BILL NUMBER: AB 1974 AMENDED BILL TEXT AMENDED IN SENATE AUGUST 22, 2002 AMENDED IN SENATE AUGUST 8, 2002 AMENDED IN SENATE AUGUST 6, 2002 AMENDED IN SENATE AUGUST 5, 2002 AMENDED IN SENATE JUNE 19, 2002 AMENDED IN ASSEMBLY APRIL 29, 2002 INTRODUCED BY Assembly Member Pescetti FEBRUARY 14, 2002 An act to amend Sections 20022, 20063, 20370, and 20383 of, to add Sections 20062.5, 20840, 20841, and 20842 to, and to repeal Sections 20225.5 and 20815.5 of, the Government Code, relating to public employees' retirement. LEGISLATIVE COUNSEL'S DIGEST AB 1974, as amended, Pescetti. Public employees' retirement: risk pools. The Public Employees' Retirement Law authorizes the creation of separate risk pools for local and school miscellaneous, local safety, and school safety members, as specified, and permits the assets and liabilities of contracting agencies to be combined for purposes of setting employer rates. This bill would revise and recast these provisions. The bill would require the Board of Administration of the Public Employees' Retirement System to establish the criteria under which contracting agencies shall participate in a risk pool and the criteria under which contracting agencies, county offices of education, school districts, and community college districts may participate in a risk pool. The bill would prohibit requiring contracting agencies with more than 100 active members in a member classification to participate in a risk pool. The bill would provide that specified provisions regarding service credit and benefit payments are applicable to local members of a contracting agency participating in a risk pool without election by the contracting agency. The bill would establish the method of determining employer contribution rates, and would require that these rates take into account assets and liabilities brought into the pool, as specified. The bill would specify that the contribution rate made to the Public Employees' Retirement System by a county office of education, school district, or community college district participating in a risk pool, as specified, is equal to the rate that the county office of education or the district would have paid had the county office of education or the district participated in a single account under a specified provision. The bill would make definitional changes to conform with and further these provisions. 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. Section 20022 of the Government Code is amended to read: 20022. "Contracting agency" means any public agency that has elected to have all or any part of its employees become members of this system and that has contracted with the board for that purpose. "Contracting agency" also means any county office of education, school district, or community college district that has elected to have all or part of its employees participate in a risk pool and that has contracted with the board for that purpose. SEC. 2. Section 20062.5 is added to the Government Code, to read: 20062.5. "Risk pool" means the combination of assets and liabilities with respect to one or more contracting agencies for the purpose of pooling actuarial experience and setting the employer contribution rates pursuant to Section 20840. SEC. 3. Section 20063 of the Government Code is amended to read: 20063. (a) "School employer" means a county superintendent of schools, other than the Los Angeles County Superintendent of Schools and the San Diego County Superintendent of Schools, that has entered into a contract with the board pursuant to Chapter 6 (commencing with Section 20610) and any school district or community college district that was a contracting agency on July 1, 1983, excluding that portion of a contract with the Los Angeles City Unified School District and the Los Angeles Community College District that pertains to local police officers, as defined in Section 20430, on July 1, 1983, and excluding a school district or a community college district, as defined in subdivision (i) of Section 20057, that entered into a contract with the board on or after January 1, 1990, and whose employees are school safety members, as defined in Section 20444. (b) Notwithstanding subdivision (a), "school employer" may not include any county office of education, school district, or community college district that participates in a risk pool. SEC. 4. Section 20225.5 of the Government Code is repealed. SEC. 5. Section 20370 of the Government Code is amended to read: 20370. (a) "Member" means an employee who has qualified for membership in this system and on whose behalf an employer has become obligated to pay contributions. (b) "State member" includes: (1) State miscellaneous members. (2) University members. (3) Patrol members. (4) State safety members. (5) State industrial members. (6) State peace officer/firefighter members. (c) "Local member" includes: (1) Local miscellaneous members. (2) Local safety members. (d) "School member" includes all employees within the jurisdiction of a school employer, other than local policemen, school safety members and members included in a risk pool. SEC. 6. Section 20383 of the Government Code is amended to read: 20383. "Local miscellaneous member" includes all employees of a county office of education, school district, or community college district who are included in a risk pool and all employees of a contracting agency who have by contract been included within this system, except local safety members. SEC. 7. Section 20815.5 of the Government Code is repealed. SEC. 8. Section 20840 is added to the Government Code, to read: 20840. (a) Notwithstanding Sections 20616, 20618, and 20815, the board may create, combine or eliminate risk pools for local miscellaneous members and local safety members. (b) The board shall establish, by regulation, the criteria under which contracting agencies shall participate in a risk pool and the criteria under which contracting agencies, county offices of education, school districts, and community college districts may participate in a risk pool. The criteria shall specify that county offices of education, school districts, and community college districts may only participate in a risk pool if the retirement formula of the risk pool is higher than the retirement formula applicable to school members. In determining the criteria, the board shall consider the expected variability of the employer contribution rate due to demographic events. In no event shall contracting agencies with more than 100 active members in a member classification be required to commence participation in a risk pool for members in that member classification. For the purpose of this subdivision an active member is a member who is an employee of the contracting agency. (c) If a contracting agency, county office of education, school district, or community college district participates in a risk pool, the assets and liabilities with respect to the affected member classification shall be combined with those of the risk pool. (d) The board shall establish, by regulation, the circumstances under which a contracting agency may cease participation in a risk pool for a member classification. (e) All of the following provisions shall apply, without election by the contracting agency participating in a risk pool, to local members included in a risk pool: (1) Sections 20965, 21022, 21026, 21037, 21536, and 21548. (2) Provisions to elect to receive credit for public service pursuant to Article 5 (commencing with Section 21020) of Chapter 11 that require the member to make the contributions as specified in Sections 21050 and 21052. SEC. 9. Section 20841 is added to the Government Code, to read: 20841. (a) The employer contribution rate for a contracting agency, county office of education, school district, or community college district participating in a risk pool shall be determined by the actuary , taking into account the difference between the assets and liabilities that were brought into the risk pool with respect to the affected member classifications. (b) The employer contribution rate for a contracting agency, county office of education, school district, or community college district participating in a risk pool may take into account the differences in the benefits provided by each employer to its members in the classification included in the risk pool. (c) If a county office of education, school district, or community college district participates in a risk pool pursuant to this section and pays a contribution rate that differs from the rate established for school employers participating in a single account with respect to school members pursuant to subdivision (b) of Section 20225, the actual rate of employer contributions made to the Public Employees' Retirement System, for purposes of Section 42238.12 of the Education Code, shall be deemed to be the contributions that the county office of education or the district would have paid had the county office of education or the district participated in a single account for school members pursuant to subdivision (b) of Section 20225. SEC. 10. Section 20842 is added to the Government Code, to read: 20842. Within six months after the effective date of any new option available to contracting agencies, the board shall (a) notify all contracting agencies participating in risk pools of the availability and approximate cost of the new option, (b) include the new option in at least one of the risk pools applicable to each member category to which the new option may apply, and (c) notify the contracting agencies of their options if they are participating in a risk pool to which the new option is added and choose not to offer the new option to their employees.