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SB-454 Public employees’ health benefits.(2017-2018)

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Date Published: 04/07/2017 04:00 AM
SB454:v98#DOCUMENT

Amended  IN  Senate  April 06, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 454


Introduced by Senator Moorlach

February 16, 2017


An act to amend Section 22944.5 of, and to add Sections 22871.4 22871.4, 22874.5, and 22944.7 to, the Government Code, relating to state public employment.


LEGISLATIVE COUNSEL'S DIGEST


SB 454, as amended, Moorlach. Public employee’s employees health benefits.
The Public Employees’ Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees’ Retirement System, prescribes methods for calculating the state employer contribution for postemployment health care benefits for eligible retired public employees and their families and for the vesting of these benefits. PEMHCA requires the employer contribution for an employee or annuitant who is in the employment of employed by the state or retired from state service to be adjusted by the Legislature in the annual Budget Act, as specified. PEMHCA prescribes different ways of calculating the employer contributions for employees and annuitants depending on date of hire, years of service, and bargaining unit.
This bill, for state employees who are first employed and become members of the retirement system on or after January 1, 2018, would limit the employer contribution for annuitants to 80% of the weighted average of the health benefit plan premiums for an active employee enrolled for self-alone, self alone, during the benefit year to which the formula is applied, for the 4 health benefit plans with the largest state civil service enrollment, as specified. The bill would similarly limit the employer contribution for an enrolled family member of an annuitant to 80% 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 and would provide the same limit on employer contributions for annuitants enrolled in Medicare health benefit plans. The bill would provide that if its provisions are in conflict with regard to an employee covered by a memorandum of understanding, the memorandum of understanding would control until it expires. The bill would prescribe the percentage of the employer contribution payable for postemployment health benefits 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, for an employee of the state, the California State University, and the Legislature, who is employed by the state for the first time and who becomes a state member of the Public Employees’ Retirement System on or after January 1, 2018.
PEMHCA establishes the Public Employees’ Contingency Reserve Fund for the purpose of funding health benefits and funding administrative expenses. PEMHCA establishes the Annuitants’ Health Care Coverage Fund, which is continuously appropriated, for the purpose of prefunding health care coverage for annuitants, including administrative costs. PEMHCA defines “prefunding” for these purposes. Existing law requires the state and employees of State Bargaining Unit 2, 7, 9, 10, or 12 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2019, and prescribes schedules of contribution percentages in this regard. For the state and employees of State Bargaining Unit 6, the date for reaching the goal is July 1, 2018.
This bill would require the state, on and after January 1, 2018, to assume all responsibility for prefunding retiree health care. The bill would require the state to prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100% of the actuarially determined normal costs by July 1, 2019. The bill would require the state to pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller, as specified, with the goal of paying 50% of the actuarially determined cost of these liabilities by January 1, 2022, and 100% of the actuarially determined cost of these liabilities by January 1, 2026. The bill would require the Controller, by January 10 of each year, to provide a report to specified committees of the Legislature that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described above.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 22871.4 is added to the Government Code, to read:

22871.4.
 (a) Notwithstanding any other law, the employer contribution for employees hired on and or after January 1, 2018, shall be as described in subdivision (b). This section shall not be construed to create eligibility for an employee who otherwise does not receive a state contribution for postemployment health care.
(b) Effective January 1, 2018, the employer contribution for each employee shall be an amount equal to 80 percent of the weighted average of the basic health benefit plan premiums for an active state civil service employee enrolled for self-alone, during the benefit year to which the formula is applied, for the four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year. For each employee with enrolled family members, the employer shall contribute an additional 80 percent 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 four basic health benefit plans that had the largest active state civil service enrollment, excluding family members, during the previous benefit year.
(c) The employer contribution provided under this section is not applicable unless and until the effective date of the employee’s enrollment in an approved health benefit plan.
(d) If the provisions of this section are in conflict with regard to an employee covered by a memorandum of understanding reached pursuant to Section 3517.5 or Chapter 12 (commencing with Section 3560) of Division 4 of Title 1, the memorandum of understanding shall be controlling until it expires.

SEC. 2.Section 22944.5 of the Government Code is amended to read:
22944.5.

(a) (1) The state and employees in State Bargaining Unit 2, 7, 9, 10, or 12 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019.

(2)The state and employees in State Bargaining Unit 6 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2018.

(3)The state and employees in the judicial branch shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017.

(b)(1)The employees in State Bargaining Unit 9 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2017, 0.5 percent of pensionable compensation.

(B)Effective July 1, 2018, an additional 0.5 percent for a total employee contribution of 1.0 percent of pensionable compensation.

(C)Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.

(2)The employees in State Bargaining Unit 10 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.

(B)Effective July 1, 2018, an additional 0.7 percent for a total employee contribution of 1.4 percent of pensionable compensation.

(C)Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 2.8 percent of pensionable compensation.

(3)The employees in State Bargaining Unit 6 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2016, 1.3 percent of pensionable compensation.

(B)Effective July 1, 2017, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.

(C)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.

(4)The state employees in the judicial branch shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2016, 1.5 percent of pensionable compensation.

(B)Effective July 1, 2017, up to an additional 1.5 percent for a total employee contribution of up to 3.0 percent of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation.

(C)This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8.

(5)The employees in State Bargaining Unit 12 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2017, 1.9 percent of pensionable compensation.

(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 3.3 percent of pensionable compensation.

(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.6 percent of pensionable compensation.

(6)The employees in State Bargaining Unit 2 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2017, 0.7 percent of pensionable compensation.

(B)Effective July 1, 2018, an additional 0.6 percent for a total employee contribution of 1.3 percent of pensionable compensation.

(C)Effective July 1, 2019, an additional 0.7 percent for a total employee contribution of 2.0 percent of pensionable compensation.

(7)The employees in State Bargaining Unit 7 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:

(A)Effective July 1, 2017, 1.3 percent of pensionable compensation.

(B)Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 2.7 percent of pensionable compensation.

(C)Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.0 percent of pensionable compensation.

(c)This section only applies to employees who are eligible for health benefits, including permanent intermittent employees.

(d)Contributions paid pursuant to this section shall be deposited in the Annuitants’ Health Care Coverage Fund and shall not be refundable under any circumstances to an employee or his or her beneficiary or survivor.

(e)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.

(f)This section shall also apply to a state employee related to a bargaining unit described in subdivision (a) who is excepted from the definition of “state employee” in subdivision (c) of Section 3513.

(g)On and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state pursuant to Section 22944.7.

SEC. 2.

 Section 22874.5 is added to the Government Code, to read:

22874.5.
 (a) Notwithstanding Sections 22870, 22871, 22873, and 22874, a state employee, defined by subdivision (c) of Section 3513, an employee of the California State University, or an employee of the Legislature, who is employed by the state for the first time, and who becomes a state member of the system on or after January 1, 2018, shall 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 postemployment 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 Contribution
Credited Years Percentage
of Employer Contribution
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) This section shall apply only to state employees who retire for 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.

SEC. 3.

 Section 22944.5 of the Government Code is amended to read:

22944.5.
 (a) (1) The state and employees in State Bargaining Unit 2, 7, 8, 9, 10, 13, 18, or 19 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019.
(2) The state and employees in State Bargaining Unit 6 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2018.
(3) The state and employees in the judicial branch shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017.
(4) The state and employees in State Bargaining Unit 1, 3, 4, 11, 12, 14, 15, 17, 20, or 21 shall prefund retiree health care, with the goal of reaching a 50-percent cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2020.
(b) (1) The employees in State Bargaining Unit 9 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 0.5 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 0.5 percent for a total employee contribution of 1.0 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(2) The employees in State Bargaining Unit 10 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 0.7 percent for a total employee contribution of 1.4 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 2.8 percent of pensionable compensation.
(3) The employees in State Bargaining Unit 6 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2016, 1.3 percent of pensionable compensation.
(B) Effective July 1, 2017, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C) Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(4) The state employees in the judicial branch shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2016, 1.5 percent of pensionable compensation.
(B) Effective July 1, 2017, up to an additional 1.5 percent for a total employee contribution of up to 3.0 percent of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation.
(C) This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8.
(5) The employees in State Bargaining Unit 12 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.5 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.0 percent for a total employee contribution of 2.5 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 3.5 percent of pensionable compensation.
(D) Effective July 1, 2020, an additional 1.1 percent for a total employee contribution of 4.6 percent of pensionable compensation.
(6) The employees in State Bargaining Unit 2 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 0.7 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 0.6 percent for a total employee contribution of 1.3 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 0.7 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(7) The employees in State Bargaining Unit 7 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.4 percent for a total employee contribution of 2.7 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(8) The employees in State Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, or 21 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2018, 1.2 percent of pensionable compensation.
(B) Effective July 1, 2019, an additional 1.1 percent for a total employee contribution of 2.3 percent of pensionable compensation.
(C) Effective July 1, 2020, an additional 1.2 percent for a total employee contribution of 3.5 percent of pensionable compensation.
(9) The employees in State Bargaining Unit 8 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.5 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.5 percent for a total employee contribution of 3.0 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 4.4 percent of pensionable compensation.
(10) The employees in State Bargaining Unit 13 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.3 percent for a total employee contribution of 3.9 percent of pensionable compensation.
(11) The employees in State Bargaining Unit 18 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.3 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.3 percent for a total employee contribution of 2.6 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.4 percent for a total employee contribution of 4.0 percent of pensionable compensation.
(12) The employees in State Bargaining Unit 19 shall make contributions to prefund retiree health care based on the following schedule, and the state shall make a matching contribution:
(A) Effective July 1, 2017, 1.0 percent of pensionable compensation.
(B) Effective July 1, 2018, an additional 1.0 percent for a total employee contribution of 2.0 percent of pensionable compensation.
(C) Effective July 1, 2019, an additional 1.0 percent for a total employee contribution of 3.0 percent of pensionable compensation.
(c) This section only applies to employees who are eligible for health benefits, including permanent intermittent employees.
(d) Contributions paid pursuant to this section shall be deposited in the Annuitants’ Health Care Coverage Fund and shall not be refundable under any circumstances to an employee or his or her beneficiary or survivor.
(e) If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(f) This section shall also apply to a state employee related to a bargaining unit described in subdivision (a) who is excepted from the definition of “state employee” in subdivision (c) of Section 3513.
(g) On and after January 1, 2018, the prefunding of retiree health care for state employees, annuitants, and their beneficiaries shall be the responsibility of the state pursuant to Section 22944.7.

SEC. 3.SEC. 4.

 Section 22944.7 is added to the Government Code, to read:

22944.7.
 (a) Notwithstanding Section 22944.5 or any other law, on and after January 1, 2018, the state shall assume all responsibility for prefunding retiree health care.
(b) The state shall prefund retiree health care for state employees, annuitants, and their beneficiaries with the goal of paying 100 percent of the actuarially determined normal costs by July 1, 2019.
(c) The state shall pay unfunded liabilities that have accrued for retiree health care for state employees, annuitants, and their beneficiaries, as reported by the Controller in subdivision (d) with the goal of paying 50 percent of the actuarially determined cost of these liabilities by January 1, 2022, and 100 percent of the actuarially determined cost of these liabilities by January 1, 2026.
(d) (1) On or before January 10 each year, the Controller shall provide to the Assembly Committee on Budget and the Senate Committee on Budget and Fiscal Review a report that shows, for that year, the actuarially determined normal cost and the unfunded liability of retiree health care for state employees, annuitants, and their beneficiaries and a calculation of the amounts necessary to meet the goals described in subdivisions (b) and (c).
(2) The report provided pursuant to this subdivision shall be submitted in compliance with Section 9795.