DSA members,

The spiking laws are on the Governor's desk to be signed. I have spoke with several local legislators and all of them believe that AB 1987 and SB 1425 will be signed into law. The exact impact from these bills will not be known until the bills are signed into law, and a comprehensive comparison of the laws against our MOU is made.

Once signed, the changes are to take effect on July 1, 2011. Let there be no doubt, 'WE WILL BE AFFECTED", but not too badly. As of right now, it appears that our sick leave credit is in line to be minimized, but until we run a comparison, we will not know the total impact. Fortunately for us, Alameda County will be one of the least affected Counties by this new legislation. Below are some highlights and analysis of the bills and their potential impact to us. As more concrete information arrives, I will get it out to everyone immediately, as many of you have fears regarding the potential impact upon your retirement.

Sincerely,

David Harris

The 2010 legislative year was marked by various calls for "pension reform." Some called for total repeal of defined benefit retirement benefits for public employees and instead replace them with a defined contribution plan. Some called for a roll back of SB 400 benefits for new hires, etc… However, one of the biggest complaints came as a result of "pension spiking".Perhaps the biggest complaints came in the wake of the City of Bell scandal….we have added those bills to the end of this…they are also considered "pension reform"...

Two bills were introduced in an attempt to address the pension spiking issue; AB 1987 (Ma) deals with pension spiking and double dipping in 1937 Retirement Act law and SB 1425 (Simitian) augments CalPERS anti-spiking laws enacted as a result of SB 53 in 1993.

AB 1987 (Ma): Establishes minimum standards and requirements for all public retirement systems in California with respect to final compensation, ongoing audits with penalties for noncompliance, and prohibitions against a retiree from immediately returning to employment with the public employer on a part-time or contract basis. The bill was sent to the Governor (If signed would be effective July 1, 2011)

• Makes various findings and declarations regarding the manipulation of retirement benefits, including pension spiking, and the duties of the retirement systems to employ sound and equitable principles of oversight and the treatment of compensation.
• Requires each retirement system to establish accountability provisions for participating employers that include an ongoing audit process and penalty provisions for noncompliance.
• Authorizes a retirement system to not include in retirement calculations any compensation they determine was paid for the principal purpose of enhancing a member's retirement benefit.
• Limits cash conversions of accrued employee benefits to that which is earned during the final compensation and prohibits final settlement pay from being included in retirement calculations.
• Prohibits a retiree from returning to work as a retired annuitant or as a contract employee for a period of 180 days after retirement. This requirement will apply to anyone retiring on and after January 1, 2012.
• Limits the compensation used in retirement calculations for members who are not in a group or class to the average increase in compensation received during the final compensation period and the proceeding two years by employees in the same or related group as the member.
• Makes the specific statutory changes needed to bring the provisions of the County Employees' Retirement Law of 1937 ('37 Act) into compliance with the new requirements imposed on all public retirement systems by the bill.
• Requires the retirement boards to promulgate regulations to more specifically delineate what is excluded from "special compensation" and specifically require items of remuneration that were previously identified by the board that are consistent with agreements reached in specified court cases including Ventura County Deputy Sheriffs' Assn. v. Board of Retirement (1997) 16 Cal. 4th 483 (Ventura) be included as special compensation.
• Specifies that items of remuneration that were previously identified by the board in a settlement agreement will only be included as special compensation to the extent they are consistent with the Ventura decision.

• Specifies that nothing in the bill prohibits eliminating, through collective bargaining, special compensation items that were agreed to in the Ventura decision.
• Specifies that nothing in this bill will require a county or district to include something as compensation that was not considered compensation by the county or district prior to January 1, 2011.

• Prohibits retirees of '37 Act retirement systems, charter city retirement systems and the police officers' and firemen's pension systems from returning to work as a retired annuitant or as a contract employee for a period of 180 days after retirement.
• Specifies that a county or district that hires someone in violation of the 180 day rule is required to pay the employer contributions, plus interest that would have been paid had the person reinstated and, if determined to be at fault, any administrative expenses incurred by the system.
• Specifies that all other provisions of the bill become operative for all active and future members of the retirement system beginning July 1, 2011.
• Specifies that this bill will not become operative unless SB 1425 (Simitian) of this year is also enacted.

SB 1425 (Simitian): This bill, a companion measure to AB 1987 (Ma), establishes higher standards for all public retirement systems in California, and makes specific statutory changes to bring the provisions of Teachers' Retirement Law (TRL) and the Public Employees' Retirement Law (PRL) into compliance with the new higher standards. Establishes minimum standards and requirements for all public retirement systems in California with respect to final compensation, ongoing audits with penalties for noncompliance, and prohibitions against a retiree from immediately returning to employment with the public employer on a part-time or contract basis. This bill is intended to augment the SB 53 anti-spiking provisions enacted in 1993. The bill was sent to the Governor

Placement Agents:

AB 1743 (Hernandez): We all remember the placement agent scandal earlier this year. It was reported that a placement agent (a former CalPERS board member) with close ties at CalPERS was paid tens of millions of dollars for getting CalPERS to invest with his clients. As a result, Assembly Member Hernandez introduced AB 1743 prohibiting a person from acting as a placement agent in connection with any potential investment made by a state public retirement system unless that person is registered as a lobbyist in accordance with, and is in full compliance with, the requirements of the California Political Reform Act (PRA).

It also requires placement agents connected with investments made by local public retirement systems to comply with any applicable requirements imposed by a local government agency on lobbyists pursuant to the PRA. The bill was sent to the Governor

AB 192 (Gatto) New Hires: Pension Liability: Requires an employer who hires an employee from a reciprocal CalPERS contracting agency to fund the part of the pension earned from the employee's previous years of service if it is based on a salary that is more than 15 percent greater than that provided from the previous employer. This is proved to be too difficult an issue to tackle in only a few days, the author says he intends to work with local officials and other stakeholders to develop similar legislation in January.

AB 194 (Torrico) Retirement Contributions: Limits the maximum salary or pay rate that can be used for determining retirement benefits to 125 percent of the salary recommended to by paid to the Governor of the State of California by the California Citizens Compensation Commission effective Dec. 7, 2009, (approximately $218,000 per year). The amount will be adjusted annually based on changes in the All Urban California Consumer Price Index. This state cap only applies to public employees who become members of public retirement systems after January 1, 2011, and is slightly lower than the existing federal cap of $245,000 set by Internal Revenue Code 401 (a) (17). The bill was sent to the Governor

City of Bell

Since the Bell salary scandal broke last month, the Legislature has looked for ways to address the scandal. While local governments have maintained that salary disclosure and transparency for both local and state agencies is the most effective response to get at the problem several bills were introduced that could prove to be problematic. Two bills deal directly with retirement: AB 192 and AB 194.

AB 1955 (De La Torre): Charter City Council Compensation: The bill penalizes charter cities that fail to adhere to an antiquated salary schedule listed in statute for general law cities, by withholding redevelopment authority and levying a 50 percent tax on any council member compensation above identified levels. It exempts charter cities with a population 285,000 or more. The bill failed passage

AB 827 (De La Torre): Contract Limitations: Unrepresented Employees: Prohibits automatic renewal provisions in the contract of an excluded employee, prohibits automatic salary increases in these contracts, unless it is a cost-of-living adjustment, without the vote of a legislative body, and requires a performance review to occur prior to increasing the salary of an excluded employee. The bill passed and is pending action by the Governor

AB 194 (Torrico) Retirement Contributions: Limits the maximum salary or pay rate that can be used for determining retirement benefits to 125 percent of the salary recommended to by paid to the Governor of the State of California by the California Citizens Compensation Commission effective Dec. 7, 2009, (approximately $218,000 per year). The amount will be adjusted annually based on changes in the All Urban California Consumer Price Index. This state cap only applies to public employees who become members of public retirement systems after January 1, 2011, and is slightly lower than the existing federal cap of $245,000 set by Internal Revenue Code 401 (a) (17). The bill passed and is pending action by the Governor

AB 192 (Gatto) New Hires: Pension Liability: Requires an employer who hires an employee from a reciprocal CalPERS contracting agency to fund the part of the pension earned from the employee's previous years of service if it is based on a salary that is more than 15 percent greater than that provided from the previous employer. This is proved to be too difficult an issue to tackle in only a few days, the author says he intends to work with local officials and other stakeholders to develop similar legislation in January.

Two bills supported by the League and other local governments provide for salary disclosure transparency and were generally supported by most in the local government community.

SB 501 (Correa): Local Agency Salary Disclosure: Requires filer of a county, city, city and county, school district, special district, or joint powers agency (JPA), to annually file a compensation disclosure form that provides compensation information for the proceeding year; and requires the Legislature and each constitutional officer to post salary information of the elected officials and specified employees as prescribed. Bill failed passage.

AB 2064 (Huber): State and Local Agency Salary Disclosure: The bill requires both state and local officials to post, and annually update, salary information on the agency's Internet Web site. Local officials subject to the bill are elected and appointed officials and senior-level administrators, similar to those subject to SB 501. The state elected officials subject to this standard include the Legislature and their employees, and state Constitutional officers and their appointed or exempt employees. An amendment was recently added to AB 2064 to ensure that should these bills be signed by the Governor, the more developed local government provisions of SB 501 will take effect. The bill failed passage.