December 10, 2012
Public Employees’ Pension Reform Act of 2013 Summary
SBCERA has developed this summary regarding how the California Public Employees’ Pension Reform Act of 2013 (PEPRA) impacts current and new SBCERA members. It is based on current interpretations of PEPRA and may be revised as the law is applied. SBCERA will continue to keep members updated if, and when, any changes for current and/or new members are implemented. SBCERA will post additional information about the impact of this legislation as it becomes available.
September 24, 2012
Public Employees’ Pension Reform Act of 2013 Update
Last month Governor Jerry Brown signed the California Public Employees' Pension Reform Act of 2013, which becomes effective January 1st. While it has been called one of the largest pieces of pension reform legislation on record, it will have minimal impact on current and retired SBCERA members. Most changes and provisions will only affect “new” public employees hired on or after January 1, 2013.
After carefully analyzing this complex legislation, we can assure current members that it will not impact your benefit formula (i.e. 2% @ 55 for General, 3% @ 50 for Safety) or the calculation of your highest earnable compensation. Also, member contribution rates to SBCERA have not changed as a result of the recent legislation. The legislation does allow for future changes to contribution rates; however, these changes would be determined through negotiations between your bargaining unit and your employer.
The legislation may impact current members and/or retirees in the following ways:
- End of Additional Retirement Credit (ARC) purchases: Effective January 1st, members will no longer be able to purchase ARC unless an official application is completed and returned to SBCERA by December 31, 2012. ARC is one of many types of service credit purchases available to members. Other types have not changed and are still available. If you are interested in purchasing ARC, read this article for more information.
- New Service-Connected Disability Retirement formulas for Safety Members only: Service-Connected Disability Retirement benefits granted for Safety Members with benefit effective dates of January 1, 2013 or later will be calculated using new formulas. The member's individual circumstances, including their age and years of service, will determine which new formula is used. More information regarding the new Safety Member's Service-Connected Disability Retirement formulas will be available soon.
- Retirees returning to work must wait longer: Once retired, members cannot return to work for an SBCERA employer for at least 180 days except under limited circumstances. These exceptions will be determined by the employer and not by SBCERA.
This article has been drafted based on preliminary interpretations and may be revised as the law is implemented. SBCERA will keep members updated if, and when, any changes for current and/or new members are implemented. SBCERA will post additional information about the impact of this legislation as it becomes available.
August 29, 2012
California Public Employees’ Pension Reform Act of 2013
Pension Reform Conference Committee Legislative Language
AB 340, known as the California Public Employees’ Pension Reform Act of 2013, has been approved by both houses of the Legislature, but has not yet been signed into law. However, because of the high interest this bill has generated, SBCERA provides a brief summary of the bill in its present form as it applies to current, active and retired members of SBCERA.
IMPACT ON SBCERA MEMBERS:
CURRENT ACTIVE MEMBERS: The benefit formulas and limits on calculating compensation earnable contained in the Public Employees Pension Reform Act of 2013 do NOT apply to current employees, HOWEVER the clarification of what is excluded from compensation earnable and the addition of a test the retirement system must perform and procedures it must adopt to ensure there is no pension spiking do. Also, provisions requiring a county or district to identify the pay period compensation was earned regardless of when it was reported and limiting the reporting of compensation to the retirement system to only compensation earnable apply. Finally, the retirement board is given the ability to audit a county or district and assess reasonable costs to cover the cost of audit, adjustment or correction when the board determines that the county or district knowingly failed to report compensation in accordance with the new provisions. In addition, the governing bodies of employers can collectively bargain with employees to require payment of all or part of the member and employer contributions as long as they are uniformly applied and do not violate laws in place as of December 31, 2012.
WHAT IT DOESN'T CHANGE:
- There will be NO benefit formula reductions.
- There will be NO changes in how SBCERA calculates final average salary for a current employee.
WHAT IT CHANGES:
- Employers CANNOT adopt an enhanced benefit formula after 1-1-13 and apply it to past service.
- The retirement system must now determine whether compensation was paid to enhance a member’s retirement benefit, which is consistent with SBCERA’s current practice of auditing a member’s account prior to payment of retirement benefits.
- The county or a district must report only compensation earnable to the retirement system, and must certify what pay period the compensation was earned regardless of when it was paid.
- If the county or a district knowingly fails to report compensation correctly, the retirement system can audit and assess fees to cover the cost of the audit, correction or adjustment necessary, and the county or district may not pass this cost on to employees.
- The retirement board may also audit the county or district to determine correctness of retirement benefits, reportable compensation, and enrollment in or reinstatement to the system.
- After 1-1-13, the retirement system is not allowed to accept applications for the purchase of additional retirement credit (airtime).
WHAT IT MIGHT CHANGE:
- The Board of Supervisors or governing bodies of districts may negotiate with employees under collective bargaining to require that employees pay all or part of member and employer contributions, as long as it is uniformly applied, agreed to in a memorandum of understanding, and does not violate the law in place as of 12-31-12.
- The Board of Supervisors or governing bodies of districts may require that members pay 50 percent of normal cost of benefits, as long as it is no more than 14% above the normal rate established for general members, 33% above the normal rate established for safety members who are local police officers, firefighters and county peace officers, and 37% above the normal rate established for safety members other than local police officers, firefighters and county peace officers, as long as it does not violate the law in place as of 12-31-12.
CURRENT RETIRED MEMBERS: There is no change in a retiree's benefits. There may be changes in the ability to return to work after retirement.
WHAT IT DOESN’T CHANGE:
- There is no change to a retiree’s benefit formula or to the final average salary used to calculate their retirement allowance, and there is no change to the Cost of Living Adjustment (COLA) provisions.
WHAT IT MIGHT CHANGE:
- The Act would restrict the ability of a retiree to return to work for a public employer in the same retirement system without reinstatement to active service and a suspension of the retirement benefit unless certain conditions are met. At this time it is not clear how the language in the Act complements current law in the County Employees’ Retirement Law of 1937 (CERL) on the issue of reemployment after retirement.
This FAQ Sheet was drafted by the SBCERA staff in order to help members understand complex pension issues surrounding AB 340. Every effort has been made to ensure the accuracy of the information offered. However, you should not rely solely on the information contained herein. In the event of any discrepancy between the information contained in this FAQ and AB 340, the provisions of AB 340 will govern.