HomeMy WebLinkAboutResolution 2012-96 - Setting Forth Terms and Conditions of C 6
Council/Agency Meeting Held: " L—
Deferred/Continued to:
Appro d� ❑ Conditionally Approved ❑ Denied I CIer s SI t re
Council Meeting Date: December 17, 2012 Department ID Number, HR 12-019
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Michele Warren, Director of Human Resources
SUBJECT: Approve Resolution No. 2012-96, A Resolution of the City Council of the City
of Huntington Beach Setting Forth Terms and Conditions of California Public
Employees Retirement System (CaIPERS) Benefits in Compliance with
Requirement of the Public Employees' Pension Reform Act(PEPRA)for New
Non-Associated Employees
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments)
Statement of Issue: Present information regarding the required implementation of the Public
Employees' Pension Reform Act(PEPRA).
Funding Source: The proposed actions do not require funding
Recommended Action: Motion to:
Adopt Resolution No. 2012- 96"A Resolution of the City Council of the City of Huntington Beach
Setting Forth Terms and Conditions of California Public Employees Retirement System (CaIPERS)
Benefits in Compliance with Requirement of the Public Employees' Pension Reform Act(PEPRA)
for New Non-Associated Employees "
Alternative Action(s):
Do not adopt Resolution No 2012-96, and risk legal challenges regarding the application of
PEPRA to New Non-Associated Employees
HB -285- Item 35. - I
REQUEST FOR CITY COUNCIL COUNCIL ACTION
MEETING DATE: 12/17/2012 DEPARTMENT ID NUMBER: HR 12-019
Analysis:
PEPRA, the statewide pension reform act passed by the Legislature and signed into law by the
Governor, mandates many changes to public retirement systems in California including the
California Public Employees' Retirement System (CaIPERS), of which Huntington Beach is a
member agency
The City is required to transition from its present"2 5%@55" formula for Miscellaneous Employees
(i e , not Marine Safety, Fire and Police) to a "2%@62" formula, and transition from its present
"3%@50" formula for Safety Employees to one of three formulas ranging from "2%@57" to
"2 7%@57 " The City has no discretion in this matter, the statutory language of PEPRA is quite
clear that new employees and new members (as defined by statute) hired on or after January 1,
2013 will be subject to the new formulas and other mandates Note that PEPRA includes an
exception for employees already employed by other PERS agencies or coordinating California
retirement plans these employees, if hired by a new agency, will come in at the hiring agency's
pre-PEPRA Ca1PERS formula.
Despite PEPRA's clear mandates, other sections of the Government Code require the governing
body to adopt by Resolution terms and conditions of employment, thus the attached Resolution
which covers Non-Associated Miscellaneous (City Manager and Department Heads) and Safety
Employees (Police Chief and Fire Chief) Staff will return at a later date to adopt similar provisions
for all other bargaining units.
Strategic Plan Goal:
Develop, retain and attract quality staff
Environmental Status:
N/A
Attachment(s): 1
o D- s
1 Resolution No 2012-96, "A Resolution of the City Council of the City of
Huntington Beach Setting Forth Terms and Conditions of California Public
Employees Retirement System (CaIPERS) Benefits in Compliance with
Requirement of the Public Employees' Pension Reform Act (PEPRA) for New
Non-Associated Employees "
2 CalPERS Circular Letter No 200-055-12 — Implementation of Public Employees'
Pension Reform Act of 2013
-3- 12/1012012 6.34 PM
Item 35. - 2 HB -286-
ATTACHMENT #9
RESOLUTION NO 2012- 96
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF HUNTINGTON BEACH,
SETTING FORTH TERMS AND CONDITIONS OF
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM(CaIPERS)
BENEFITS IN COMPLIANCE WITH REQUIREMENTS OF THE PUBLIC
EMPLOYEES' PENSION REFORM ACT(PEPRA) FOR NEW NON-ASSOCIATED
EMPLOYEES
WHEREAS, the State Legislature passed and the Governor of California signed
Assembly Bill 340, the Public Employees' Pension Reform Act of 2013 (PEPRA), which makes
a number of changes to the Public Employees' Retirement Law, and
WHEREAS, PEPRA requires a public retirement system to modify its retirement plan to
comply with PEPRA; and
WHEREAS, the California Public Employees Retirement System (CaIPERS) is a public
retirement system subject to PEPRA's provisions, and
WHEREAS, the City has contracted with CaIPERS to provide retirement benefits for its
employees, and
WHEREAS, PEPRA mandates that with respect to new members, as defined by statute,
who are lured on or after January 1, 2013, that CaIPERS establish new retirement formulas and a
single methodology for determining the amount of a new member's retirement for its contracting
agencies (PEPRA Mandates), and
WHEREAS, the retirement formulas and methodology for calculating retirement
compensation which is set forth in City resolutions and memoranda of understanding (MOUs)
setting forth the terms and conditions of employment for City employees are different than the
PEPRA Mandates, and
WHEREAS, PEPRA provides that the PEPRA Mandates supersede the resolutions and
MOUs with respect to new members and thus, the City has no discretion as to whether to
implement the PEPRA Mandates for new members (as defined by statute) hired on or after
January 1, 2013, and
WHEREAS, pursuant to state law, the City Council establishes the compensation,
including retirement benefits, for its employees by ordinance or resolution, and
WHEREAS, the City Council of the City of Huntington Beach desires to modify salary and
benefits for non-represented employees upon adoption of this resolution,
Resolution No. 2012-96
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HUNTINGTON
BEACH DOES HEREBY RESOLVE AS FOLLOWS
SECTION 1 Pursuant to the Public Employees' Pension Reform Act of 2013 (PEPRA) and
notwithstanding any provision of any other City Council resolution or memorandum of understanding
between the City and unrepresented employees, any new member employee, as defined by PEPRA, who
is hired on or after January 1, 2013, shall be subject to the following retirement benefits
For Non-safety Employees
Government Code section 7522 20(2%@ 62 retirement formula)
Government Code section 7522 32 (final compensation rate used to calculate pension benefit is average
of member's highest annual pensionable compensation over a consecutive 36 month period)
For Sa&1y Employees
Government Code section 7522 25 (2% @ 50 retirement formula,maximum benefit of 2 7%@ 57).
Government Code section 7522 32 (final compensation rate used to calculate pension benefit is average
of member's highest annual pensionable compensation over a consecutive 36 month period)
SECTION 2 Except as modified herein existing benefits shall remain in effect
SECTION 3 Any resolution in conflict herewith,whether by minute action or resolution of the
City Council heretofore approved, is hereby repealed
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular
meeting thereof held on the 17 t h day of December, 2012
&Meay
-
REVIENYED kND APPROVED APPROVED AS TO FORM
k-�
Ci ger 4ci
INITIATE VED
ctor of uman Resources
Res. No. 2012-96
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, JOAN L FLYNN the duly elected, qualified City Clerk of the City
of Huntington Beach, and ex-officio Clerk of the City Council of said City, do
hereby certify that the whole number of members of the City Council of the City
of Huntington Beach is seven, that the foregoing resolution was passed and
adopted by the affirmative vote of at least a majority of all the members of said
City Council at an Regular meeting thereof held on December 17, 2012 by the
following vote
AYES: Sullivan, Hardy, Harper, Boardman Carchio, Shaw, Katapodis
NOES: None
ABSENT: None
ABSTAIN: None
City-'Clerk and ex-office ( lerk of the
City Council of the City of
Huntington Beach, California
ATTACHMENT #2
California Public Employees'Retirement System
P.O.Box 942709
Sacramento,CA 94229-2709 Reference No
(888)CAPERS(or 888-225-73M Circular Letter No: 200-055-12
TTY:(877)249-7442 Distribution, IV,V,VI,X.Al.XVI
CaFERS tntww.calpers.ca.gov Special:
Circular Letter December 3, 2012
TO: ALL CALPERS EMPLOYERS
SUBJECT: IMPLEMENTATION OF PUBLIC EMPLOYEES' PENSION REFORM
ACT OF 2013
The purpose of this Circular Letter Is to confirm CalPERS current interpretation of the
Public Employees' Pension Reform Act of 2013 (PEPRA) and related"Public
Employees' Retirement Law(PERL)amendments in Assembly Bill (AB) 340, passed by
the Califomia Legislature on August 31,2012, and signed by the Governor on
September 12, 2012.
Recent news about the enactment of pension reform has generated increased attention
and questions from our employers, members, and stakeholders. We created this
Circular Letter to provide a summary of the provisions outlined in the bill as they apply
to CaIPERS retirement and health benefits.We also include information on
myjCaIPERS system modifications and explain what actions employers need to take to
comply with the new provisions that change-low they do business with CaIPERS.
This Circular Letter is not intended to provide a comprehensive summary of PEPRA and
related law changes.The current interpretations discussed bellow address the key areas
of the bill that may directly affect CaIPERS interactions with our members and -
employers:Our pension yeform team continues to analyze PEPRA provisions and the
resulting impacts. As CalPERS moves ahead-With irnplementing PEPRA and'related
amendment to he-P€f r our intefpr�tati ns-may be�revised:CaIPERS-.strenWy
recommendsfhat all employers review AB 340 Wits entirety to understehtl-how the "
changes in law will affect their organization and employees.
I E-MBERSHIP AND BENEFIT FORMULA$
Definition of a Now Membee- -
A new member is defined in PEPRA as any of-the following!
e A new hire who is brought into CaIPERS membership for the first time on or after
January 1, 2013, and who has no,prior membership in any California public -
retirement system.
ip Tor I SirsTlimeop0r,5109Y
January 1, 2013, and who is not eligible for reciprocltk with anothar California' '
public retirement system.
— --------- --- HB -29 1- Item 35. - 7
Circular Letter No.:200-055-12
December 3,2012
Page 2
® A member who first established CaIPERS membership prior to January 1, 2013,
and who is rehired by a different CaIPERS employer after a break in service of
greater than six months.
Effective January 1, 2013, every new enrollment will be tested against this definition of
"new member", regardless of whether the enrollment is for a first-time CaIPERS
member or an existing CaiPERS member.
It is important to note that if a member has a break in service of more than six months
but returns to service with the same employer, the member would not be considered a
new member under PEPRA. All State agencies, including CSU,are treated as a single
employer under PEPRA, as are all school employers.
CalPERS refers'to all'members that do not fit within the definition of new member as
"classic members". All existing CalPERS members as of December 31, 2012, will retain
the existing benefit levels for future service with the same employer. Because the new
member determination is made on an appointment-by-appointment basis, classic
members will be tested against the "new member"definition upon each new
appointment and, in some cases, may become "new members"for services under a
new appointment. PEPRA does not require retroactive reductions to benefits earned for
prior service, even where a member separates from service and is later re-hired as a
new member by a new employer and becomes subject to the applicable PEPRA
i • formula. In,thesecases, the member's "classic member"service will be calculated
separately from his ocher service as a "new member". - -_
CaIPERS will develop a form for employers to use when a member hired by a CaiPERS
agency,is considered a classic member as a result of membership with a previous
-reciprocal retirement system. Employers must complete the form and retain it in the
individual's employment records for auditability purposes:
mylCaiPERS will be updated to include fields on the enrollment page where employers
will identify if the new hire is coming from a reciprocal agency and prompt the employer
for the necessary data elements which-subject them to reciprocity. lt.will be extremely
important#or rr3pldyers to properly-ld'entify the status of rraembers at the time of'hire.
Based on the information provided by the employer, mylCalP1=RS will automatically
determine the proper benefit group for each member. In addition, CalPERS will create
for each employer a report identifying their recent enrollments and the correct
corresponding formula based on the information provided at enrollment. If an employer
believes the enrollment is incorrect, they may contact CaIPERS to review and correct
the data as necessary. Employers must store, in their own databases, the participant
details necessary to categorize individuals as new members or classic members,
►tom are f #rise are rro lla ie i-memb ro tme-n
with an effective date of January 1, 2013, or later should be held until employers receive
notification that the transaction may be processed. _
Item 35. - 8 --- --- -- KB -292-
Circular Letter No.:200-055-12
December 3,2012
Page 3
Throughout the upcoming months, CaIPERS will create and/or update forms and
publications to assist employers with enrollment transactions for new members.A
Circular Letter will be sent to employers as those resources become available.
Benefit Formulas
The reduced benefit formulas and increased retirement age provisions under PEPRA
create new defined benefit formulas for all new miscellaneous (non-safety)and safety
members.
For new safety members, the law provides for three possible retiremwA Qm uiasand
requires that new safety members be provided with the new formula that is closest to
the formula offered to classic members of the same classification and that provides a
lower benefit at 55 years of age than the formula offered to classic members.The three
new defined benefit formulas for pew safety members include a normaltetirement age
of 50 and a maximum benefit at age 57.
For all new miscellaneous members,with the exception of State Tier 11, the new defined
benefit formula is 2%at age 62, with an early retirement age of 52 and a maximum
benefit factor of 2.5% at age 67. For State Tier 11 members, the new formula is 1.250A at
age 67.
L Please refer to the.tables below to see how the reduced benefit formulas compare to
current formulas.
Current Miscellaneous Formula New Miscellaneous Formula
1.5% 65 1.5% 65 (retain existing formula
1.25% 65 1•.25% 67
All others 2% 62
Current Safety Formula New Safety Formula
3%@50, 3%@55, 2% 50 2.7% 57
2.51D/6 55 2.51% 57
2% 55,2,5% 60 Y. 55 •2% 57
The new formulas will be Implemented in my[CalPERS to take effect on January 1;
2013. The legislatively mandated formulas and provisions will be merged with the
employer's existing optional provisions, with some exceptions, effective on December
31, 2012, to Create ttie new benefitgroups.
No formal contract amendments are necessary to implement the new mandated benefit
groups. CaIPERS will work with employers to update the employee's contract(s) either at
the time of a future amendment or as soon as practicable_ CalPERS estimates that it
will take appro� jmately two-years to-complete this updatMrocess for all empla ers._,
xs -293- Item 35. - 9
Circular Letter No_:200-055-12
December 3, 2012
Page 4
EMPLOYER AND MEMBER CONTRIBUTIONS
Normal Cost Contributions
For public agencies, school employers, CSU, and the judicial branch, a new member's
initial contribution rate will be at least 50% of the total normal cost rate for their defined
benefit plan or"the current contribution rate of similarly situated employees, whichever
is greater", except where it would cause an existing Memorandum of Understanding
(MOU) to be impaired. If an employer determines that an existing MOU is impaired, and
communicates that decision to CaIPERS using the required certification form, then any
otherwise impaired contribution rate agreement will apply to new members through the
duration of the MOU. Once the impaired MOU is amended, extended, renewed, or
expires, the new requirements will apply.
CaIPERS•interprets-"similarly°situated membersto mean=those employees that are.in
the same benefit group (meaning those employees with the same benefit formula).The
member contribution rate is not required to change for classic members of a public
agency or school district.
State employees, including both classic and new members (excluding new CSU
members and new judicial branch members), will pay the statutory rates determined
through bargaining and provided for by statute. See Proposed Changes in Member d
Contribution Rates for State Employees for changes that PEPRA imposes on State
.P.111.f member contributions available on CalPERS On-Line. -
i CaIPERS will be sending a letter to each employer,this month outlining the benefit
formula applicable to new members, as well as the employer and member contribution
rates that will be effective January 1, 2013, for new members. For classic members,
employers should refer to the June 30, 2011 actuarial valuation report that was mailed
in November 2012 to determine what amount reflects 50% of the total normal cost for
classic members. In addition, a new report will be added in my)CalPER9 that will
identify member and corresponding member rates by group and plan.The Appointment
Details and Events page In mylCaiPERS will also display the appropriate c ontributiori
rates for members.
Beginning January 1, 2018, public agencies that have collectively bargained in good
faith and completed impasse procedures (including mediation and fact-finding)will be
able to unilaterally require classic members to pay up to 50% of the total normal cost of
their pension benefit. It is important to note that the employee confribution may only be
increased up to an 8% contribution rate for miscellaneous members, a 12% contribution
rate for local police officers, local firefighters, and county peace officers, or an 11%
contribution rate for all other local safety members.
Cost Sharing of Employer Contributions
rnre�pabiir:��enoi�age-afi-rend�drtfteir�lP - =hrri-�trt�e -
pay a portion of the employer's contribution.These contributions are paid in addition,to
the member contribution rate. Under existing law, such employer cost sharing contract
amendments were required to be tied to a benefit Improvement. phis requirement will be
- eliminated as of January 1, 2013, when the new amendments to the PERL go into
Item 35. - 10 HB -294-
Circular Letter No.:200-055-12
December 3, 2012
Page 5
effect. In addition, under the new law, cost sharing agreements may differ by bargaining
unit or for classifications of employees subject to different benefit levels as agreed to in
an MOU.The new law also permits cost sharing of the employer costs for non-
represented employees as approved in a resolution passed by the public agency._
Employer Paid Member Contributions(EPMC)
PEPRA prohibits EPMC for new members, employed by public agencies, school
employers, the judicial branch, or CSU, unless an employer's existing MOU would be
impaired by this restriction. It is up to each employer to determine if an MOU would be
impaired by this restriction on EPMC for new members. The Impaired MOU must have
an effective date of January 1, 2013, or earner.
if the employer determines that an existing MOU is impaired, then any stated EPMC
agreements4vill-apply-to-new•members through•the•duration°bf-the-MOU:,•CaIPERS--'
must receive the full required member contributions, regardless of the amounts paid by
the member or the employer. Once the Impaired MOU is amended, extended, renewed,
or expires, EPMC will no longer be permitted for new members. CaIPERS will
implement a manual validation procedure to ensure EPMC is not being reported on
payroll for new members.
M Employers must notify CaIPERS in writing if they determine that their MOU is impaired
t and provide a certification to CaIPERS, signed by the agency`s presiding officer,
confirming-that application-of Section 7522.30(c).of.-FEPRA would-cause an existing
MOU to be.impaired. CaiPERS.will provide a form to employers for this-certification.
More information on the-certification and the form will be sent to employers an a future'
Circular Letter. `
EPMC may continue to be reported for classic members pursuant to existing PERL
provisions. Employers who wish to-eliminate or reduce EPMC for classic members are
able to do so under existing law through collective bargaining and contract
amendments. Existing PERL statutes allow employers to periodically increase, reduce
or eliminate employer paid member contributions.
Pension Holiday
The combined employer and member contributions required, in any fiscal year, cannot
be tower than the total year's normal cost.
Some employers currently have a surplus in their plan and presently pay less than the
total normal cost. CaIPERS will review each employer in this category and determine
whether this provision must be implemented at the start of the next fiscal year. A letter
will be sent to affected employers notifying them of their required contribution amounts.
PENSIONABLE COMPENSATION '
Cbmpensatibn Caps
This•provision caps the annual pensionable compensation that can be-Used to calculate,
final compensation for new members.
HB -295- Item 35. - I I
Circular Letter No.:200-055-12
December 3,2012
Page 6
Presently, there is a compensation cap in place for first-time members hired after
January 1, 1996. The compensation cap is set by the Internal Revenue Service and is
referred to as the 401(a)(17) limit. CalPERS will continue to cap contributions for
affected classic members at the 401(a)(17) limit.
New member contribution caps are effective January 1, 2013.The new member cap for
2013 will be$113,700 (100% of the 2013 Social Security contribution and benefit base)
for members that participate in Social Security or$136,440 (120% of the 2013
contribution and benefit base)for those employees that do not participate in Social
Security. Adjustments to the caps are permitted annually based on changes to the
Consumer Price Index for All Urban Consumers.
Employers will report full pay rate and actual earnings for all members in mylCalPERS
and the system v✓ill•flag and notify-the employer when the contributl6h limit+has been
reached fortliat calendar year. Member contributions must stop when the member's
actual earnings reach the contribution limits outlined above.
Note that this does not necessitate a'change to your file formatting structure,rather it is
related to how employers track and report payroll. Reporting up to the compensation
cap for new members will occur in the same manner it does currently for classic
members subject to the 401(a)(17) limit.
Currently, CaIPERS does not cap employer contributions at.the 401(a)(17)limit,and we
do not intend to cap'employer contributions of the PEPRA limits for at least the next two
years.We are conducting further analysis to determine if employer contributions will be
capped beginning with the 2015/2016 fiscal year.We will share the new information with
you in a future Circular Letter once a final decision has been made.
Three-Year Final Compensation
PEPRA requires that a three-year final compensation period be used to calculate the
average final compensation for a retirement calculation for all new members. Some
employers, including the State, already provide for a three-yearflnal compensation
period.
Public employers are also prohibited from adopting a final compensation period of less
than three years for classic members who are currently,subject to three-year final
compensation.
Pensionable Compensation
PEPRA introduces a new term "pensionable compensation"-for the purposes of
determining reportable compensation for new members. PEPRA broadly defines
pensionable-compensation, and while it specifically excludes some forms of
compensation, it Noes not clearly identify which forms of pay fall withiri the scope of
eta#e-c�oe���tion:Calf`'ERS�s=evafr�afirrg-�hat=fo�'ms�orrrp�s�a�vr�r
considered as pensionable compensation and how they should be reported.We will
update employers on this issue iri a future Circular Letter that we anticipate will be sent
later this month.
Item 35. - 12 HB -296-
Circular Letter No.: 200-055-12
December 3, 2012
Page 7
Excessive Compensation
This new PERL provision requires the CalPERS Board to 'define a significant increase
in actuarial liability due to increased compensation paid to a non-represented
employee". The Board is further directed to implement program changes to ensure that
a public agency that creates a significant increase in actuarial liability bears the
increased cost associated with that liability. '
CalPERS will develop the program changes necessary to assess the cost of excessive
compensation to the employer that paid the excessive compensation. This provision will
apply to any significant increase in actuarial liability that is determined after January 1,
2013, regardless of when excessive compensation was paid.
CalPERS is working to develop the program changes and definitions necessary to
N adminristerathese provisions and ahticipates'prornUlgatino regulatibnsIb4ddr`�ss`thdde
new requirements. Updates on this issue will be provided to employers in a future
Circular Letter.
WORKING AFTER RETIREMENT
PEPRA includes two provisions applicable to working after retirement. These provisions
include restrictions, including, but not limited to:
• All employees who retire from public service will be prohibited from working more
than 960 hours per calendar or fiscal year for any public employer in the same
public retirement system that the individual is retired from without reinstating from
=> retirement.
• A 180-day waiting period is required for all employees who retire from a public
employer before a retiree can return to work without reinstating from retirement,
except under certain specified circumstances.The 180-day waiting period starts
from the date•of retirement.
• Any public retiree appointed to a full-time position on a State board or
commission will be,required to suspend their retirement allowance and become
an active member of CalPERS, unless the appointment is non-salaried.
As currently required, employers must continue to report in my[CalPERS all the hours
worked by any CalPERS retired annuitant in order to monitor the 960-hour cap per fiscal
year. CalPERS retirees who are hired as independent contractors or consultants with a
direct relationship,for purposes of this section, are considered retired annuitants and
must also be reported and tracked in myjCalPERS.
The 180-day waiting period provision applies without excepfion to retirees who receive
either a golden handshake or some other employer incentive to retire, Retired
annuitants who:started working before January 1, 2013, are not impacted by the,180-
day walting.pe'dod.
myjC;MPERS plans to validate the 180-day waiting.period for all new enrollments and' -
will flag arty potential violations of this waiting period for additional review. Potential
violations will not prohibit the online mylCalPERS enrollment; however,when enrolling a
retiree under the certification-resolution exception to the 180-day waiting period, the
xB -297- Item 35. - 13
Circular Leiter No..200-055-12
December 3,2012
Page 8
employer must submit a copy of,the certification-resolution to CalPERS.The rest of the
enrollment process will remain the same as today.
PENSION AND HEALTH BENEFIT CHANGES
Industrial Disabfifty Retirement(IDR).Benefits
In addition to the current calculation options of the IDR benefit for a member, this
provision adds a calculation for a safety member who qualifies for an iDR that may
result in a higher benefit than 50% of salary. An actuarial reduced retirement formula,as
determined by the actuary for each quarter year of service age less than 50,will be
used to determine if the IDR benefit is greater for the safety member who qualifies for
IDR. These provisions remain in effect only until January 1,2018.After that date,the
new OR provisions will not apply unless the date is extended by statute.
Retroactive Pension Benefit Enhancements
Public employers will be prohibited from granting retroactive pension benefit
enhancements that would apply to service performed prior to the operative date of the
enhancement.An increase to a retiree's annual cost-of-living adjustment within existing
statutory limits is not considered to be an enhancement to a retirement benefit.
CaiPERS will develop a list of those existing optional benefits that are considered to be
retirement benefit enhancements and therefore subject to this restriction. CalPERS also
plans to promulgate a regulation interpreting and clarifying this provision, Additional
information will be sent to employers in a future Circular Letter.
Replacement Benefrt Plans
PEPRA piohibits public employers from providing new employees a plan of replacement
benefits to supplQment retirement benefits that are limited by Internal Revenue Code
Section 415(b). This provision also prohibits public employers from offering a
replacement benefit plan to any employee group that was not provided this benefit prior
to January 1, 2013.
CalPERS will continue to offer replacement benefit plans for classic members not
impacted by this provision. - ' V M
Health Benefrt Vesting Schedule
This provision.generally prohibits employers from providinga more advantageous
health benefit vesting schedule to certain individuals (namely a public employee who is
elected or appointed, a trustee, excluded from collective bargaining, exempt from'civil
service, or a manager)than it does for other public employees, including represented
employees, of the same public employer who are in related retirement membership
classifications. in the event that bargaining groups under one employer have -
established different vesting schedules,the non-represented employees must align with
`—'t a eas a va ageo s o - fire psi a e inmT hip=:clai s frcati ,
State miscellaneous. -
F
Item 35. - 14 HB -298-
i
Circular Letter No.:200-055-12
December 3,2012
Page 9
If an employer has established tiered vesting schedules based upon date of hire, then
all non-represented employees must be subject to the same tiered vesting schedules as
represented employees of the same membership classifications.
Additional Retirement Service Credit(ARSC)
The ability to purchase non-qualified service, or"airtime", will be eliminated on January
1, 2013.An official application must be submitted and stamped as received by
CaIPERS on or before December 31, 2012. Only applications from individuals who
qualify to purchase ARSC on or before December 31, 2012, will be accepted. CalPERS
is reviewing whether other types of nonqualified service credit may be impacted by this
prohibition.
The prohibition on future "airtime"service credit purchases does not prohibit purchases
of qualified service credit.-For example,service credit purchases for qualified military
service will still be allowed.
Felony Forfeiture of Pension Benefits
Any current or future public official or employee convicted of a felony while carrying out
his or her official duties, in seeking an elected office or appointment, and/or in
connection with obtaining salary or pension benefits,will be required to forfeit any
pension or related benefit earned from the date of the commission of the felony.
OTHER RETIREMENT PROGRAMS
Alternate Retirement Program (ARP)
ARP, a retirement savings program that certain State employees are automatically
enrolled in for two years from their initial hire date, will be eliminated. The bill provides
that all new members hired on or after July 1, 2013, will no longer be enrolled in the
program.An urgency legislative amendment was introduced to change the,ARP
elimination date from duly 1, 2013 to January 1, 2013. CalPERS will continue to monitor
the bill and work with the State Controller's Office and the California Department of
Human Resources to determine how to enroll new State miscellaneous and industrial
members beginning January 1, 2013, Once a process has been identified, we will notify
State:employers.
Members currently enrolled in ARP will continue to participate in ARP pursuant to
existing statutory requirements.
CaiPERS does not administer ARP. For program details on the ARP savings plan,
contapt the California Department of Human Resources at www.caihr.ca.gov.
Legislat/ve Retirement System (LRS)
These,provisions prohibit new members, including constitutional, statutory elected t
officers n the Inswance-G=r issimer,.wbo-assum officP�ot'�heXxst ima=wor
after January 1, 2013,from enrolling in LRS, Members already enrolled--in LRS prior to
January 1, 2013, will continue to participate in the plan until they separate or refire.
HB -299- Item 35. - 15
Circular Letter No.:200-055-12
December 3, 2012
Page 10
my(CaiPERS will be modified to remove LRS enrollment as an option for new members.
The current process that allows new members to elect optional membership into
CalPERS will not change.
ADDITIONAL INFORMATION
Ca1PERS On-Line
For more information on PEPRA.and how it impacts current and future CaIPEE2S
members, visit the Pension Reform Impacts page on CalPERS-Orr=Line at
www.calpers.ca.gov.This page features the latest updates regarding PEPRA including
a question and answer section and links to additional resources. In addition, the video
"Pension Reform:A Discussion with CaIPERS Experts" highlights how pension reform
impacts employers.
Teleconferences
CaIPERS will conduct a series of teleconferences to address questions you may have
relating to the information in this Circular Letter. Please register online via the Pension
Reform Impacts page.
Date Time Agency Type
Dec 10 9:30 to 11:30 am Public Agenc
Dec 10 1:30 to 3:30 prn School
Dec 11 9.30 to 11:30 am State
Dec 12 9:30 to 11:30 am Public Agency
Dec 13 9:30 to 11:30 am School
Dec 14 9:30 to 11:30 am State
- myJCalPERS Changes
CaIPERS will provide more detailed Information regarding myjCaIPERS changes in the
coming weeks.
Contact Us
Please share this information with your employees to help answer their questions and
provide additional information on the changes. If you have any questions, please call
the CaiPERS Customer Contact Centerat 888 CaIPERS,(or 888-225-7377).
KAREN DeFRANK, Chief
Customer Account Services Division
Item 35. - 16 HB -300-