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By: @Aaron Avery

On Monday, August 3, AB 1383 [McKinnor] Public employees’ retirement benefits, will be heard in the California State Senate Appropriations Committee and will be followed by additional consideration by the committee on its Suspense File. CSDA is actively opposing the measure in coalition with other public employer associations because it undermines the California Public Employees' Pension Reform Act (PEPRA) and the stability that reform has brought to the public pension system and public agency budgets.

AB 1383 is sponsored by the California Professional Firefighters, and seeks to make the following changes to PEPRA:

• Increase the pensionable compensation cap (for all PEPRA employees, not just fire and police); 
• Reduce the retirement age for public safety (e.g., fire and police) from 57 to 55, prospectively; 
• Add a fourth safety tier (e.g., fire and police) that is 3% @ 55, prospectively and subject to bargaining; and,
• Allow local agencies to adjust their local formula in a prospective manner.

Should your agency wish to register a position on the bill prior to the Senate Appropriations Committee’s disposition of the bill, a sample letter that you may wish to adapt to your purposes is included below. Letters may be submitted at this website: California Legislature Position Letter Portal.

DOWNLOAD SAMPLE LETTER HERE

The letter should be addressed as follows but submitted through the Letter Portal linked above:

The Honorable Sabrina Cervantes

Chair, Senate Committee on Appropriations
State Capitol, Rm. 412
Sacramento, CA 95814

If your agency submits a position letter, please send a CC to aarona@csda.net.

The California Public Employees' Retirement System (CalPERS) has prepared a cost analysis of AB 1383, which may be viewed here. Supplemental materials may be viewed here. Additional supplemental materials identify potential cost increases from the bill for both Pooled Plans and Non-Pooled Plans. The CalPERS analysis does not estimate costs for member agencies participating in County Retirement Systems, or other types of public pensions. However, AB 1383’s requirements apply to all public pensions, including County Retirement Systems. 

According to CalPERS, given the current discount rate of 6.8%, AB 1383 is expected to increase the required contributions of employers and PEPRA members and increase the present value of future benefits (PVB) by $4.8 billion across State, Schools, and Local Agency plans. In addition to the change in PVB, CalPERS estimates that the change to the accrued liability to be $233 million across State, Schools, and Local Agency plans.

Additionally, AB 1383 further proposes that employers may increase their safety PEPRA formula to 3% at age 55 through individual agency collective bargaining. The benefit for this formula will be limited to 90 percent of final compensation. The increase in the “Normal Cost” due to this change could lead to increased annual Normal Cost contributions of $353 million in the first year and increase the present value of future benefits by $3.4 billion, assuming all safety plans adopted this tier.

In some cases, cost increases may be split between the employer and PEPRA employees; please contact your retirement system for additional details, and your agency should consult with your district counsel as appropriate.

For additional information on CSDA’s position, please contact Aaron Avery at aarona@csda.net. Stay tuned to Advocacy News and CSDA eNews for additional updates.