SACRS Legislative Report. Spring 2018

Transcription

1 SACRS Legislative Report Spring 2018

2 Legislative Committee Tracy Towner - Chair Ventura County Employees' Retirement Assn. Thomas Garcia Imperial County Employees' Retirement System Robert Gaumer Sacramento County Employees' Retirement Arthur Goulet Ventura County Employees' Retirement Assn. David Lantzer Sonoma County Employees' Retirement Assn. Skip Murphy San Diego County Employees' Retirement Assn. Gina Ratto Orange County Employees' Retirement System Steven Rice Los Angeles County Employees' Retirement Assn. Larry Walker San Bernardino County Employees' Retirement Assn. Russell Watts Contra Costa County Employees' Retirement Assn. Julie Wyne Sonoma County Employees' Retirement Assn. Andy Yeung Segal Consulting Sulema Peterson SACRS Executive Director Mike Robson SACRS Lobbyist - Edelstein Gilbert Robson & Smith, LLC. Trent Smith SACRS Lobbyist - Edelstein Gilbert Robson & Smith, LLC.

3 SACRS Sponsored Bills

4 AB 2085 (Cooley) Surviving Spouse Adds a provision to the CERL to define surviving spouse to include only a spouse who is legally married to the member, is neither divorced nor legally separated from the member, and who meets all other requirements of the CERL pertaining to the length of the marriage and the spouse s age at the time of the member s death. Currently, the term surviving spouse is not defined in CERL. Retirement systems have relied on trial court decisions to determine if a surviving spouse is eligible for a survivor continuance. A problem arose when a court of appeals concluded that a legally separated spouse qualifies as a member s surviving spouse. This opinion was contrary to the practices of at least eight CERL systems and three prior decisions issued by the superior courts in Santa Barbara, Contra Costa and Ventura Counties. Before the first committee hearing, LACERA issued a letter of opposition. SACRS Legislative Committee voted not to pursue AB 2085 in 2018.

5 SB 1270 (Vidak) At-will employees Authorizes a county board of retirement to appoint at-will assistant administrators and chief investment officers provided the Board of Supervisors approves and adopts a resolution by majority vote. Amends section Some retirement systems already have this authority. Permissible for retirement systems Must be approved by Board of Supervisors Sponsored by Tulare CERA. Legislative Committee voted to recommend SACRS assume sponsorship of AB Passed out of the Senate on Consent Calendar pending in the Senate.

6 CERL Bills

7 AB 2004 (Obernolte)-Big Bear Fire Agencies Enacts the Big Bear Fire Agencies Pension Consolidation Act of 2018 which provides that all safety employees currently employed by the Big Bear Lake Fire Protection District would be deemed employees of the Big Bear Fire Authority upon a resolution adopted by the San Bernardino County Employees Retirement Association. June 2012, the boards of the Big Bear City Community Services District and Lake Fire Protection District acted to establish a Joint Powers Authority creating the Big Bear Fire Authority. Big Bear City employees were members of CalPERS. AB 2004 is needed to place all employees of the new JPA into SBCERA. Passed out of the Assembly.

8 AB 3084 (Levine) OPEB Reporting Requires the governing body of a public agency to show that it has met, or if it has not met, detail why and what the public agency is doing to meet specified parameters related to the provision of other postemployment benefits (OPEB), in its annual finance statements submitted to the State Controller. Reporting requirements: depositing contributions in a trust for the exclusive benefit of plan members; investing contributions in excess of any pay-as-you-go amounts in a diversified investment portfolio; and using a discounted rate that recognizes the expected return of the entire portfolio. Author s statement: the State Controller has stated, the OPEB liability will be unpredictable and will remain a paramount fiscal challenge over the next three decades. This accountability bill is a step in the right direction to getting our fiscal house in order on this pressing issue, which we have to take more seriously in the near term. Originally, this bill placed the recording requirements on the retirement systems. SACRS drafted and pursued amendments to correctly place the reporting requirements on public agencies. (Thanks Julie Wyne!) Appropriations Suspense File.

9 Other Bills of Interest

10 SB 1022 (Pan) Agency termination Permits California Public Employees Retirement System(CalPERS) contracting agencies to more rapidly terminate a contract with CalPERS and pay associated termination fees in order to limit ongoing pension liability. Requires terminating agencies to notify past and present employees and retirees in writing of the intent to terminate the contract. Authorizes CalPERS to share member and annuitant data with the contracting agencies to fulfill the agencies obligation to notify their past and present employees and retirees. Gets CalPERS off the hook from delivering retirees bad news if contracting agency terminates contract with CalPERS. Sponsored by CalPERS. Senate Appropriations Committee.

11 SB 1166 (Pan) Delinquency Notification Requires a California Public Employees Retirement System(CalPERS) contracting agency that fails to make the required employer s contribution within the applicable time limitations to notify a member or retired member of the agency s delinquency by mail within 30 days of the payment having become delinquent. Sister Bill to SB 1022 (Pan). Relieves CalPERS from having to deliver bad news. Sponsored by Cal State Retirees. Senate Appropriations Committee.

12 AB 1912 (Rodriguez) Joint Powers Liability Requires agreements of member agencies of a Joint Powers Authority (JPA) that participates as a contracting agency in the California Public Employees Retirement System (CalPERS), or any other public employee retirement system for purposes of administration of retirement benefits, to be jointly and severally liable for the retirement obligations of the JPA. Last year, CalPERS reduced the retirement benefits of almost 200 employees of the East San Gabriel Valley Human Services Consortium a JPA after its sole source of revenue was terminated. The JPA terminated all of its employees, was unable to pay its retirement obligations to CalPERS and became insolvent. In response to a CalPERS demand for payment of the JPA s pension obligations, the Cities of Azusa, Covina, Glendora, and West Covina that created the JPA cited existing JPA law, contract, and case law to support their position that they were not responsible for the JPA s retirement obligations, and refused to remit payment to CalPERS for the JPA s unfunded obligations to the system. AB 1912 seeks to make members of a JPA responsible for their portion of the JPA s pension obligations if the JPA dissolves. Sponsored by SEIU and supported by labor. Opposed by local governments. Assembly Appropriations Committee.

13 AB 2196 (Cooper) - Service Credit Payments Requires CalPERS members choosing to purchase service credits to pay the balance in full at the time of retirement. Prohibits current practice of allowing payment plans during retirement. Sponsored by CalPERS. CalPERS provides 50 different types of service credit eligible that active members may purchase before their retirement date. If the member retires while still making installment payments on a service credit election, the member may choose to pay the remaining balance in full; otherwise, the payments will be deducted from their retirement allowance. If a member continues to make installment payments into retirement and then subsequently passes away with an outstanding balance, CalPERS continues to deduct the required monthly payment from his or her beneficiary s monthly allowance, or deducts the unpaid balance from any lump-sum death benefit payments. If the member does not provide for an ongoing monthly survivor allowance or a lump-sum death benefit payment, there is an unpaid balance that cannot be collected. Bill will reduce workload and complexity for CalPERS. Passed out of the Assembly.

14 AB 2731 (Gipson)-Carried Interest Tax Imposes an additional17% tax on the portion of a taxpayer s taxable income derived from investment management services interest (carried interest). Revenue will be deposited into the College, Career, and Community Ready Fund. Revenues from the Fund are to be continuously appropriated to the State Department of Education for apportionment to local education agencies to support specified programs. Carried interest, often part of a private equity manager s compensation package, is the right to receive a certain share of the profits earned by an investment fund without contributing a similar share of the fund s financial capital. Under current law, these taxpayers who receive carried interest pay a federal tax rate on their carried interest income at the capital gains rate (15%) instead of at the income tax rate (37% for those in the top federal income tax bracket). Critics of this arrangement argue that this income should be taxed as if were income that managers earn for their services. The author seeks to close the carried interest loophole that allows hedge fund or private equity fund managers to pay a lower tax rate than most other working professionals. If passed into law, could AB 2731 negatively impact the type of investments available to retirement systems? Supported by labor and opposed by the Financial Services Institute. Assembly Appropriations Committee.

15 Social Responsibility Bills

16 SB 964 (Allen) Climate Financial Risk Requires California Public Employees Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS) to analyze climate-related financial risk to the extent that the respective pension boards identify climate-related financial risk as a material risk to their respective funds. Clarifies that nothing in the bill shall require the board to take action unless the board determines in good faith that the action is consistent with the fiduciary responsibilities of the board as described in Section 17 of Article XVI of the California Constitution. Sponsored by Environment California and Fossil Free California. Senate Appropriations Committee.

17 SJR 24 (Jackson) - Firearms This Senate Joint Resolution (SJR) calls upon California Public Employees Retirement System (CalPERS) to engage with companies with which it is invested that produce or sell firearms to determine a reasonable method for those companies to withdraw from the production and sale of firearms or to produce a plan to divest from those companies. SJR have no power of law simply a recommendation from the Legislature. Different approach than SB 964 and other divestment bills. Senate Appropriations Committee.

18 AB 2571 (Gonzalez Fletcher) Race and gender pay equity Would require private equity firms with hospitality industry assets to report pay differential data of the hospitality employees if the hotel is owned in any part by public pension investment funds. Sponsored by UNITE HERE union representing hospitality workers. Opposed by California Camber of Commerce, hospitality industry, and local government. Bill was dropped by the author before first hearing.

19 Reform Bills

20 SB 1031 (Moorlach) Cost of Living Adjustments This bill would prohibit a public retirement system from making a cost-of-living adjustment to any allowance payable to, or on behalf of, a person retired under the system who becomes a new member on or after January 1, 2019, or to any survivor or beneficiary of that member or person retired under the system, for any year in which the unfunded actuarial liability of the system is greater than 20 percent. Supported by various Orange County cities. Opposed by labor. Failed passage in the Senate PERS Committee.

21 SB 1032 (Moorlach) CalPERS member terminations This bill would eliminate the existing Terminating Agency Pool (TAP) process for a contracting agency that seeks to terminate its California Public Employees Retirement System (CalPERS) contract. The bill would instead authorize the contracting agency to reduce its employees and retirees pension benefits to the amount of its attributable assets and accumulated contribution in CalPERS. Agency could terminate its contract without paying the actuarial required amount necessary to ensure the payment of pensions obligated to its employees and retirees under the plan; or transfer the funds, as specified, to a pension provider designated by the contracting agency. Supported by a few cities and opposed by labor. Failed passage in Senate PERS Committee.

22 SB 1033 (Moorlach)- Actuarial Liability: Reciprocity This bill would allocate actuarial liability arising from increases in compensation, as specified, to the employers of a represented employee for an increase to the employee s compensation beyond what would have been reasonably expected and which results in increased actuarial liability for the employee s prior employer or employers due to reciprocity. Goal of the bill is to reposition financial responsibility upon agencies that increase compensation and benefits to bear all actuarial liability resulting from such action. Causative agency means an agency that employs or has employed a member who was previously employed by an agency and for which the more recent employing agency s action causes the employee s previous employer to incur an increase in actuarial liability beyond what would have been reasonably expected for the member. Impacted agency means an agency that experiences an increase in actuarial liability beyond what would have been reasonably expected for the member as a result of actions by a causative agency or agencies. Bill opposed by some labor unions. Bill had some sympathy from committee members. Author agreed not to take the bill up for a vote and will work with committee on a solution.

23 SB 1149 (Glazer) Defined Contribution Plan Allows new state employees to opt out of the existing California Public Employees Retirement System (CalPERS) defined benefit (DB) pension plan within 30 days of starting employment and instead divert the employee and employer contributions that would otherwise be made on their behalf for the DB plan s normal cost to a new defined contribution (DC) retirement savings account developed and administered by the state employer s labor representative, California Department of Human Resources (CalHR). After completing 5 years of employment, an employee who opted out of the pension plan would have 90 days to reverse the decision and opt in by depositing with CalPERS the total sum necessary to fund what would have accrued to the employee under the CalPERS pension plan over the 5 years. After the 90 days, the employee would be permanently excluded from CalPERS membership. Defines state employee for purposes of this bill as an individual who first begins employment in a miscellaneous or industrial classification on or after January 1, 2020, and who was not a member of any public retirement system prior to that date. Senator Glazer is a Democrat from the East Bay. Opposed by labor. Failed passage in the Senate PERS Committee.

24 SB 1433 (Moorlach) Deferred Retirement Option Program Prohibits a county or district from establishing a new or additional Deferred Retirement Option Program (DROP) and from allowing an employee to participate in a Deferred Retirement Option Program who had not been participating before. A Deferred Retirement Option Program is an optional program that allows safety employees to continue working while accumulating service pension payments in a DROP account at a guaranteed interest rate. Eligible members may voluntarily enter DROP during their final five years of employment, during which they receive no further service credit, as they are considered retired for the purposes of pension calculations. Upon termination of employment, the participating member begins receiving their retirement allowance plus the money they have accumulated in DROP. Opposed by Los Angeles County Professional Peace Officers Association. Failed passage in the Senate PERS Committee.

25 Questions?