BILL ANALYSIS SB 53 Date of Hearing: July 7, 1993 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL SECURITY SAL CANNELLA, Chair SB 53 (Russell) - As Amended: July 2, 1993 SUBJECT PERS: administration DIGEST Existing law under the Public Employees Retirement Law defines the šterms"compensation" and "compensation earnable" for purposes of determining šrequired contributions and benefits. This bill: 1) Provides a clear definition of compensation (current provisions relating što reportable pay-rate and compensation would be repealed and new definitions added). 2) Provides full funding of all member benefits. 3) Reduces the ability to manipulate "compensation", thereby increasing š benefits. 4) Provides the PERS Board with clear oversight of benefits. 5) Does not interfere with current collective bargaining agreements. 6) Allows a 19-month window period for the re-negotiation of labor š agreements which provide for the "grandfathering" of benefits negotiated in good faith and based on information provided by PERS, until June 30, 1994. 7) Provides a 10-year, rather than three-year, statute of limitations in š cases of fraud. 8) Penalizes agencies that knowingly fail to enroll eligible employees š into membership. 9) Corrects an inequity in the conversion of sick leave into pension š service credit at the time of retirement. 10) Eliminates abuses by truly part-time city attorneys who are currently š treated as "elective officers." - continued - SB 53 Page 1 SB 53 11) Adds a provision to permit the conversion of employer-paid member š contributions during a members final compensation period if the employer opts to include this provision in its contract and pay for it. 12) Eliminates windfall benefits to certain elected or appointed š board/council members who can now receive full-time PERS service credit for monthly meetings. 13) Repeals the authority that permits employers to hire retired annuitants š for a limited but indefinite duration (i.e., without regard to the 960 hours in a calendar year rule that applies to employment situations for moth other retired annuitants to fill a temporary vacancy until a permanent appointment is made. 14) Simplifies internal and external audits. FISCAL EFFECT According to PERS, there will be no increased administrative costs which šcannot be absorbed by existing funds. COMMENTS In the last few years, PERS has uncovered extensive evidence of wide spread šabuse of one-year final compensation by contracting agencies. The abuse of šthe final compensation method of calculating benefits is commonly called š"pension spiking". It is but one form of the vast area of Pension Abuse šwhich this bill attempts to address. Numerous newspaper articles, media šcoverage and legislative hearings have given the spiking problem a lot of šattention. The problems at the American River Fire District are the most špublicized. This bill also addresses a variety of other forms of Pension šAbuse. Last year, AB 2331 (Elder), began as a PERS sponsored bill until it was šamended to include provisions which PERS felt ran contrary to the intent of šthe bill. The bill was ultimately vetoed by the Governor. This bill has been šthe result of a series of meetings including the author, PERS, contracting šemployers, employee groups, the Department of Personnel Administration, Cal šTax, policy & fiscal committee staff from both houses, and interested šparties The goal of the language in this bill is to define compensation in a way šwhich will make it more difficult to include payments which are not normal, šor regular compensation, with the end result that it will be more difficult što include money into final compensation and thus "spike" a retirement šbenefit. PERS hopes to make reportable payrates "stable and predictable šamount all members of a group or class." This bill was recently amended (July 2) to accommodate concerns raised by š - continued - SB 53 Page 2 SB 53 the Department of Personnel Administration. POSITIONS Support Public Employees Retirement System - Sponsor California Peace Officers' Association California Police Chiefs' Association California Correctional Peace Officers Association California Teachers Association California State Association of Counties Peace Officers Research Association of California California Union of Safety Employees City of Claremont California Faculty Association Opposition California Professional Firefighters California Department of Forestry Employees Association Public Service Skills, Inc. - continued - SB 53 Page 3