The Public Employee
Pension Reform Act:
What AB 340 & AB197
Means For Public Safety
Presented by Michael Jarvis
Mastagni, Holstedt, Amick, Miller & Johnsen
mjarvis@mastagni.com (916) 446-4612
Mastagni, Holstedt, Amick, Miller & Johnsen
ISSUES WE’LL COVER:
1. New Formulas for New Hires
2. The Pensionable Compensation Cap
3. Changes to Cost Sharing
4. Limits to Enhancements
5. Special Exclusions
6. New IDR Rules
Mastagni, Holstedt, Amick, Miller & Johnsen
Definition of a New Employee
• Any employee who is new to
any Public Retirement System.
• An employee who has had a
break in service of 6 months or
greater.
Mastagni, Holstedt, Amick, Miller & Johnsen
Reduced Retirement Formulas
for New Hires
• 2 @ 57
• 2.5 @ 57
• 2.7 @ 57
Basic Safety Plan
Safety Plan Option 1
Safety Plan Option 2
If your latest retirement tier was 3 @ 50, 3 @ 55, or 2@
50 the retirement tier for new employees will be Safety
Plan Option 2 (2.7% @ 57).
All new retirement plans will be three year final Comp.
Retirement age remains at age 50.
Mastagni, Holstedt, Amick, Miller & Johnsen
Laterals
• Employees who were employed prior
to 2013 shall move to the latest
retirement plan offered by the new
employer Pre-AB 340.
- Must have reciprocity (CalPERS
to 37Act or visa versa).
- In any classification.
Mastagni, Holstedt, Amick, Miller & Johnsen
The Pensionable Compensation Cap
• Cap the annual salary that counts towards final
compensation for all new employees at:
• $110,100 for employees who receive Social
Security.
• $132,120 for employees who do not receive Social
Security.
• Increases annually based on the CPI for all Urban
Consumers.
• This is not the maximum earning, but rather the
maximum salary used in the retirement calculation.
Mastagni, Holstedt, Amick, Miller & Johnsen
Cost Sharing for New Hires
• Requires employees contribute a minimum
of 50% of the total normal cost rate.
• Employer can not impose contributions of
greater than 50%.
• 7522.30 (f) If contracts “in effect on January
2, 2013, would be impaired by any
provisions of this section, that provision
shall not apply to the public employer and
public employees subject to that contract
until the expiration of that contract”.
Mastagni, Holstedt, Amick, Miller & Johnsen
Cost Sharing for Existing
Employees
• Employers able to impose 50% of
normal costs to take effect on
January 1, 2018.
• Impasse procedures must be
followed (including fact finding).
Mastagni, Holstedt, Amick, Miller & Johnsen
CalPERS Cost Share
• Employee contribution capped at 12%
County Peace Officers.
• Employee contribution capped at 8% for
Miscellaneous.
• Employees can agree to pay greater than
the above caps, but can not be forced to
pay above the caps.
Mastagni, Holstedt, Amick, Miller & Johnsen
1937 Act Cost Share for
Existing Employees
• Employee contribution increases capped at
33% above the applicable normal rate of
contribution.
Mastagni, Holstedt, Amick, Miller & Johnsen
CalPERS Limits to Enhancements
• For new employees only!
• Pensionable compensation excludes:
• Any compensation paid to increase retirement
benefit.
• Unused leaves (Vacation, Annual, Personal, Sick,
or CTO).
• Allowances (housing, vehicles, or uniforms).
• Overtime (some exceptions).
• Bonuses.
Mastagni, Holstedt, Amick, Miller & Johnsen
1937 Act Limits to Enhancements
• “Compensation earnable” does not include:
• Compensation that had previously been provided in kind or
compensation paid to a third party, other than the retirement
system, and which was converted to and received by the member
in the form of a cash payment.
• Any one-time or ad hoc payment made to a member, but not to
all similarly situated members in the member’s grade or class.
• Any payment that is made solely due to the termination of the
member’s employment, but is received by the member while
employed, except those payments that do not exceed what is
earned and payable in each 12-month period during the final
average salary period regardless of when reported or paid.
Mastagni, Holstedt, Amick, Miller & Johnsen
1937 Act Limits to Enhancements
• “Compensation earnable” does not include:
• Payments for unused vacation, annual leave, personal leave, sick
leave, or compensatory time off, however denominated, whether
paid in a lump sum or otherwise, in an amount that exceeds that
which may be earned and payable in each 12-month period during
the final average salary period, regardless of when reported or paid.
• Payments for additional services rendered outside of normal
working hours, whether paid in a lump sum or otherwise.
• Payments made at the termination of employment, except those
payments that do not exceed what is earned and payable in each 12month period during the final average salary period, regardless of
when reported or paid.
Mastagni, Holstedt, Amick, Miller & Johnsen
Prohibits Purchase of Airtime
• Prohibited the purchase of Airtime.
• Official applications had to be received prior
to January 1, 2013.
Mastagni, Holstedt, Amick, Miller & Johnsen
Felons Forfeit Pension Benefits
• Employees would forfeit pensions if
convicted of a felony:
• In carrying out official duties.
• In seeking an elected office or
appointment.
• In connection with obtaining salary or
pension benefits.
Mastagni, Holstedt, Amick, Miller & Johnsen
New IDR Rules
• 7522.66 Sunsets January 1, 2018.
• A Safety member shall receive an industrial disability
retirement benefit equal to the greater of the following:
• 50% of current compensable earnings.
• Service retirement if of age.
• If less than 50 years of age an actuarially reduced factor, as
determined by the actuary, for each quarter year that his or
her service age is less than 50 years of age, multiplied by
the number of years of safety service subject to the
applicable formula.
• Pending revisions in state legislature as we speak!
Mastagni, Holstedt, Amick, Miller & Johnsen
Pension Change
Current
Employees
Future Employees
Reduced Retirement Formulas
NO
YES
Cap Compensation
NO
YES
Equal Sharing of Normal Cost
YES
YES
New IDR Rules
YES
YES
Prohibit Purchase of Airtime
YES
YES
Pension Spiking
NO
YES
Same health benefits for represented and nonrepresented employees.
YES
YES
Prohibit Retroactive Pension Increases
YES
YES
Prohibit Pension Holiday
YES
YES
Three-Year Final Compensation
NO
YES
Felons Forfeit Pension Benefits
YES
YES
Post Retirement Employment Limited
YES
YES
Eliminate Replacement Benefit Plans
NO
YES