BILL NUMBER: SB 1176 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Huff
(Coauthors: Senators Anderson, Berryhill, Blakeslee, Cannella,
Dutton, Emmerson, Fuller, Gaines, Harman, La Malfa, Runner,
Strickland, Walters, and Wyland)
FEBRUARY 22, 2012
An act to amend Section 22826 of the Education Code, and to amend
Sections 1243, 20090, 20899.5, 20909, 31486.35, and 31658 of, and to
add Sections 1244, 1245, 7503.71, 7503.72, 7503.73, 7503.74, 7503.76,
7514.60, 7514.70, 7514.81, 22871.1, and 22874.2 to, the Government
Code, relating to public employees' retirement, and declaring the
urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 1176, as introduced, Huff. Public employees' retirement.
(1) Existing law establishes the Public Employees' Retirement
System (PERS) and the State Teachers' Retirement System (STRS) for
the purpose of providing pension benefits to their employees.
Existing law also establishes the Judges' Retirement System II which
provides pension benefits to elected judges and the Legislators'
Retirement System which provides pension benefits to elective
officers of the state other than judges and to legislative statutory
officers. The County Employees Retirement Law of 1937 authorizes
counties to establish retirement systems pursuant to its provisions
in order to provide pension benefits to county, city, and district
employees. The Regents of the University of California have
established the University of California Retirement System as a trust
for this purpose.
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
making specified contributions to the system. Existing law authorizes
retirement benefits to be increased.
This bill, on and after January 1, 2013, would prohibit a public
retirement system from allowing the purchase of additional retirement
service credit, as described above. The bill would except from this
prohibition an official application to purchase this type of service
credit received by the retirement system prior to January 1, 2013.
The bill would prohibit any member who does not have at least 5 years
of service credit before the operative date of this bill, or any
person hired on or after that date, from purchasing additional
retirement service credit.
This bill would provide that any enhancement to a public
retirement system's retirement formula or benefit that is adopted on
or after January 1, 2013, would apply only to service performed on or
after the operative date of the enhancement, except under specified
circumstances. The bill would also provide that, if a change to a
member's classification or employment results in an increase in the
retirement formula or benefit applicable to that member, the increase
would apply only to service performed on or after the operative date
of the change.
This bill would require a public employer to offer to its
employees first hired on or after July 1, 2013, a hybrid pension plan
or alternative pension plan option, as specified. The bill would
require that each hybrid pension plan be designed with the goal of
providing at normal retirement age, based upon a full career in
public service of 30 years for safety employees and 35 years for all
other public employees, replacement income of 75% of a public
employee's final compensation.
(2) 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 bill would require that a public employee, as defined, who is
convicted of any state or federal felony for conduct arising out of,
or in the performance of, his or her official duties in pursuit of
the office or appointment, or in connection with obtaining salary,
disability retirement, or service retirement, or other benefits,
forfeit retirement benefits earned or accrued from the earliest date
of the commission of the felony to the forfeiture date, as specified.
The bill would also require any contributions to the public
retirement system made by the public employee on or after the
earliest date of commission of the felony to be returned, without
interest, to the public employee upon the occurrence of a
distribution event, as defined, unless otherwise ordered by a court
or determined by the pension administrator. The bill would also make
related, conforming changes.
(3) Existing law defines final compensation for various
employment classifications in connection with the benefits provided
by the retirement systems.
The bill, for the purposes of determining a retirement benefit
paid to a person who first becomes a member of a public retirement
system on or after January 1, 2013, would require that final
compensation be calculated by multiplying the member's years of
service credit by a percentage of the member's final compensation
based on age at retirement using the member's payrate during a period
of at least 36 consecutive months, as specified.
(4) 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 ensure
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 bill would require public employees who contribute to a
defined benefit plan or component to contribute at least 1/2 of the
annual actuarially determined normal costs, and would prohibit a
public employer from contributing in any fiscal year, in combination
with employer contributions, less than the plan normal cost. The bill
would also prohibit an employer from paying the member's share of
the employee contribution, except as specified.
(5) Existing law generally prohibits any person who has been
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 bill would prohibit a person who retires from a public
employer from serving without reinstatement, except during an
emergency to prevent stoppage of public business or because the
retired employee has skills needed to perform work of limited
duration, as specified.
(6) The California Constitution prohibits changing the composition
of the retirement board of certain public pension systems, including
the number, terms, and method of selection and removal of members,
unless the change is ratified by a majority vote of the electors of
the jurisdiction in which the participants of the pension system are
or were prior to retirement, employed. Existing law creates the Board
of Administration of PERS for the purpose of governing the system
and prescribes the composition of the board. Existing law requires
that one member of the board of administration be a member of the
State Personnel Board, serving at the pleasure of the State Personnel
Board, and that a member representing the public be chosen jointly
by the Speaker of the Assembly and the Senate Committee on Rules.
Existing law further requires that an official of a life insurer be
appointed to the board of administration by the Governor.
This bill would revise the composition of the Board of
Administration of PERS. The bill would eliminate the position of the
member of the State Personnel Board and would replace that position
with the Director of Finance. The bill would add to the board 2
persons, appointed at the pleasure of the Governor, who represent the
public, have financial expertise, and are not interested in the
system, as specified. The bill would also replace the official of a
life insurer, whom the Governor is currently authorized to appoint,
with a gubernatorial appointee who has expertise in health insurance
and is not interested in the system.
(7) The Public Employee's Medical and Hospital Care Act (PEMHCA)
requires the employer contribution, with respect to each employee or
annuitant who is in employment or retired from state service, to be
adjusted by the Legislature in the annual Budget Act, as specified.
Those adjustments are required to be based on the principle that the
employer contribution for each employee or annuitant shall be an
amount equal to 100% of the weighted average of the health benefit
plan premiums for an employee or annuitant enrolled for self-alone,
during the benefit year to which the formula is applied, for the 4
health benefit plans that had the largest state enrollment, excluding
family members, during the previous year. For each employee or
annuitant with enrolled family members, the employer is required to
contribute an additional 90% of the weighted average of the
additional premiums required for enrollment of those family members,
during the benefit year to which the formula is applied, in the 4
health benefit plans that had the largest state enrollment, excluding
family members, during the previous year.
This bill, for employees first hired on or after January 1, 2013,
would limit the employer contribution amount to no greater than the
lowest premium formula paid for a current employee enrolled for
self-alone health benefit coverage year during the benefit year to
which the formula is applied multiplied by the weighted average of
the health benefit plan premiums, as specified. The bill would
further require an employer, for each enrolled family member of a
retired employee, to contribute an additional percentage that is no
higher than the lowest premium formula paid for enrolled family
members multiplied by the weighted average of the additional health
benefit plan premiums required for enrollment of those family
members.
(8) Under PEMHCA, a state employee is required to have a certain
number of years of state service, depending on hiring date and other
factors, before he or she may receive any portion of the employer
contribution payable for annuitants for postretirement health
benefits.
This bill would prohibit a state employee who becomes a state
member of the system on or after January 1, 2013, from receiving any
portion of the employer contribution payable for annuitants unless
the person is credited with 15 years of state service at the time of
retirement. The bill would further specify that the percentage of the
employer contribution payable for postretirement health benefits for
an employee shall be based on the number of completed years of
credited state service at retirement, with 50% after 15 credited
years of service, and 100% after 25 or more years of service.
(9) The bill would also declare that ensuring the statewide
integrity of local government pension systems and ensuring the
sufficiency of local public safety services are matters of statewide
concern and not a municipal affair, and that, therefore, all cities,
including charter cities, would be subject to the provisions of the
bill. The bill would also declare that these provisions apply to the
University of California.
(10) The bill would delay the operation of its provisions until
January 1, 2013, contingent on voter approval of an unspecified
Senate Constitutional Amendment by voters at the November 6, 2012,
statewide election.
(11) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22826 of the Education Code is amended to read:
22826. (a) A member, other than a retired member, may request to
purchase up to five years of nonqualified service credit provided the
member is vested in the Defined Benefit Program as provided in
Section 22156.
(b) A member who requests to purchase nonqualified service credit
as provided in this chapter shall contribute to the retirement fund
the actuarial cost of the service, including interest as appropriate,
as determined by the board based on the most recent valuation of the
plan with respect to the Defined Benefit Program in effect on the
date of the request, in accordance with subdivisions (a), (f), (g),
and (h) of Section 22801.
(c) Notwithstanding any other law, any request to purchase
nonqualified service credit pursuant to this section shall be made
before, and any approval of a purchase shall be made only for the
requests received before, the operative date of the act adding this
subdivision.
SEC. 2. Section 1243 of the Government Code is amended to read:
1243. (a) This section shall apply to any elected public officer
who takes public office, or is reelected to public office, on or
after January 1, 2006 , and prior to the operative date of the
act adding Sections 1244 and 1245 .
(b) If an elected public officer is convicted during or after
holding office of any felony involving accepting or giving, or
offering to give, any bribe, the embezzlement of public money,
extortion or theft of public money, perjury, or conspiracy to commit
any of those crimes arising directly out of his or her official
duties as an elected public officer, he or she shall forfeit 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.
(c) The elected public officer described in subdivision (b) shall
forfeit only that portion of his or her rights and benefits that
accrued on or after January 1, 2006, on account of his or her service
in the elected public office held when the felony occurred.
(d) Any contributions made by the elected public officer described
in subdivision (b) to the public retirement system that arose
directly from or accrued solely as a result of his or her forfeited
service as an elected public officer shall be returned, without
interest, to the public officer within 90 days after a non
appealable decision is final .
(e) The public agency that employs an elected public officer
described in subdivision (b) shall notify the public retirement
system in which the officer is a member of the officer's conviction.
(f) An elected public officer shall not forfeit his or her rights
and benefits pursuant to subdivision (b) if the governing body of
the elected public officer's employer, including, but not limited to,
the governing body of a city, county, or city and county, authorizes
the public officer to receive those rights and benefits.
(g) For purposes of this section, "public officer" means an
officer of the state, or an officer of a county, city, city and
county, district, or authority, or any department, division, bureau,
board, commission, agency, or instrumentality of any of these
entities.
(h) This section applies to any person appointed to service for
the period of an elected public officer's unexpired term of office.
SEC. 3. Section 1244 is added to the Government Code, to read:
1244. (a) This section shall apply to a public employee first
hired by a public employer or first elected or appointed to an office
on or after the operative date of this section and, on and after
that date, Section 1243 shall not apply.
(b) If a public employee is convicted by a state or federal trial
court of any felony under state or federal law for conduct arising
out of or in the performance of his or her official duties, in
pursuit of the office or appointment, or in connection with obtaining
salary, disability retirement, service retirement, or other
benefits, he or she shall forfeit all accrued rights and benefits in
any public retirement system in which he or she is a member to the
extent provided in subdivision (c) and shall not accrue further
benefits in that public retirement system, effective on the date of
the conviction.
(c) (1) A public employee shall forfeit all the retirement
benefits earned or accrued from the earliest date of the commission
of any felony described in subdivision (b) to the forfeiture date,
inclusive. The retirement benefits shall remain forfeited
notwithstanding any reduction in sentence or expungement of the
conviction following the date of the public employee's conviction.
Retirement benefits attributable to service performed prior to the
date of the first commission of the felony for which the public
employee was convicted shall not be forfeited as a result of this
section.
(2) For purposes of this subdivision, "forfeiture date" means the
date of the conviction.
(d) (1) Any contributions to the public retirement system made by
the public employee described in subdivision (b) on or after the
earliest date of the commission of any felony described in
subdivision (b) shall be returned, without interest, to the public
employee upon the occurrence of a distribution event unless otherwise
ordered by a court or determined by the pension administrator.
(2) For the purposes of this subdivision, a "distribution event"
means any of the following:
(A) Separation from employment.
(B) Death of the member.
(C) Retirement of the member.
(e) The public employer that employs a public employee described
in subdivision (b) and that public employee shall each notify the
public retirement system in which the public employee is a member of
that public employee's conviction within 60 days of conviction in the
trial court. The public employer's notification obligations shall
not apply if the public employee's conviction occurs after the public
employee separates from employment or office with that public
employer. The operation of this section is not dependent upon the
performance of the notification obligations specified in this
subdivision.
(f) A public retirement system may assess a public employer a
reasonable amount to reimburse the cost of audit, adjustment, or
correction, if it determines that the public employer failed to
comply with this section.
(g) If a public employee's conviction is reversed and that
decision is final, the employee shall be entitled to recover the
forfeited retirement benefits as adjusted for the contributions
received pursuant to subdivision (d).
(h) The definitions in Section 7514.60 shall apply to this
section.
SEC. 4. Section 1245 is added to the Government Code, to read:
1245. (a) This section shall apply to a public employee first
hired by a public employer or first elected or appointed to an office
before the operative date of this section and, on and after that
date, Section 1243 shall not apply.
(b) If a public employee is convicted by a state or federal trial
court of any felony under state or federal law for conduct arising
out of or in the performance of his or her official duties, in
pursuit of the office or appointment, or in connection with obtaining
salary, disability retirement, service retirement, or other
benefits, he or she shall forfeit all accrued rights and benefits in
any public retirement system in which he or she is a member, to the
extent provided in subdivision (c), and shall not accrue further
benefits in that public retirement system, effective on the date of
the conviction.
(c) (1) A public employee shall forfeit the retirement benefits
earned or accrued from the earliest date of the commission of any
felony described in subdivision (b) to the forfeiture date,
inclusive. The retirement benefits shall remain forfeited,
notwithstanding any reduction in sentence or expungement of the
conviction following the date of the public employee's conviction.
Retirement benefits attributable to service performed prior to the
first date of the commission of the felony for which the public
employee was convicted shall not be forfeited as a result of this
section.
(2) For purposes of this subdivision, "forfeiture date" means the
date of the conviction.
(d) (1) Any contributions to the public retirement system made by
the public employee described in subdivision (b) on or after the
earliest date of the commission of any felony described in
subdivision (b) shall be returned, without interest, to the public
employee upon the occurrence of a distribution event, unless
otherwise ordered by a court or determined by the pension
administrator.
(2) For the purposes of this subdivision, a "distribution event"
means any of the following:
(A) Separation from employment.
(B) Death of the member.
(C) Retirement of the member.
(e) The public employer that employs a public employee described
in subdivision (b) and that public employee shall each notify the
public retirement system in which the public employee is a member of
the public employee's conviction within 60 days of the conviction.
The public employer's notification obligations shall not apply if the
public employee's conviction occurs after the public employee
separates from employment or office with that public employer. The
operation of this section is not dependent upon the performance of
the notification obligations specified in this subdivision.
(f) A public retirement system may assess a public agency a
reasonable amount to reimburse the cost of audit, adjustment, or
correction, if it determines that the public agency failed to comply
with this section.
(g) If a public employee's conviction is reversed and that
decision is final, the employee shall be entitled to recover the
forfeited retirement benefits as adjusted for the contributions
received pursuant to subdivision (d).
(h) The definitions in Section 7514.60 apply to this section.
SEC. 5. Section 7503.71 is added to the Government Code, to read:
7503.71. The following shall apply to all public employers, to
public employees hired on or after the operative date of this
section, and to all public employees hired by a public employer
before the operative date of this section to the fullest extent
permissible under the California Constitution and the United States
Constitution:
(a) Notwithstanding any other law, any enhancement to a public
employee's retirement formula or retirement benefit adopted on or
after the operative date of this section shall apply only to service
performed on or after the operative date of the enhancement and shall
not be applied to any service performed prior to the operative date
of the enhancement.
(b) Notwithstanding any other law, if a change to a member's
classification or a change in employment results in an enhancement in
the retirement formula or retirement benefit applicable to that
member, that enhancement shall apply only to service performed on or
after the operative date of the change and shall not be applied to
any service performed prior to the operative date of the change.
(c) The definitions in Section 7514.60 apply to this section.
SEC. 6. Section 7503.72 is added to the Government Code, to read:
7503.72. The following shall apply to all public employers and
public employees:
(a) In any fiscal year, a public employer's contribution to a
defined benefit plan or component of a retirement plan, in
combination with employee contributions to that defined benefit plan
or component of that plan, shall be not less than the normal cost for
that defined benefit plan or component of that plan for that fiscal
year.
(b) The definitions in Section 7514.60 shall apply to this
section.
SEC. 7. Section 7503.73 is added to the Government Code, to read:
7503.73. This section shall apply to all public employers, to
public employees hired on or after the operative date of this
section, and to all public employees hired by a public employer prior
to the operative date of this section to the fullest extent
permissible under the California Constitution and the United States
Constitution.
(a) Public employees who contribute to a defined benefit plan or
component shall contribute at least one-half of the annual
actuarially determined normal costs for such defined benefit plan or
component, subject to the limitations in subdivision (b). A public
employer shall not pay, on behalf of a member of a public retirement
system, any of the member's share of required employee contributions.
(b) If an employee's pension contribution is below 50 percent of
the normal cost of the defined benefit plan or component on the
operative date of this section, the increase to the employee's
contribution shall be phased in to at least 50 percent over a period
not to exceed three years. The terms of the phase-in shall be
determined through collective bargaining or, for those employees not
subject to collective bargaining, by the employer.
(c) If the normal cost of an employee's defined pension benefit
plan or component declines, the amount of the employee's contribution
may be reduced to not less than 50 percent of the normal cost of
that benefit through collective bargaining or, for those employees
not subject to collective bargaining, by the employer.
(d) Employee contributions described in this section shall be
considered employer contributions for the purposes of federal tax
law.
(e) The definitions in Section 7514.60 apply to this section.
SEC. 8. Section 7503.74 is added to the Government Code, to read:
7503.74. (a) On and after the operative date of this section, a
public retirement system shall not allow the purchase of
nonqualified, additional retirement service credit, however that
service credit may be denominated.
(b) The prohibition of this section does not apply to an official
application to purchase additional retirement service credit that was
received by the public retirement system prior to the operative date
of this section.
(c) For the purposes of this section, "additional retirement
service credit" means service credit for time that does not otherwise
qualify as public service, military service, leave of absence, or
other time recognized for service by a public retirement system.
(d) The definitions in Section 7514.60 apply to this section.
SEC. 9. Section 7503.76 is added to the Government Code, to read:
7503.76. (a) Notwithstanding any other law, a person who retires
from a public employer on or after the operative date of this section
shall not serve, be employed by, or be hired through a contract
either directly or through a third party by, a public employer
without reinstatement from retirement, except as permitted by this
section.
(b) A person who retires from a public employer on or after the
operative date of this section may serve without reinstatement from
retirement or loss or interruption of benefits provided by the
retirement system upon appointment by the appointing power of a
public employer either during an emergency to prevent stoppage of
public business or because the retired employee has skills needed to
perform work of limited duration.
(c) Appointments authorized under this section shall not exceed a
total for all employers in that public retirement system of 960 hours
or 120 full-time days or other equivalent limit, in a consecutive
12-month period. The rate of pay for the employment shall not be less
than the minimum, nor exceed the maximum, paid by the employer to
other employees performing comparable duties. A retired person whose
employment without reinstatement is authorized by this section,
including, but not limited to, service on a public board or
commission, shall acquire no service credit or retirement rights
under this section with respect to the employment unless he or she
reinstates from retirement.
(d) (1) Subdivision (b) does not apply to any retired person
otherwise eligible to serve or be employed by a public employer, if,
during the 12-month period prior to an appointment described in this
section, the retired person received any unemployment insurance
compensation arising out of prior employment subject to this section
with the same employer.
(2) A retired person who accepts an appointment after receiving
unemployment insurance compensation as described in this subdivision
shall terminate that employment on the last day of the current pay
period and shall not be eligible for reappointment subject to this
section for a period of 12 months following the last day of
employment.
(e) The definitions in Section 7514.60 apply to this section.
SEC. 10. Section 7514.60 is added to the Government Code, to read:
7514.60. As used in Section 12 of Article VII of the California
Constitution and the statutory references contained therein, the
following terms have the following meanings:
(a) "Employee contributions" means the contributions to a public
retirement system required to be paid by a member of the system, as
fixed by law, regulation, administrative action, contract, contract
amendment, or other agreement.
(b) "Final compensation" means the member's highest average
payrate during a period of at least 36 consecutive months immediately
preceding his or her retirement, or last separation from service if
earlier, or during any other period of at least 36 consecutive months
during his or her public retirement system membership that the
member designates on the application for retirement.
(c) "Member" means a public employee who is a member of any type
of a public retirement system.
(d) "Normal cost" means the portion of the present value of
defined benefits that is attributable to the current year of service,
as determined by the public retirement system's actuary according to
the most recently completed valuation.
(e) (1) "Payrate" means the normal monthly rate of pay or base pay
of the member paid in cash to similarly situated members of the same
group or class of employment for services rendered on a full-time
basis during normal working hours, pursuant to publicly available pay
schedules. "Payrate," for a member who is not in a group or class,
means the monthly rate of pay or base pay of the member, paid in cash
and pursuant to publicly available pay schedules, for services
rendered on a full-time basis during normal working hours.
(2) "Payrate" shall include an amount deducted from a member's
salary or wages for any of the following:
(A) Participation in a deferred compensation plan.
(B) Payment for participation in a retirement plan that meets the
requirements of Section 401(k) of Title 26 of the United States Code.
(C) Payments into a money purchase pension plan and trust that
meets the requirements of Section 401(a) of Title 26 of the United
States Code.
(D) Participation in a flexible benefits program.
(3) "Payrate" shall not include any of the following:
(A) Accrued vacation, sick, or other leave of any form.
(B) Severance pay.
(C) Overtime work, other than as defined in Section 207(k) of
Title 29 of the United States Code and as set forth in collective
bargaining agreement provisions as of the operative date of the act
adding this section, and any renewal of those collective bargaining
provisions.
(D) The monetary value of any in-kind remuneration.
(E) Supplemental payments for items, including, but not limited
to, uniform allowances, vehicle allowances, housing allowances,
employer contributions to deferred compensation or defined
contribution plans, and bonuses.
(f) "Public employee" means an officer, including those elected or
appointed, or an employee of a public employer.
(g) "Public employer" means:
(1) The state and every state entity, including, but not limited
to
the University of California.
(2) Any political subdivision of the state, including, but not
limited to, a city, county, city and county, charter city, charter
county, charter city and county, school district, community college
district, joint powers authority, joint powers agency, and any public
agency, authority, board, commission, district, or other entity.
(h) "Public retirement system" means any pension or retirement
system of a public employer.
(i) "Safety member" means a public employee whose principal duties
consist of active law enforcement service and who is authorized to
carry firearms under terms and conditions specified by his or her
employing agency, or a firefighter whose principal duties consist of
active firefighting or fire suppression.
SEC. 11. Section 7514.70 is added to the Government Code, to read:
7514.70. (a) (1) A hybrid pension plan provided by Section 12 of
Article VII of the California Constitution shall reduce employer and
taxpayer risk and cost.
(2) A hybrid pension plan shall consist of a defined benefit
component, a defined contribution component or alternative plan
component, and, when applicable, benefits under the federal Social
Security Act (42 U.S.C. Sec. 301 et seq.). The hybrid pension plan
shall be designed with the goal of providing annually during
retirement replacement income of 75 percent of a public employee's
final compensation, based on a full career in public service. The
hybrid pension plan design shall also target a cap on the combined
defined benefit and defined contribution benefit at the amount of the
contribution and benefit base specified in Section 430(b) of Title
42 of the United States Code, or its successor, for those receiving
social security benefits or 120 percent of the contribution and
benefit base specified in Section 430(b) of Title 42 of the United
States Code, or its successor, for those not receiving social
security benefits. As used in this paragraph, "full career in public
service" means 30 years of service and a normal retirement age of 57
for public employees in safety member classifications and 35 years of
service and a normal retirement age of 67 for all other public
employees.
(b) (1) A public employer shall offer to its public employees
first hired on and after July 1, 2013, a hybrid pension plan made
available by the public retirement system pursuant to this section,
or an alternative pension plan option that is determined and
certified by the system's chief actuary and by the system's board to
have no greater risk and no greater costs to the employer than any
available hybrid plans provided by this section.
(2) An action to obtain a judgment or writ restraining and
preventing the implementation or continued implementation of the
alternate plan may be maintained against the retirement system
actuary, the board of the retirement system, the retirement system,
or the employer challenging any of the following: (A) the
determination that the alternate plan is of no greater risk and of no
greater cost to the employer; (B) the authorization to offer the
alternative plan; or (C) the actual offer of the alternate plan to
employees. An action may be brought by any resident or corporation
that is assessed for and is liable to pay, or within one year before
the commencement of the action, has paid a tax within the
jurisdiction or geographical boundaries of the public employer. The
right to maintain an action described in this paragraph is in
addition to and does not limit any other right of action otherwise
provided in law.
(3) (A) To the extent that a public retirement system determines
that employee contributions to a defined benefit plan, or to a
defined benefit portion of a hybrid pension plan, may be considered
employer contributions for purposes of federal tax law, on or after
July 1, 2013, the public employer shall provide to any public
employee who is a member of the defined benefit pension plan the
option to elect to participate prospectively in a hybrid pension
plan, and that election shall be irrevocable.
(B) Any election to participate in a hybrid pension plan as
authorized by subparagraph (A) shall be on a prospective basis only
and shall not affect pension benefits previously earned. A defined
benefit pension plan and a defined benefit portion of the hybrid
pension plan may, to the extent applicable under the particular plan,
take into account in calculating the amount of any previously earned
pension benefits pensionable compensation earned after the date the
public employee moves between those plans.
(c) The definitions in Section 7514.60 shall apply to this
section.
SEC. 12. Section 7514.81 is added to the Government Code, to read:
7514.81. (a) This section applies to public employees first hired
on and after the operative date of this section. The limitations
contained in this section are in addition to other limitations and
shall not provide a public employee any additional benefits or rights
beyond those granted to the public employee by other provisions of
law.
(b) A defined benefit for retirement shall be calculated by
multiplying the member's years of service credit by a percentage of
the member's final compensation based on age at retirement.
(c) To be entitled to make an application for service retirement,
a member shall first be credited with five years of service and
attain 52 years of age for safety member classifications and 57 years
of age for all other public employees. If the minimum age
requirements for eligibility are increased under the federal Social
Security Act (42 U.S.C. Sec. 301 et seq.), the age requirements of
this section shall increase by an equal number of years for any new
employee hired after the operative date of the change in federal law.
(d) The definitions in Section 7514.60 apply to this section.
SEC. 13. Section 20090 of the Government Code is amended to read:
20090. The Board of Administration of the Public Employees'
Retirement System is continued in existence. It consists of:
(a) One member of the State Personnel Board, selected by and
serving at the pleasure of the State Personnel Board.
(a) The Director of Finance.
(b) The Director of the Department of Personnel Administration.
(c) The Controller.
(d) The State Treasurer.
(e) An official of a life insurer and Two
persons, appointed by the Governor, one of whom has expertise in
health insurance and is not interested in a public pension
or retirement system, as described in subdivision (i), and one of
whom is an elected official of a contracting agency ,
appointed by the Governor .
(f) One person representing the public,
(f) Two persons, appointed by, and to serve at the pleasure of,
the Governor, who represent the public, have financial expertise, and
are not interested in a public pension or retirement system, as
described in subdivision (i).
(g) One person representing the public,
appointed jointly by the Speaker of the Assembly and the
Senate Committee on Rules.
(g)
(h) Six members elected under the supervision of the
board as follows:
(1) Two members elected by the members of this system from the
membership thereof.
(2) A member elected by the active state members of this system
from the state membership thereof.
(3) A member elected by and from the active local members of this
system who are employees of a school district or a county
superintendent of schools.
(4) A member elected by and from the active local members of this
system other than those who are employees of a school district or a
county superintendent of schools.
(5) A member elected by and from the retired members of this
system.
(i) For purposes of this section, a person is interested in a
public pension or retirement system if the person or any member of
the person's immediate family (1) is a member of the system, (2) is
eligible to receive or is receiving pension benefits or retirement
benefits from the system, (3) is a member of, or affiliated with, any
employee organization that represents employees who are eligible to
receive or are receiving pension or retirement benefits from the
system, or (4) has any material financial interest in an entity that
contracts with the system.
SEC. 14. Section 20899.5 of the Government Code is amended to
read:
20899.5. (a) An elective
officer of a contracting agency that is a city, county, or city and
county shall not receive credit for service or contributions for
credit for service in violation of the prohibitions provided in
Section 23007.5, 34095, or 50033.
(b) Nothing in this section shall prohibit an elective officer
from purchasing service credit pursuant to Section 20909.
SEC. 15. Section 20909 of the Government Code is amended to read:
20909. (a) A member who has at least five years of credited state
service, may elect, by written notice filed with the board, to make
contributions pursuant to this section and receive not less than one
year, nor more than five years, in one-year increments, of additional
retirement service credit in the retirement system.
(b) A member may elect to receive this additional retirement
service credit at any time prior to retirement by making the
contributions as specified in Sections 21050 and 21052. A member may
not elect additional retirement service credit under this section
more than once.
(c) For purposes of this section, "additional retirement service
credit" means time that does not qualify as public service, military
service, leave of absence, or any other time recognized for service
credit by the retirement system.
(d) Additional retirement service credit elected pursuant to this
section may not be counted to meet the minimum qualifications for
service or disability retirement or for health care benefits, or any
other benefits based upon years of service credited to the member.
(e) This section only applies to the following members:
(1) A member while he or she is employed in state service at the
time of the additional retirement service credit election.
(2) A member of the system defined in Section 20324.
(f) For purposes of this section, "state service" means service as
defined in Section 20069.
(g) Notwithstanding any other law, no request to purchase
nonqualified service credit pursuant to this section may be made
after, and no purchase may be made for the requests received after,
the operative date of the act that adds this subdivision.
SEC. 16. Section 22871.1 is added to the Government Code, to read:
22871.1. Notwithstanding Section 22871, an employee first hired
on or after the operative date of this section, including academic
positions with the California State University, and survivors of any
of those employees shall have an employer contribution amount in
retirement no greater than the last three-year average of the premium
formula paid on his or her behalf as an active employee enrolled for
self-alone health benefit coverage during the benefit year to which
the formula is applied multiplied by the weighted average of the
health benefit plan premiums. For each enrolled family member of a
retired employee, the employer shall contribute an additional
percentage that shall be no greater than the last three year average
of the premium formula paid for enrolled family members when the
employee was an active member, multiplied by the weighted average of
the additional health benefit plan premiums required for enrollment
of those family members. These contribution rates shall be adjusted
annually for all retired employees. "Weighted average" as used in
this section shall consist of the four health benefit plans that had
the largest state enrollment, excluding family members, during the
previous benefit year. Only the enrollment of, and premiums paid by,
state employees and annuitants enrolled in a basic health benefit
plan shall be counted for purposes of calculating the employer
contribution under this section.
SEC. 17. Section 22874.2 is added to the Government Code, to read:
22874.2. (a) Notwithstanding Sections 22870, 22871, 22873, and
22874, a state employee, as defined in subdivision (c) of Section
3513, who is employed by the state for the first time, and who
becomes a state member of the system on or after January 1, 2013, may
not receive any portion of the employer contribution payable for
annuitants unless the person is credited with 15 years of state
service at the time of retirement.
(b) The percentage of the employer contribution payable for
postretirement health benefits for an employee subject to this
section shall be based on the completed years of credited state
service at retirement as shown in the following table:
Years of Service
Credited Years Percentage
Contribution of Employer
15 50
16 55
17 60
18 65
19 70
20 75
21 80
22 85
23 90
24 95
25 or more 100
(c) For employees who retire prior to the normal retirement age
the percentage of employer contribution shall be reduced by an
actuarially equivalent amount for each year between the age at
retirement and the applicable normal retirement age.
(d) This section shall apply only to state employees who retire
from state service. For purposes of this section, "state service"
means service rendered as an employee of the state or an appointed or
elected officer of the state for compensation. Notwithstanding
Section 22826, for purposes of this section, credited state service
includes service to the state for which the employee, pursuant to
Section 2081.5 did not receive credit.
(e) This section does not apply to:
(1) State employees previously employed before January 1, 2013,
who return to state employment on or after January 1, 2013.
(2) State employees hired prior to January 1, 2013, who were
subject to Section 20281.5 during the first 24 months of state
employment.
(3) State employees on an approved leave of absence employed
before January 1, 2013, who return to active employment on or after
January 1, 2013.
(f) Notwithstanding Section 22875, this section shall also apply
to a related state employee who is exempted from the definition of
"state employee" in subdivision (c) of Section 3513, and an officer
or employee of the executive branch of state government who is not a
member of the civil service who met the requirements of this section
when employed by the state for the first time.
(g) If the terms of a contract, including a memorandum of
understanding, between a public employer and its public employees,
that is in effect on the operative date of this section, would be
impaired by any provision of this section or by any statutory
provision referenced in this section, that provision shall not apply
to the public employer and public employees subject to that contract
until the expiration of that contract. A renewal, amendment, or any
other extension of that contract shall be subject to the requirements
of this section and the statutory provisions referenced in this
section.
SEC. 18. Section 31486.35 of the Government Code is amended to
read:
31486.35. (a) An active member may elect, by written notice filed
with the board before the operative date of the act that adds
subdivision (h) , to make contributions pursuant to this
section and to receive up to five years of service credit in the
retirement system for additional retirement credit, if the member has
completed at least five years of credited service with that
retirement system.
(b) As used in this section, "additional retirement credit" means
time that does not otherwise qualify as county service, public
service, military service, medical leave of absence, or any other
time recognized for service credit by the retirement system.
(c) Notwithstanding any other provision of this chapter, service
credit for additional retirement credit may not be counted to meet
the minimum qualifications for service retirement or for purposes of
establishing eligibility for benefits based on 30 years of service,
additional ad hoc cost-of-living benefits based on service credit,
health care benefits, or any other benefits based upon service
credit.
(d) A member who elects to make contributions and receive service
credit for additional retirement credit shall contribute to the
retirement fund, prior to the effective date of his or her
retirement, by lump-sum payment or by installment payments over a
period not to exceed 10 years, an amount that, at the time of
commencement of purchase, in the opinion of the board and the
actuary, is sufficient to not place any additional financial burden
upon the retirement system.
(e) No member may receive service credit under this section for
additional retirement credit that he or she has not completed payment
pursuant to subdivision (d) before the effective date of his or her
retirement or, if applicable, prior to the date provided in Section
31485.7. Subject to the limitations of United States Internal Revenue
Service regulations, a member who has elected to make payment in
installments may complete payment by lump sum at any time prior to
the effective date of his or her retirement.
(f) Sums paid by a member pursuant to this section shall be
considered to be and administered as contributions by the member.
(g) This section is not operative in a county until the board of
supervisors, by resolution adopted by majority vote, makes this
section applicable in the county.
(h) No member without at least five years of credited service
before the operative date of the act that adds this subdivision, or a
person first hired on or after that date, shall be permitted to make
an election to receive additional retirement credit.
SEC. 19. Section 31658 of the Government Code is amended to read:
31658. (a) An active member may elect, by written notice filed
with the board before the operative date of the act that adds
subdivision (h) , to make contributions pursuant to this
section and to receive up to five years of service credit in the
retirement system for additional retirement credit, if the member has
completed at least five years of credited service with that
retirement system.
(b) As used in this section, "additional retirement credit" means
time that does not otherwise qualify as county service, public
service, military service, medical leave of absence, or any other
time recognized for service credit by the retirement system.
(c) Notwithstanding any other provision of this chapter, service
credit for additional retirement credit may not be counted to meet
the minimum qualifications for service or disability retirement or
for purposes of establishing eligibility for any benefits based on 30
years of service, additional ad hoc cost-of-living benefits based on
service credit, health care benefits, or any other benefits based
upon service credit.
(d) Any member who elects to make contributions and receive
service credit for additional retirement credit shall contribute to
the retirement fund, prior to the effective date of his or her
retirement, by lump-sum payment or by installment payments over a
period not to exceed 10 years, an amount that, at the time of
commencement of purchase, in the opinion of the board and the
actuary, is sufficient to not place any additional financial burden
upon the retirement system.
(e) No member may receive service credit under this section for
any additional retirement credit for which he or she has not
completed payment pursuant to subdivision (d) before the effective
date of his or her retirement. Subject to the limitations of United
States Internal Revenue Service regulations, a member who has elected
to make payment in installments may complete payment by lump sum at
any time prior to the effective date of his or her retirement.
(f) Any sums paid by a member pursuant to this section shall be
considered to be and administered as contributions by the member.
(g) This section is not operative in any county until the board of
supervisors, by resolution adopted by majority vote, makes this
section applicable in the county.
(h) No member without at least five years of credited service
before the operative date of the act that adds this subdivision, or a
person first hired on or after that date, shall be permitted to make
an election to receive additional retirement credit.
SEC. 20. The Legislature finds and declares the following:
(a) The security of public moneys is important to all residents of
the state, therefore it is necessary for this act to apply to the
University of California.
(b) The security of public moneys and the fiscal integrity of
local governmental agencies in this state, including charter cities,
have a direct impact on the long-term well-being of all residents of
this state. Further, local governments that are impacted by
unsustainable pension obligations have difficulty providing
sufficient public safety services and place additional financial
burdens on the state. Accordingly, the Legislature finds and declares
that ensuring the statewide integrity and security of local
government pension systems and ensuring the sufficiency of local
public safety services are matters of statewide concern and not a
municipal affair, as that term is used in Section 5 of Article XI of
the California Constitution. Therefore, this act shall apply to all
cities, including charter cities.
SEC. 22. The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 23. If any section of this act is in conflict with a
memorandum of understanding that is current and in effect on the date
of the enactment of this section, the memorandum of understanding
shall be controlling while it remains in effect. Upon expiration of
the memorandum of understanding that is in effect and current on the
enactment date of this act, this act shall be controlling and may not
be superseded by a subsequent memorandum of understanding.
SEC. 24. This act shall become operative on January 1, 2013, and
only if Senate Constitutional Amendment ____ is approved by the
voters at the November 6, 2012, statewide general election.
SEC. 25. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
In order for the provisions of this act to be applicable as soon
as possible for the 2012-13 fiscal year, and thereby facilitate the
orderly administration of state government at the earliest time
possible, it is necessary that this act take effect immediately.