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SB-681 Public employees’ retirement: contracting agencies: termination.(2017-2018)

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Date Published: 04/17/2017 02:52 PM
SB681:v98#DOCUMENT

Amended  IN  Senate  April 17, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 681


Introduced by Senator Moorlach

February 17, 2017


An act to add Section 20570.1 to the Government Code, relating to public employees’ retirement.


LEGISLATIVE COUNSEL'S DIGEST


SB 681, as amended, Moorlach. Public employees’ retirement. retirement: contracting agencies: termination.
The Public Employees’ Retirement Law creates the Public Employees’ Retirement System (PERS), which provides a defined benefit to its members based on age at retirement, service credit, and final compensation. That law authorizes any public agency to make its employees members of PERS by contracting with the Board of Administration of PERS. Existing law provides for the termination of a contract, including requiring the board to enter, upon request, into a prescribed agreement with the terminating agency relating to the calculation of final compensation for employees and related necessary adjustments in the employer’s contribution.
This bill would state the intent of the Legislature to subsequently amend this bill to include provisions to allow the governing body of a public agency that contracts with PERS for employee retirement benefits to terminate its contract with the system in a manner that does not result in excessive costs or penalties to the agency, to allow a public agency terminating its contract to have the ability to withdraw its assets paid into the system with the same rote of return, and to ensure that a public agency that terminates its contract with the system shall remain responsible for any of its unfunded liabilities. require the Board of Administration of PERS to allow a contracting agency to terminate its contract with the system in a manner that does not result in excessive costs or penalties to the contracting agency, allows the contracting agency to withdraw its net assets paid into the system less payments made to its members and their beneficiaries, and ensures that the contracting agency remains responsible for its unfunded liabilities so that those liabilities are not shifted onto other PERS members or employers. Before a contracting agency would be eligible to terminate its contract, the bill would require a contract to have been in effect for at least 5 years and meet other notice and approval requirements. The bill also would require the agreement between the contracting agency and the board to contain provisions to protect the interests of the system, and would require a contracting agency, before terminating its contract, to determine how termination would affect the health care benefits of its members and also to determine the federal tax ramifications associated with its decision. The bill would contain related legislative findings.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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


SECTION 1.

 It is the intent of the Legislature to subsequently amend this measure to include provisions as follows: do the following:
(a) To allow Allow the governing body of a public agency that contracts with the Public Employees’ Retirement System (PERS) for employee retirement benefits to terminate its contract with the system in a manner that does not result in excessive costs or penalties to the public agency.
(b) To allow Allow a public agency that terminates its contract with the system to have the ability to withdraw its net assets paid into the system with the original assumed rate of return included in the withdrawal. system, less payments made to its members and their beneficiaries.
(c) To ensure Ensure that a public agency that terminates its contract with the system shall remain responsible for any of its unfunded liabilities for employee retirement benefits so that those liabilities are not shifted onto other participants in PERS.

SEC. 2.

 Section 20570.1 is added to the Government Code, to read:

20570.1.
 (a) Notwithstanding any other law, the board shall allow a contracting agency to terminate its contract with the system in a manner that does all of the following:
(1) Does not result in excessive costs or penalties to the contracting agency.
(2) Allows the contracting agency to withdraw its net assets paid into the system, less payments made to its members and their beneficiaries.
(3) Ensures that the contracting agency remains responsible for its unfunded liabilities for employee retirement benefits so that those liabilities are not shifted onto other participants in the system.
(b) For a contracting agency to be eligible to terminate its contract, the contract shall be in effect for at least five years and approved by an ordinance or resolution adopted by the governing body of the contracting agency. The governing body may terminate the contract by the adoption of a resolution giving notice of intention to terminate, and by the adoption, not less than one year thereafter by the affirmative vote of two-thirds of the members of the governing body, of an ordinance or resolution terminating the contract. Upon board approval, termination shall be effective on the date designated in the ordinance or resolution terminating the contract.
(c) The agreement between the contracting agency and the board shall contain provisions to protect the interests of the system, including provisions for determining the amount, time, and manner of transfer of cash or securities, or both, to be transferred to the contracting agency representing the value of the contracting agency’s interests in the retirement fund and its employees’ interests based on accumulated contributions and accumulated rate of return, to be credited to the agency and its employees.
(d) A contracting agency, before terminating its contract with the system, shall determine how termination would affect the health care benefits of its members and also shall determine the federal tax ramifications associated with its decision.