Pension Reform Agreement – AB 340 (Furutani) The California Public Employees’ Pension Reform Act of 2013 (PEPRA) FAQ’s on AB 340: How does this agreement affect current employees? Most of the basic framework of AB 340 (Furutani) does not affect current state employees, except for a few provisions: 1. The requirement that the employee and employer equally share normal costs of pension benefits (50/50 share of costs). However, under our current contract, Local 1000 members in the Miscellaneous category already meet this threshold; 2. The ability to purchase “airtime” (currently employees can purchase up to five years of service credit for time that was not in PERS service). This is expensive to purchase as one has to pay not only his share but the employer’s share; 3. A public employee who commits a felony arising out of performing official duties will forfeit retirement benefits accrued after the date the felony occurred; 4. Retired annuitants will be limited to 960 hours in a consecutive 12 month period; and 5. A person who retires after January 1, 2013 is prohibited from returning to work as a retired annuitant for a period of 180 days. If passed, when would the agreement go into effect? The bill would take effect on January 1, 2013. How does this agreement affect new employees hired after January 1, 2013? Increase retirement ages: New employees hired after January 1, 2013 will have their retirement benefits calculated based on the following formulas: The earliest an employee would be eligible to retire is age 52 at 1.0% (rather than age 50 at 1.0%) Implements a 2% at age 62 formula Increases the retirement age for top benefits from age 63 at 2.418% to age 67 at 2.5%. Caps pensionable income: Caps pensionable income – Require all new public sector workers to participate in a new formula that is capped at $110K of pensionable income for those in Social Security and $132K for those without Social Security. If the new employee makes less than $110,000, then there would be no impact. Eliminates spiking final compensation: Requires that final compensation be defined for all new employees as the highest average annual compensation over a three year period – (already in Local 1000’s contract) Eliminates spiking from special compensation: Require that compensation for all new public sector employees be defined as the normal rate of regular, recurring pay, excluding special bonuses, unplanned overtime, payouts for unused vacation or sick leave, and other pay perks Eliminates double dipping: Puts into place a 180-day "sit-out" period before a retiree could return to work as well as a one-year "sit-out" period for retirees who received either a Golden Handshake or some other employer incentive to retire. A retiree would be allowed to return as an annuitant before 180 days if the appointment is approved by the governing body of the local agency in a public meeting and is necessary to fill a critically needed position. Felons forfeit pension benefits: Require public officials and employees to forfeit pension and related benefits if they are convicted of a felony in carrying our official duties, in seeking an elected office or appointment, or in connection with obtaining salary or pension benefits Eliminate retroactive pension increases: Eliminate retroactive pension increases - Prohibit applying pension improvements to prior service Eliminate “pension holidays” Prohibit all employers from suspending employer and employee contributions necessary to fund annual pension costs Eliminate Airtime • Eliminate the ability of a public employee to purchase nonqualified service or "airtime." What if I take a new position that pays over the $110,000 cap? Am I considered a new employee? • No. I thought Local 1000 already negotiated an end to pension spiking? Local 1000 negotiated anti-spiking measures and has advocated in the Legislature to stop these abusive practices. The PEPRA will ensure that pension spiking is prevented at all levels of government. What AB 340 does NOT do: (1) Increase vesting period and contributions for Retiree Healthcare; (2) Establish a hybrid 401k pension system; and (3) Change the composition of the CalPERS Board of Administration. How did the Governor and the Legislature come up with this proposal? The Legislative Conference Committee on Public Employee Pensions included the agreement in their final report and placed the provisions of the agreement into Assembly Bill (AB) 340 (Furutani), also known as The California Public Employees’ Pension Reform Act of 2013 (PEPRA). AB 340 is now on both Floors of the Assembly and Senate. The Legislature has scheduled a floor vote in both houses for Friday, August 31, 2012, the last day of legislative session. The bill only requires a majority vote to be sent to the Governor’s desk. What does the PEPRA stand for? The California Public Employees’ Pension Reform Act of 2013
Posted on: Sat, 28 Sep 2013 19:29:25 +0000
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