HomeMy WebLinkAboutMINUTES - 03161993 - 1.36 TO: BOARD OF SUPERVISORS 5 Contra
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�,.
.`,.� Costa
FROM: Phil Batchelor, County Administrator
:. .
County
DATE: March 11, 1993
SUBJECT: LEGISLATION: SB 430 (Boatwright)
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
Acknowledge that the Board of Supervisors is the SPONSOR of SB 430
by Senator Boatwright, which makes several changes to the
retirement system.
BACKGROUND:
The Board of Supervisors included in its 1993 Legislative Program
the following retirement related measures which the Board wanted to
sponsor:
1 . Allow the amortization schedule to be extended "not to exceed"
30 years, rather than only 30 years as per SB 1107 . Going all
the way to 30 years reduces the employer' s contributions by
2 .43% and saves the County $7 .5 million a year.
2 . Include Tier II retirees in the group of retirees who are
eligible for ad hoc, supplemental COLA' s .
3 . Include clarification that, for any supplemental increases
which are prefunded, their value reduces the retiree' s
accumulated unpaid COLA account.
4 . Add a revised version of AB 2411 from 1992, regarding optional
spousal survivor benefit election.
Senator Boatwright has agreed to author these changes and has
introduced SB 430 for this purpose. The first three of these
measures are included in SB 430, as introduced. We anticipate that
the fourth item will be added as an amendment in the near future.
CONTINUED ON ATTACHMENT: _X__YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE S :
ACTION OF BOARD ON March , 1993 APPROVED AS RECOMMENDED OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENT ~r ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
ATTESTED MAR 16 1993
Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF
CC: SUPERVISORS AND COUNTY ADMINISTRATOR
See Page 3 .
BY DEPUTY
Item 1 is, in a sense, a technical change - although it is a
significant one. Currently, this County' s retirement fund is
funded in such a way that the retirement system' s accrued unfunded
actuarial obligation will be fully funded in about 18 years . This
amount is being reduced each year so that in 18 years the County' s
accrued unfunded actuarial obligation will be reduced to zero. In
1992, legislation was enacted that would allow any 1937 'Act county
to return to a 30 year amortization period. This would mean that
the County as the employer could, in effect, remortgage the accrued
unfunded actuarial obligation and repay it over 30 years, rather
than 18 years .
This action requires a request from the Board of Supervisors and
approval by the Retirement Board. It is unlikely that the
Retirement Board would agree to moving back to a 30 year
amortization period. However, the law as enacted in 1992 does not
allow any other period of time less than 30 years . The Retirement
Board might, for instance, be willing to allow the Board of
Supervisors to move to a 25 year amortization period, rather than
30 years . This is not permitted. A simple change in the law to
read "not to exceed 30 years" , rather than. "30 years" would allow
a good deal of negotiation and compromise between the Board of
Supervisors and the Retirement Board. As an example, moving back
to a full 30 years amortization period would save the County 2 . 43%
of payroll or approximately $7 .5 million a year in retirement
contributions .
Item 2 corrects a technical oversight in the drafting of Tier II
legislation. The Board of Supervisors is authorized under certain
specified circumstances to offer a supplemental cost-of-living-
increase (COLA) to retirees whose retirement pay has fallen at
least 25% behind the cost of living since the individual retired.
Provision is included in the law for the Board to provide such
supplemental COLA' s to Tier I and Safety retirees . However, there
is no similar provision for Tier II retirees . This is not an
immediate problem because so few Tier II members have retired. Of
those who have, the gap between their retirement income and the
accumulated cost of living since retirement is only a few
percentage points . However, eventually this will become an issue
and it appears to be better to clarify the law now when it does not
affect any specific individual .
Item 3 is related to item. 2 . The Board of Supervisors is
authorized to prefund supplemental COLA' s, so that there is no
immediate drain on the retirement fund when they are granted. For
each retiree, there is an account maintained which identifies the
difference between the individual ' s retirement COLA and the
increase in the cost of living since the individual retired.
Obviously, if a supplemental COLA is granted, its value is deducted
from the accumulated gap between retirement COLA' s and the cost of
living increase. A supplemental COLA cannot be granted until the
gap is at least 25% . However, there is no provision in law to
require or provide that if a prefunded supplemental COLA is granted
that its value also be deducted from this accumulated "gap" . This
is again a technical change which probably ought to be made now
when it is unlikely that the Board of Supervisors will be in a
position in the near future to prefund a supplemental COLA. The
change would simply provide that the amount of such a supplemental
COLA be deducted from the"gap" account which is being maintained
for each employee.
Item 4 of the retirement package involves optional survivor benefit
election. The problem here involves a situation where an employee
is terminally ill . If the employee remains an employee and lives
long enough, a decision can be made regarding which retirement
option will best suit the spouse' s age and financial situation and
a change in option can be made before the employee dies . In the
case of a sudden accident which kills the employee instantly or
nearly instantly, there generally is not sufficient time to change
the election made regarding the option the spouse has an
opportunity to select.
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Legislation passed the Legislature the past two years and has been
vetoed by the Governor both times . However, the 1992 veto message
suggested an alternative methodology which would apparently be
acceptable to the Governor. We are in the process of drafting
legislation which we believe will meet the Governor's objections
and which would still provide the spouse with the maximum possible
options under the circumstances . This can apparently be done by
simply limiting this election to those spouses of retirement system
members who "would have been entitled to disability retirement, but
died prior to making application" . As soon as this language has
been drafted, we will ask Senator Boatwright to amend SB 430 to
include this provision.
In view of the fact that this bill enacts a portion of the Board's -
1993 Legislative Program, we recommend that the Board acknowledge
that it is the sponsor of SB 430 .
cc: County Administrator
Treasurer-Tax Collector
Auditor-Controller
County Counsel
Retirement Administrator
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SENATE BILL No. 430
{
Introduced by Senator Boatwright
February. 24, 1993 s
f �
An act to" amend Sections 31453.6, 31681.8, 31837.1, and
31874:3 of the Government Code, .relating to the County
Employees Retirement Law of 1937.
LEGISLATIVE COMEUS DIGEST
SB 430, as ,introduced, Boatwright. ' County Employees
Retirement Law of 1937.
The existing County Employees Retirement Law of 1937
authorizes a county retirement board, upon the request of the
coui�ty board of supervisors demonstrating 'financial
necessity, to adopt a funding period of 30 years to amortize
unftmded actuarial'obligations.
'This bill accord those county retirement boards the
j flexibility of adopting, instead, a funding period of up .to 30
years.
- This bill would make other-clarifying, technical, corrective,
and related changes in provisions relating to cost-of-living
payments to retirees, disability retirement allowances for
certain employees of Contra Costa County, and supplemental t .>>:�:>•
cost-of-living adjustments.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: 'no.
The people of the State of California do enact as follows:
1 SECTION 1. Section 31453.6 of the Government
2 Code is amended to read:
3 31453.6. Notwithstanding any other provision of this
.4 chapter, the board of retirement may, at the request of
5 the board of supervisors, adopt, a funding period of up to
6 30 years to amortize unfunded accrued actuarial
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SB 430 2�;
1 obligations, as determined by their actuary or by an 2
2 actuary employed by the- :board of investments,. for �
3 benefits applicable to all inembership categories for the 4
4 purpose of determining employer contribution rates for 4
5 --counties and districts. The board of retirement shall A.
6 approve"a new amortization-period based upon a request
7• from the board of supervisors that demonstrAtes 'a '
1
8 financial necessity. The board of retirement may,deny a
9 request-when'the request *ould subject,the fund to an
10 - unsound financial.risk. - It
11 A board of'retirement may take.an action to approve I 1I
12 a request pursuant to- this section only once. 1s
13 SEC. 2. Section 31681.8 of the .Government Code is It
14 - amended. to 'read: 11
15 31681.8. (a) The�board =of supervisors in any county
1�
16 under the.County Employees Retirement Law of 1937 1f
17 may provide, effective on a date determined- by. the 1*
18 .board, for cost-of-living payments, in addition to those I if
19 payable under Articles 16.5 (commencing with Section 1`•
20 31870) and 16.6 (commencing with Section 31875), to
s stem who 2.
. 21 members of this system or. a supersededy
22 retired .and to their. surviving beneficiaries who are
2�
'M receiving allowances under this -system, provided the
24 following conditions are met: ,:- 2,
25 (1) On January l'of the year of adoption or readoptiori 2i
26 of this section, theaccumulations established by Section 2,
27 31870, 31870.1, .. , e . 3 31870.2, or 31870.3, as
28 applicable, shall, for any member, equal or exceed 25 ; 2
29 percent in order for that member to be eligible for such z
30 cost-of-living payment. However, no payment shall be 3'
31 .made pursuant to this section or Section 31739.5 that 3
32 would reduce the accumulations established by Section 3.
33 3. 870, 31870.1, 31870.2, or 31874.3 below 25 percent. i 3
i
34 (2) The payments shall be made either quarterly or '<_ 3
35 monthly to those members and survivors eligible for the 3
36 first payment. 3
37 (3) The amount of each payment is equal to the 3
38 product of a sum determined by the board of supervisors, • 3
39 but ' not to exceed fifteen dollars ($15) times the 3
44 member's full years of county service not exceeding 30
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AML
by an 1 years,
Lts, for 2 (b) The payments made pursuant to this-section and
for the A Section 31739.5 shall be made only:during the lifetimes of
rtes for 4 the members or.their survivors receiving allowances and
I shall .5 to no other person.
-equest 6 .. (c) The payments made pursuant to. this section and
Ates "a 7 Section 31739.5 shall not be considered as a part of the
deny a 8 monthly retirement allowance,optional death allowance,
I to an 9 ...or annual death allowance, nor shall anysuch payments
10 be _construed as guaranteeing any similar payments in
9prove 11 any subsequent year.
12 (d) . The payments made pursuant'to this section and
:ode is 13 Section 31739.5 shall serve to reduce the accumulations
I4 -established by Section 31870, 31870.1; 31870.2, or 31870.3,
count, 15 as applicable; .by the same percentage as the payment
)f 1937 16 that is made pursuant to this section anay Section 31739.5;
by, the 17 (e) Notwithstanding subdivision (a), the payments to.
those 18 . -beneficiaries of members pursuant to Section 31760.1,
►ect on 19, 31765.1., 31781.1, or,31785.or to beneficiaries who elected
75), to .20 a.combined. benefit pursuant to Section 31781.3 shall be
n who 21 60 percent of,the payments which otherwise would have
Yo are 22 been payable under subdivision (a) to the members.
-�d the 23: "
24 ( Notwithstanding subdivision (a), the Payments to
option25 beneficiaries - of members ' whoelected optional
;ection settlement 3 pursuant to Section 31763shall be 50 percent
).3 as 27 of the' payments which otherwise would have been
ped 25 28 payable under. subdivision (a) to the. member.
ir such 29 -( }-
call be' 30 (g) This section shall not.be operative in any county
5 that 31 in any year; unless it is adopted or readopted in any year
ection 32 by the board of supervisors; Any such adoption or
�t. 33 readoption in any particular year shall not be construed
xly or `{. 34 to require any adoption or readoption in any subsequent
or the 35 year.
36 (h) Before adoption by the board of supervisors in any
:o the 37 year, the cost of-the payments authorized by.this section
visors, 38 and Section 31739.5 shallbe determined by a qualified.
Is the 39 actuary and the board of supervisors shall, with advice of
ing 30 40 the actuary, provide for the payment of such cost in such
i
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SB 430 . —4—
manner.
—
manner.as to fully fund the benefits on a sound actuarial
2 basis, including use -.of available funds in the reserves
3 provided; in :.Section 31592:2 with the approval of the
4 .retirement board, or an increase in the employer rates of
5 contributions, or a combination `of these sources of
6 payments. This actuarial determination shall be made
7 only upon authorization by the board of supervisors.
8 (i) , Upon adoption by any county providing benefits
i; 9 pursuant to this section, of Article 5.5 .(commencing with
10 .Section 31.510) of-this chapter, the board of retirement
11 shall; instead, pay those benefits from the Supplemental
j 12 Retiree Benefits Reserve. established pursuant to Section
II 14 SEQ. 3. ' Section=31837.1 of the Government Code is
15 amended to read:
16 31837.1. Notwithstanding Sections .31837 and 31838,
' 17 any member covered under Section 31751. who elects,
I' 18 pursuant to Sections 31700 and 31832 31831.2,to leave
19 accumulated contributions on deposit may be retired for
20 disability 'and receive a disability retirement.allowance
21 under this section during any period hereafter. in which.
22 the member receives a disability retirement allowance
.23 under the Public Employees' Retirement System or a
24 retirement: systemestablished under this chapter in _
25 another county, subject to all'of the following conditions:
'i 26 (a) That.. seek the allowance shall not be paid if the
27 period intervening between the last service credited
28 under this system.and becoming a member in stieh the
29 other system exceeds 180 days..
30 (b) That, if the member is retiring for
31 non-service-connected disability, the disability
32 requirements shall be that of the other system and the
33 member's retirement allowance shall be based on the f
34 other system's disability benefit formula. The disability
35 benefit received in the county shall be calculated as if all
36 the member's service was in the other system but then
37 prorated using the ratio of service in this county to the
38 total service in both systems.
39 (c) That,.if the member is retiring for disability arising
40 out of and in the course of employment subject to sueh
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I actuarial 1 Oe other system, the allowance to the member shall be
reserves 2. an annuity which is the actuarial equivalent of the
ial of the 3 . member's accumulated- contributions at the time of
er rates of 4 retirement.
aurces of
5. SEC. 4. Section 31874.3 of the Government Code is
be made 6. amended to read:
rvisors 7 31874.3. (a) .Whenever . the`.' percentage of annual
benefits 8 increase in the cost of living as of January 1-of each year
g �'3' Y
icing with ; 9 as shown by the Bureau ofL.abar Statistics Consumer
etirement ' 10 Price Index.for All-Urban Consumers exceeds 3 percent,
phMental 11 the board of retirement may provide that all or.part of
to Section 12.:. Ot .the excess over;either:.2:percent or 3 percent shall
13 be applied to. the retirement allowances, optional death
it Code is 14 allowances or annual: death `allowances increased in
15. Section,31870 er 818�0: , $1870:1,38170.2,.or31870:3;The
nd 3183$2 16 board shall determine the amount of 946h the excess to
ho elects, 4' 17• be applied and atteh that amount shall not. exceed an
!, to leave 18 ' amount that can be paid from earnings of the retirement
-etired for 19 fund whieh ..that .are in excess ;of the total interest
allowance 20. credited to contributions and reserves plus I percent of
in which• 21 the. total"assets of the retirement fund:
all
The. supplemental increases in excess of the
23 : 3- ercent:increasesapplied to the retirement allowances
stem. or a P ,
ha ter in optional death "allowances or annual death allowances
londitions: 25,. increased in Section 31870,er 3IM4, 31870.1, 31870
• 26" 31870.3 shall - not become ' a a art of the retirem n -
)aad if the P e t
credited 27 allowances, optional death allowances or annual death
stleh the 28 .allowances to be increased .by subsequent increases
29 under Section 31870 or:018704 , 31870.1, 31870.2, or
ring for 31870.3.
30'
disability 31 This subdivision shall be operative in any county that
a and the 32 has elected by a majority vote of the board of supervisors
-Id on the 33 to make either Section 31870 er 31M.-1, 31870.1;31870.2,
34
disability f' 31870.3 applicable' in seeh the county.
ed as if all 35 (b) The board of retirement. may, instead of taking
but then 36 action pursuant to subdivision (a), provide supplemental.
city to the 37 cast-of-living increases, effective on a date to be
38 determined by the board, to the retirement allowances,
ity arising 39 optional death allowances Ior .annual death allowances
,t tosueh Aft. 40 increased in Section 31870 a 3g , 31870.1, 31870.2, or.
Wile
99 160 - 99 180
SB 430 --6-
1 31870.3:.; provided.hoer; . However, only those
2 members shall' be eligible for ., this. increase whose
3 accumulation established by Section 31870 er
4 31870.1, -31870.2; :or. 31870.3 shall equal or exceed 25
5 percent as of January 1 of the year in which the board of
.6 retirement adopts an increase hereunder. However, no
7 payment shall'be made pursuant to flus section,or Section , 'T`
8 31739.5.that would reduce.the accumulations established
9 , by Section 31870, 31870.1, 31870.2, or 31870.3 below.25
10 percent: _ F
11 The` supplemental increases to the retirement
12 allowances,! optional.:deat2i allowances or annual death -
13 allowances increas &m Section 31870.or 5 18W-4."31870.10 .
14 31870:2, _or ,:31870:3 r shall not become a part of the
I 15 retirement allowances, optional death allowances or
lfi annual death allowances to be increased by subsequent
}' 17 increases under Section 31870 er �870.1 , 31870.1,
18 - 31870.2 or-31870.3. ' .
19 The supplemental ,increases made pursuant to this
i 20 subdivision and Section.31739.5 shall serve to reduce the .
21 accumulations ...established by Section 31870, 31870.1,
22. 31870.2-or 31870.3,as:applicable, by the same percentage -
23 as the payment that is made pursuant to this section,and
24 Section 31739,5
25 This subdivision shall be operative in any county that
26 las elected by a majority vote of the board of supervisors
27 .to make ekher Section 31870 er 31578., 31870.1, 31870-2.
28 or 31870.3 .appli.cable in gtieh the county.
29 (c) Upon adoption by any county providing benefits
30 pursuant to this section, of Article 5.5 (commencing with
31 Section'31510) of this chapter, the board of retirement
32 shall, instead, pay those benefits from the Supplemental
33 .Retiree Benefits Reserve established pursuant to Section -)
34 31510.8.
f
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