BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2582
Norma Torres, Chair HEARING DATE: June 9, 2014
AB 2582 (Bonta) as amended 6/02/14 FISCAL: YES
RETIREMENT HEALTH BENEFITS: BART VESTING SCHEDULE
HISTORY :
Sponsor: Bay Area Rapid Transit District (BART)
Other legislation:AB 1144 (Hall),
Chapter 244, Statutes of 2013
AB 2053 (Allen) of 2012,
Vetoed by the Governor
AB 2510 (Fletcher),
Chapter 600, Statutes of 2010
ASSEMBLY VOTES :
PER & SS 6-0 4/23/14
Appropriations 17-0 4/30/14
Assembly Floor 73-0 5/08/14
SUMMARY :
AB 2582 authorizes the Bay Area Rapid Transit District (BART)
to establish a vesting requirement for post-retirement health
benefits coverage that is different than what is allowed
under current law for contracting agencies and which has been
bargained with BART's employee representatives.
BART's health insurance employer contribution for annuitants
with 10 years of credited service would be 50% of that
provided to active employees. The employer contribution
would increase incrementally by 10% for each credited year of
service, reaching 100% if the annuitant attained 15 years of
credited service. Annuitants who retire for disability and
have at least 5 years of BART service would receive 100% of
BART's employer contribution for active employees.
BACKGROUND AND ANALYSIS :
1)Existing law :
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a) establishes the Public Employees' Medical and Hospital
Care Act (PEMHCA), administered by the California Public
Employees' Retirement System (CalPERS), to provide health
coverage for employees and annuitants of the State and
the California State University.
b) allows a school or local agency employer to contract
with CalPERS for PEMHCA and requires the employee or
annuitant contribution, when added to the employer
contribution, to cover the total cost of the PEMHCA
coverage premium.
c) defines an annuitant as one who, among other
requirements, retires from the system within 120 days of
separation from public employment.
d) does not allow contracting employers to provide PEMHCA
coverage to active employees without also covering
retired annuitants. However, with respect to the
employer contribution for annuitants, provides specified
options available to the contracting agency, including:
i) an equal employer contribution amount for both
active employees and annuitants. Under this option,
an employee who retires and meets the definition of
annuitant becomes 100% vested and receives an employer
contribution amount equal to what the active employees
receive; or
ii) for a contracting agency that joins PEMHCA on
or after January 1, 1986, the option to pay a lesser
employer contribution amount for annuitants than for
active employees as long as the agency increases its
contribution for annuitants each year until it equals
the agency's contributions for active employees as
specified; or
iii) a pre-set "vesting schedule" based on an
employee's credited years of service to determine a
set percentage of the employer contribution amount for
annuitants. Under this option, an annuitant must have
at least 10 years of CalPERS credited service to
qualify for 50% of the employer contribution and would
receive an additional 5% for each additional year of
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credited service for a total of 100% with 20 years of
credited service. At least 5 years must be with the
employer providing PEMHCA.
iv) allows under the 10-20 year vesting schedule, an
employer contribution of 100% if the annuitant retired
for disability or if the annuitant had 20 years of
service, regardless of the length of separation from
service prior to retirement.
e) provides specified and individual variations to the
above options and requirements under separate statutes
specific to the City of Carson, the City of San Diego,
school employers, Alameda County Transportation
Improvement Authority, and Mariposa County. These
statutes are subject to collective bargaining agreements.
2)This bill :
a) authorizes BART to make contributions for
postretirement health benefits for the districts'
unrepresented employees, including members of the
district board of directors to the extent that they are
eligible under existing law, and for any unit of
employees whose terms and conditions of employment are
determined through collective bargaining. The employer
contributions will be based on the following:
i) credited years of service worked with BART;
ii) a collectively bargained agreement with all
represented employees regarding post-employment health
coverage; and,
iii) for unrepresented employees, including
directors if eligible, criteria and schedules as
provided to the represented employees through a
collectively bargained agreement.
b) requires the agreement to provide an employer
contribution of 50% after 10 years of credited service,
increasing incrementally to 100% after 15 years of
credited service. All service must be with BART.
c) requires any agreement for providing an employer
contribution for retiree healthcare to also provide full
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employer contributions for those employees who retire
for disability with at least 5 years of service with
BART.
d) specifies that these provisions only apply to BART
employees first hired on or after January 1, 2014, and
to directors who first serve as director on or after
January 1, 2014.
e) specifies that these provisions only apply to
represented employees if the agreement is expressly
incorporated into a memorandum of understanding, as
specified.
f) specifies that these provisions do not apply to
employees who retire prior to the effective date of the
bargaining agreement, and, in the event the bargaining
agreement establishes a retroactive effective date,
these provisions will only apply to prospective
retirements.
g) requires BART to provide CalPERS with notification of
each agreement or personnel action applying these new
requirements, and any additional information necessary
to implement the proposed change.
FISCAL :
According to the Assembly Appropriations committee, this bill
would result in costs that are "minor and absorbable for the
California Public Employees' Retirement System (CalPERS)."
COMMENTS :
1)Suggested Amendments :
The bill attempts to make clear that the new health benefit
vesting schedule and terms will apply only to employees who
retire after the effective date of the MOU or, if the
effective date is made retroactive to a period before the MOU
was signed, then only prospectively to an employee who
retirees after the signing of the MOU. However, the
provision causes confusion with respect to an employee who
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may retire after the MOU effective date, or after the MOU
signing date, but before the effective date of this bill, if
enacted (i.e., January 1, 2015).
In order to clarify that the provisions of the bill apply
only to retirements that occur on or after the effective date
of the bill, staff recommends that the bill be amended to
state that the new plan applies to those retiring on or after
the bill's effective date.
2)Arguments in Support :
According to the sponsor, AB 2582 would "authorize a new
vesting schedule for retiree lifetime healthcare benefits
that was negotiated between BART and our employee
organizations last fall?The new schedule will provide cost
savings to BART of over $13.8 million over the next 30
years."
3)SUPPORT :
Bay Area Rapid Transit District (BART), Sponsor
4)OPPOSITION :
None.
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