Governor Davis Signs SB 400 -- Major Boost For PERS Retirees

October 1, 1999

Governor Davis Signs SB 400 - Major Boost For PERS Retirees

The single piece of retirement legislation that received more attention than any other bill this past legislative session was SB 400 (Ortiz, D-Sacramento). SSC received more phone calls on this bill than any other during the 1999 legislation session. No wonder why...it represents a significant boost in retirement pay for PERS recipients.

This bill was a critical factor in the negotiations between Governor Davis and state workers over their pay increases. Once those negotiations were completed and state labor contracts were signed, the Governor consented to supporting SB 400. The bill was signed by Governor Davis on September 29 and becomes effective January 1, 2000.

The bill was primarily aimed at state workers, public safety and firefighters employees, however, many of its provisions will give school employees who are members of CalPERS significant pension enhancements.

What's in SB 400 For School Employees?

2% at age 55. The bill provides a new retirement formula for state miscellaneous, university, state industrial and school members who retire on or after January 1, 2000. The new formula would have a minimum retirement age of 50 and would provide a retirement benefit factor of 2% at age 55 increasing to 2.5% at age 63 and above.
Twelve-month period for final compensation. SB 400 changes the method of calculating the average monthly compensation used in computing retirement allowances for school members who retire on or after January 1, 2000 from an average of 36 consecutive months to the highest annual compensation that was earnable by the school member during any consecutive 12 month period of employment preceding the effective date of his or her retirement. (Legislation that would have provided the same benefit to STRS members (AB 821) was held in the Senate Appropriations Committee and will become a 2-year bill. It may be acted upon when the legislature returns to Sacramento January 2000.)
Special retirement increase. The bill provides a 1% to 6% ad hoc retirement allowance increase, effective January 1, 2000, for state and school retirees who retired prior to 1998. This increase would be in addition to the annual cost-of-living allowance and supplemental payments from the Purchasing Power Protection Act. Retirees who retired in 1997 would receive a 1% increase, 1995-96 retirees would receive a 2% increase, 1990-94 retirees would receive a 3% increase, 1985-89 retirees would receive a 4% increase, 1975-84 retirees would receive a 5% increase, and retirees retiring in 1974 and prior would receive a 6% increase.
Higher surviving spouse benefits. Establishes a new "5th Level" of survivor benefits for state and school employees participating in the 1959 Survivor Benefit Program. Under the new program, benefits are increased to $750 per month for a single recipient, $1,500 per month for two recipients and $1,800 per month for three or more recipients. The age at which a surviving spouse becomes eligible for benefits is decreased from 62 to 60. This new level requires the members and the employer, if necessary, to each pay $2 per month for the increased benefit.

SB 400 marks the first significant improvement in retirement benefits for most state and school members in approximately 30 years.

-- Arnold Bray