Replacement Benefit Plan (RBP) exists to allow the replacement of the annual retirement benefit allowance amount that exceeds Internal Revenue Code (IRC) 415(b) limits. IRC 415(b) is the federal provision that limits annual retirement benefits that can be accrued by or paid to a member of a qualified defined benefit pension plan. The maximum limit is established by the Internal Revenue Service each year. CalPERS’ RBF is used to make whole the retirement allowance once the limit is reached and is funded by employer contributions, which must be made before the benefit can be paid to the retiree.

Currently, CalPERS employers, when they make a RBF payment, can take the credit for that amount, less FICA taxes, against its annual contribution payable to PERF. CalPERS, recognizing the financial hardship for employers once this credit is no longer permitted for fiscal year 2013-14, has developed a procedure that will enable employers to utilize the offset in the interim until the new rule goes into place. For the period of January 1, 2013 through June 30, 2013, CalPERS will allow a one-time adjustment to an employer’s contribution rate under PERF. The amount of the adjustment will be the amount that the employer must pay to RBF, according to its 2013 annual invoice, for what it owes to retirees in the RBP as of December 31, 2012, less FICA taxes. Employers can expect to receive that invoice on or around January 15, 2013.