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SB-24 Public employees’ retirement: benefit plans.(2013-2014)

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SB24:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Senate Bill No. 24


Introduced by Senator Walters

December 03, 2012


An act to amend Sections 7522.02, 7522.15, 7522.20, and 7522.25 of, and to add Section 7522.03 to, the Government Code, relating to public employees’ retirement.


LEGISLATIVE COUNSEL'S DIGEST


SB 24, as introduced, Walters. Public employees’ retirement: benefit plans.
Existing law regulates state and local public retirement systems and generally requires public employees who are new members, as defined, of those systems, on and after January 1, 2013, to participate in specified benefit plans. Existing law permits a public employer that, before January 1, 2013, offers a defined benefit pension plan that provides a defined benefit formula with a lower benefit factor at normal retirement age, and results in a lower normal cost, than the defined benefit formula required for new employees on and after January 1, 2012, to continue to offer that defined benefit formula and excepts the employer from specified requirements regarding pensionable compensation. Existing law requires, in the case of these plans, if a new defined benefit formula is adopted on or after January 1, 2013, that the formula meet certain requirements and, among other things, be approved by the Legislature. Existing law prescribes the same requirements for a retirement benefit plan that consists solely of a defined contribution plan if the employer, on or after January 1, 2013, adopts a new defined benefit pension plan or defined benefit formula, as specified.
This bill would eliminate the requirement that the Legislature approve the changes in the instances described above. This bill would also authorize a local agency public employer or public retirement system that offers a defined benefit pension plan to offer a benefit formula with a lower benefit factor at normal retirement age and that results in a lower normal cost than the benefit formulas that are currently required, for purposes of addressing a fiscal necessity.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 7522.02 of the Government Code is amended to read:

7522.02.
 (a) (1) Notwithstanding any other law, except as provided in this article, on and after January 1, 2013, this article shall apply to all state and local public retirement systems and to their participating employers, including the Public Employees’ Retirement System, the State Teachers’ Retirement System, the Legislators’ Retirement System, the Judges’ Retirement System I, the Judges’ Retirement System II, county and district retirement systems created pursuant to the County Employees Retirement Law of 1937, independent public retirement systems, and to individual retirement plans offered by public employers. However, this article shall be subject to the Internal Revenue Code and Section 17 of Article XVI of the California Constitution. The administration of the requirements of this article shall comply with applicable provisions of the Internal Revenue Code and the Revenue and Taxation Code.
(2) Notwithstanding paragraph (1), this article shall not apply to the entities described in Section 9 of Article IX of, and Sections 4 and 5 of Article XI of, the California Constitution, except to the extent that these entities continue to be participating employers in any retirement system governed by state statute. Accordingly, any retirement plan approved before January 1, 2013, by the voters of any entity excluded from coverage by this section shall not be affected by this article.
(b) The benefit plan required by this article shall apply to public employees who are new members as defined in Section 7522.04.
(c) Individuals who were employed by any public employer before January 1, 2013, and who became employed by a subsequent public employer for the first time on or after January 1, 2013, shall be subject to the retirement plan that would have been available to employees of the subsequent employer who were first employed by the subsequent employer on or before December 31, 2012, if the individual was subject to reciprocity established under any of the following provisions:
(1) Article 5 (commencing with Section 20350) of Chapter 3 of Part 3 of Division 5 of Title 2.
(2) Chapter 3 (commencing with Section 31450) of Part 3 of Division 4 of Title 3.
(3) Any agreement between public retirement systems to provide reciprocity to members of the systems.
(d) If a public employer, before January 1, 2013, offers a defined benefit pension plan that provides a defined benefit formula with a lower benefit factor at normal retirement age and results in a lower normal cost than the defined benefit formula required by this article, that employer may continue to offer that defined benefit formula instead of the defined benefit formula required by this article, and shall not be subject to the requirements of Section 7522.10 for pensionable compensation subject to that formula. However, if the employer adopts a new defined benefit formula on or after January 1, 2013, that formula must conform to the requirements of this article or must be determined and certified by the retirement system’s chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article and must be approved by the Legislature. New members of the defined benefit plan may only participate in the lower cost defined benefit formula that was in place before January 1, 2013, or a defined benefit formula that conforms to the requirements of this article or is approved by the Legislature as provided in this subdivision.
(e) If a public employer, before January 1, 2013, offers a retirement benefit plan that consists solely of a defined contribution plan, that employer may continue to offer that plan instead of the defined benefit pension plan required by this article. However, if the employer adopts a new defined benefit pension plan or defined benefit formula on or after January 1, 2013, that plan or formula must conform to the requirements of this article or must be determined and certified by the retirement system’s chief actuary and the system’s board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article and must be approved by the Legislature. New members of the employer’s plan may only participate in the defined contribution plan that was in place before January 1, 2013, or a defined contribution plan or defined benefit formula that conforms to the requirements of this article.
(f) The Judges’ Retirement System I and the Judges’ Retirement System II shall not be required to adopt the defined benefit formula required by Section 7522.25 or 7522.30 7522.20 or 7522.25 or the compensation limitations defined in Section 7522.10.
(g) This article shall not be construed to provide membership in any public retirement system for an individual who would not otherwise be eligible for membership under that system’s applicable rules or laws.

SEC. 2.

 Section 7522.03 is added to the Government Code, to read:

7522.03.
 (a) Notwithstanding Section 7522.15, a local agency public employer or public retirement system that offers a defined benefit pension plan may, for purposes of addressing a fiscal necessity, offer a benefit formula with a lower benefit factor at normal retirement age and that results in a lower normal cost than the benefit formula required by Section 7522.20 or 7522.25.
(b) The authority provided by subdivision (a) shall be exercised upon the direction of the legislative body of the local agency, as manifest in a duly enacted ordinance or resolution that describes the fiscal necessity, or upon a vote of the people of the affected jurisdiction.
(c) For purposes of this section, “local agency” means a city, county, or district.

SEC. 3.

 Section 7522.15 of the Government Code is amended to read:

7522.15.
 Except as provided in subdivisions (d) and (e) of Section 7522.02 or in Section 7522.03, each public employer and each public retirement system that offers a defined benefit plan shall offer only the defined benefit formulas established pursuant to Sections 7522.20 and 7522.25 to new members.

SEC. 4.

 Section 7522.20 of the Government Code is amended to read:

7522.20.
 (a) Each Except as provided in Section 7522.03, each retirement system that offers a defined benefit plan for nonsafety members of the system shall use the formula prescribed by this section. The defined benefit plan shall provide a pension at retirement for service equal to the percentage of the member’s final compensation set forth opposite the member’s age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a nonsafety member. A member may retire for service under this section after five years of service and upon reaching 52 years of age.
Age of RetirementFraction
52  ........................
1.00
521/4 ........................
1.025
521/2 ........................
1.050
523/4  ........................
1.075
53  ........................ ........................
1.100
531/4 ........................
1.125
531/2 ........................
1.150
533/4 ........................
1.175
54  ........................
1.200
541/4 ........................
1.225
541/2 ........................
1.250
543/4 ........................
1.275
55  ........................
1.300
551/4 ........................
1.325
551/2 ........................
1.350
553/4 ........................
1.375
56  ........................
1.400
561/4 ........................
1.425
561/2 ........................
1.450
563/4 ........................
1.475
57  ........................
1.500
571/4 ........................
1.525
571/2 ........................
1.550
573/4 ........................
1.575
58  ........................
1.600
581/4 ........................
1.625
581/2 ........................
1.650
583/4 ........................
1.675
59  ........................
1.700
591/4 ........................
1.725
591/2 ........................
1.750
593/4 ........................
1.775
60  ........................
1.800
601/4 ........................
1.825
601/2 ........................
1.850
603/4 ........................
1.875
61  ........................
1.900
611/4 ........................
1.925
611/2 ........................
1.950
613/4 ........................
1.975
62  ........................
2.000
621/4 ........................
2.025
621/2 ........................
2.050
623/4 ........................
2.075
63  ........................
2.100
631/4 ........................
2.125
631/2 ........................
2.150
633/4 ........................
2.175
64  ........................
2.200
641/4 ........................
2.225
641/2 ........................
2.250
643/4 ........................
2.275
65  ........................
2.300
651/4 ........................
2.325
651/2 ........................
2.350
653/4 ........................
2.375
66  ........................
2.400
661/4 ........................
2.425
661/2 ........................
2.450
663/4 ........................
2.475
67  ........................
2.500
(b) Pensionable compensation used to calculate the defined benefit shall be limited as described in Section 7522.10.
(c) A new member of the State Teachers’ Retirement System shall be subject to the formula established pursuant to Section 24202.6 of the Education Code.

SEC. 5.

 Section 7522.25 of the Government Code is amended to read:

7522.25.
 (a) Each Except as provided in Section 7522.03 each retirement system that offers a defined benefit plan for safety members of the system shall use one or more of the defined benefit formulas prescribed by this section. A member may retire for service under any of the formulas in this section after five years of service and upon reaching 50 years of age.
(b) The Basic Safety Plan shall provide a pension at retirement for service equal to the percentage of the member’s final compensation set forth opposite the member’s age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member.
Age at Retirement
Fraction
50  ........................
 1.426
501/4 ........................
 1.447
501/2 ........................
 1.467
503/4 ........................
 1.488
51  ........................
 1.508
511/4 ........................
 1.529
511/2 ........................
 1.549
513/4 ........................
 1.570
52  ........................
 1.590
521/4 ........................
 1.611
521/2 ........................
 1.631
523/4 ........................
 1.652
53  ........................
 1.672
531/4 ........................
 1.693
531/2 ........................
 1.713
533/4 ........................
 1.734
54  ........................
 1.754
541/4 ........................
 1.775
541/2 ........................
 1.795
543/4 ........................
 1.816
55  ........................
 1.836
551/4 ........................
 1.857
551/2 ........................
 1.877
553/4 ........................
 1.898
56  ........................
 1.918
561/4 ........................
 1.939
561/2 ........................
 1.959
563/4 ........................
 1.980
57 and over  ........................
 2.000
(c) The Safety Option Plan One shall provide a pension at retirement for service equal to the percentage of the member’s final compensation set forth opposite the member’s age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member.
Age at Retirement
Fraction
50  ........................
 2.000
501/4 ........................
 2.018
501/2 ........................
 2.036
503/4 ........................
 2.054
51  ........................
 2.071
511/4 ........................
 2.089
511/2 ........................
 2.107
513/4 ........................
 2.125
52  ........................
 2.143
521/4 ........................
 2.161
521/2 ........................
 2.179
523/4 ........................
 2.196
53  ........................
 2.214
531/4 ........................
 2.232
531/2 ........................
 2.250
533/4 ........................
 2.268
54  ........................
 2.286
541/4 ........................
 2.304
541/2 ........................
 2.321
543/4 ........................
 2.339
55 ........................
 2.357
551/4 ........................
 2.375
551/2 ........................
 2.393
553/4 ........................
 2.411
56 ........................
 2.429
561/4 ........................
 2.446
561/2 ........................
 2.464
563/4 ........................
 2.482
57 and over ........................
 2.500
(d) The Safety Option Plan Two shall provide a pension at retirement for service equal to the percentage of the member’s final compensation set forth opposite the member’s age at retirement, taken to the preceding quarter year, in the following table, multiplied by the number of years of service in the system as a safety member.
Age at Retirement
Fraction
50  ........................
 2.000
501/4 ........................
 2.025
501/2 ........................
 2.050
503/4 ........................
 2.075
51  ........................
 2.100
511/4 ........................
 2.125
511/2 ........................
 2.150
513/4 ........................
 2.175
52  ........................
 2.200
521/4 ........................
 2.225
521/2 ........................
 2.250
523/4 ........................
 2.275
53  ........................
 2.300
531/4 ........................
 2.325
531/2 ........................
 2.350
533/4 ........................
 2.375
54  ........................
 2.400
541/4 ........................
 2.425
541/2 ........................
 2.450
543/4 ........................
 2.475
55  ........................
 2.500
551/4 ........................
 2.525
551/2 ........................
 2.550
553/4 ........................
 2.575
56  ........................
 2.600
561/4 ........................
 2.625
561/2 ........................
 2.650
563/4 ........................
 2.675
57 and over  ........................
 2.700
(e) On and after January 1, 2013, an employer shall offer one or more of the safety formulas prescribed by this section to new employees who are safety employees eligible for membership in the system. The formula offered shall be the formula that is closest to, and provides a lower benefit at 55 years of age than, the formula provided to members in the same retirement classification offered by the employer on December 31, 2012.
(f) On and after January 1, 2013, an employer and its employees subject to Safety Option Plan One or Safety Option Plan Two may agree in a memorandum of understanding to be subject to Safety Option Plan One or the Basic Safety Plan, subject to the following:
(1) The lower plan shall apply to members first employed on or after the effective date of the lower plan, and shall be agreed to in a memorandum of understanding that has been collectively bargained in accordance with applicable laws.
(2) A retirement plan contract amendment with a public retirement system to alter a retirement formula pursuant to this subdivision shall not be implemented by the employer in the absence of a memorandum of understanding that has been collectively bargained in accordance with applicable laws.
(3) An employer shall not use impasse procedures to impose the lower plan.
(4) An employer shall not provide a different defined benefit for nonrepresented, managerial, or supervisory employees than the employer provides for other public employees, including represented employees, of the same employer who are in the same membership classifications.
(g) Pensionable compensation used to calculate the defined benefit shall be limited as described in Section 7522.10.