“PEPRA” California Public Pension Reform Act

1. “PEPRA”California Public Pension Reform Act Public Employees’ Pensions: Sliced, Diced, Chopped & Cropped Bill Sokol Weinberg,Roger,& Rosenfeld

2. Who Is Covered • 1. Does NOT include University of California or Charter City/County Plans • 2. Does cover CalPERS, CalSTRS, and ‘37 Act County Pension Plans • So – most public employees affected • 1.6 million CalPERS; 850,000 CalSTRS

3. The Good, the Bad, the Uglyin No Particular Order • Compensation used for benefits calculation CAPPED • $110,100 if you receive Social Security • 120% of this if no Social Security ($132,120) • Adjusted each year by ConsumerPriceIndex(CPI) • But Legislature can override CPI • So even if you earn more, it will not be used to determine your pension • No contributing employer can have Plan w/ higher caps • This caps public pension totals • (Judges Retirement Systems I & II excluded from caps!)

4. “New” Members • Most changes affect “new” employees only • 1. never in System before Jan 1, 2013 • 2. moves between Systems w/ 6 mon break in service • 3. moves between public employers in same system w/more than 6 mon break • Lower benefit plans already in existence can be offered to new employees • All DC’s already in existence can be offered to new employees

5. DB Formulas for New Employees • Non-Safety, Non-Teachers (so mostly Miscellaneous Employees, the big category) • 1% at early retirement age of 52 • 2% at normal retirement age of 62 • 2.5% maximum at retirement age of 67 • CalSTRS • 2% at 62 • Early retirement at 55 • 2.4% maximum at retirement age of 67

6. DB Formulas for New Ee’s (cont.) • Safety Employees (Fire, Police, DA’s, etc.) • 3 new plans for 2%, or 2.5%, or 2.7% @ 57

7. Employee Contributions • Big “Hit”: • Employees must pay one-half of the normal cost of the DB Plan each year • Five years for Union to negotiate; after that, it locks in

8. Employer Contributions • No suspension of contributions because Plan is full-funded or over-funded • In other words, No more pension contribution “holidays”

9. Benefit Calculation • Final Compensation to be defined as “highest average compensation” over a three-year period • Excluded: • “spiking” to increase pensions • “in kind” comp converted to cash at end of work • One-time payments • Termination Pay • Unused Leave Pay • Pay for Work Outside Normal Hours • Uniform/Housing/Vehicle Allowances • Overtime (except “planned overtime”) • Bonuses

10. Benefits (cont.) • Cannot provide better retiree health plan vesting for exempt than for represented ee’s • No “retroactive” benefit increases • No purchases of “air time” after Jan 1, 2013 • Officials elected after Jan 1, 2013 cannot base elected pension on prior public service • New employees in misc. Second Tier from 1.25% at 65 to 1.25% at 67

11. Post-Retirement • No pension payments if retiree works more than 960 hours in any 12 consecutive months • If retiree receives unemployment benefits, cannot work for 12 months thereafter as retiree for public employer • Retiree appointed to salaried public Board after Jan 1, 2013 gets pension or salary, not both (exempt – Parole Board)

12. Post-Retirement • Pension forfeited if convicted of felony connected to: • Carrying out official duties • Seeking public office • In connection with obtaining salary or benefits • (The “Bell, California” Clause)

13. More on Benefits • Safety members who get Industrial Disability Retirement (IDR) under age 50 may get actuarially reduced benefit (sunsets in 2018) • Newly elected officials can be in CalPERS, but not in Legislators’ Retirement System • (ending the boondoggle “let’s take care of ourselves” System)