Chapter 14

Overview of the1937 Act

Overview On County Employees' Retirement Law of 1937

("1 937 Act") Retirement Systems

Presented by John R. Descamp, CEO Sacramento County Employees'

Retirement System

"SCERS"

....................................................... lNTRODUCnON 1

................................................ MATERWSPRESENTED 1

.......................................... COUNTY RmREMENT SYSTEMS 1

InitirlAuthomrtion ................................................. I

...................................................... Exdn9L.w I

............................................... In&p.ndantS yrbm 2

CaIPERSSysbrn .................................................. 2

................................................. ME1937ACTSYSEMS 2

cumntsy rt.m ................................................... 2

St.t.dPurpov .................................................... 2

Coinpkxity of thm M ............................................... 2

EstablirhingaSystam .............................................. 3

B m r d d R d m m n t ................................................ 3

Boarddlnvastnmnts ............................................... 3

.................................... R d m m n t Board's Fiduciary D u t b 3

................................... Administmtivm Costs and Pmrronnal 3

.............................................. W o r m y for ttn Bmrd 4

............................................... BmrdMadiulAdvior 4

W r i n g Omur .................................................... 4

Funding ....................................................... 4

............................................ 1 m r m e n t a minpc 4

AduarlslEvsluations ........................................... 5

......................................... Employes Conbibutions 6

......................................... Employc~rCont~ibutionr 8

......................................... B o i c M g n o f w P h n 6

............................. Serviw Retirement Benefik

Di~abiUtyRetimment ............................................ .............................. Nonsarvice-Connected Disability

................................. SenficsConneded Disability

Coct-oflivingPmvisions ........................................ SurvivohBenefits .............................................

MHnkrshipCrit.~ ................................................ ............................................................ SUMMARY

NOTES ............................................................... TABLEI ............................................................... TABLEI ..............................................................

............................................................... TABLE

M W M A ............................................................. EXHIBCTB ............................................................. GLOSSARY ............................................................

-u, inf-on prssanted is intended to sane 8s an overview for petsons such as plan administrators, tndws. mbem of boar& of mpwims, le@dor& labor and managemant reprasentative6, plan partidpants and other

parties, who am, to vatyinp degms, familiar with the County Employeer' Retirement Lsw of 1937 m e 1937 ALT) and retimment systems enac!ed pursuant to Its provisions.

In some instances information presented is described in general t e r n and is not intended or suggested to b definitive. spedfic, or complete and may not even be current for some systems.

The information is pmsented to ganenlly familiarize tha reader with the 1977 A d and 1037 Act system.

Reaint dwelopnsnts such or the approval by California votem of the 'Califomis Pension Pmtedion Act of 1 9 W may have profound impact upon the 1937 Act and the administration and management of 1037 Act and other California retirement system, i.e.. it may fundamentally alter relationships between retirement boards and respective executive and legislative branches of Califomia state and local governments. At this miting, it is uncertain as to exactly what this impact will be. For the readets information, a copy of the Act is pmvided .r Exhibit A.

Notes on a psembtion The Impticalions Of Pmpasition 162, The CaEfomia Pension Protection A# For C.Ufomia Public Pension Systems' made before the spring conference of the State Association Of County Retirement Systems on May 7. 1903. by Joo Wystt and Michael Tourmanoff of Hufstedler. Kaus and Ettinger. a law partnefship, am provided as Exhibit B.

Each reeder is presented with the following material:

- boddet apWdng gsnsnl of the 1937 Ad, Its anabed mmr, how they am organid, how they am funded, what bonefib am pmvidd, ete.

Each reader k mcommended to aequim:

- A copy of Sammento County Employees' Retirement System's CSCERS') or mrnilar document from some other 1037 A d retirement system.

These materials, presented with or without narration, should pmvide a satisfactory overview.

Each reader is &isad to review copies of hidher retirement system summary plan description or membeh hsndbodr for more spedfic infwmatim mgmdng idimynaasier of the retirement plan of inter& or of which (s)k is a member, h 6 h , adnir&mtm, cde. WMb &ng tb material, ramamber that as trustees and admi ' m are governed by the 1037 Act and it is the basis of all our decisions. Tha statements in this booU=; systems' member handboob and summary plan desaiptions am general and hsve been made ss simple as prssible while atill being accurate. The law is sometimes very complex, but when a conflict anses, any decision will be based on the law and not on booklets or handbook.

The Legdatum initially authorized a mUrement system for munty employees wfth the enadment of the County Employ-' Reti- Lawof 1919. Thi. k w a s replaced b y h 1937 Act. and was eventuPUy repemled in 1947.

ar axMng IRIYa cOurLy my v i d e mtimment benefits to ih employ& in three ways. It mpy: (1) atsblish an independent sVrtam. O conbad with the Caflfomia Public Employees' Retirement System (CaIPERS), or (3) emiablish a system under the 1037 Ab.

Article XI, Sedion I of the State CoMtuUon authorizes genenl law counties to provide for the number. mrnpendion. tenure and Pppainlmsnt of employees. In addition. m c l e XI. Sections 4 and 6. authorizes charter counties and charter dties and counties to astablish independent retirement systems if their charters so provide. Two g-l Law munlies (San b i s Oblspo and Trinity) and one charter dty and county (Sen Fnncisco) cumn(ly have independent systems. Trinity County also is a contracJing agency with CalPERS for providing benefikto It6 'safety' members.

In lg3B the Legidaturn authorired employees of counties (and other publlc agendes) to join CslPERS mt the munty's owon. CununUy 37 counties pmdpate in this system. Table I on page 13 chows, for each partidpting county, the total number of CalPERS members for each county.

Tho 1937 Act provides for retirement systems for county and didrict employees in tho- counties adoptlng tb pmvisioru All rddltions, or deletions to retirement systems established under this law require adion by the State Legdature. Twenty California counties operate retirement systems under the provisions of the 1937 A d

The 20 counties are: Alameda. Contn Costa. Fresno, Imperial. Kern. Los Angeleo, Marin. Mendodno. M d . Orange. Sacramento. San Bemadno, San Diego. San Joaquin, Sen Mateo. Santa Barbara. Sonoma. Stanidour. Tulam and Ventura. Lm Angeies, in I=, warthe first county to adopt the 1837 Act provisions. Imperial was the Ins&, establishing its system in 1851. Most of the member counties created their systems in the middle 1 W s .

The membefships of the systsrm p m l l d the size of the sponsoring counties. Lm Angeles has the largest .yd.m vvith in axass of 124,000 membeis and benefidaries, whlle Mendodno has the smallest system with slightiy mom than 2.000 membea Taken together, as of June 1998. the 1837 A d systems have in ex- of 313,000 m e m h and reprsrent approximately 555 billion in assets. Them systems twether constitute the third large& pubsc employees' 'system' in the state, ranking behind only the Public Employees' Retirement System and the State Teachers' Retirement System. Table II on page 14 show, for each partidpaling county, the date on whlch the retirement system wnt into effect. and total membership.

The 1937 Act was enacted to mwgnize a public obligation to county and disbid employees who become incapmciMed by age or long mwica in public employment and its accompanying physical disabilities by maldng pmvision for retirement compensaUon and death benefits as additional elements of compensation for M u m services and to pmide s mspns by wMch public employees who become incapadtated may be replaced by mom capnble ompbyeesto the bsttermerrt of the public service without prejudice end without inflicting a hardship upon the employees mmovd.

Atthough the 1937 Act u originally mitten was intended to b a system of benefits applicable to all sy&ema mmcbd pumuant to Ils pnnrision* Uwnqh IegkMve mnstitutiortal amendments. legislative statutory amendments, .nd a d p u w s language wbjected to a mu)tltude of Interpretations by boards, admlnisbators, legal advhon and courts, administration of the 1937 A d systems has become complex, complicated, and difficult

The 1837Act b now replete with pmvidons which am stated to be only epplicable In counties of a certain 'dm' an determined by population. It h also replete with pmvidons which are only applicable in cartain counties if specifically adopted by the county's board of supervisors or the board of retirement, or both. These provisions #labk courdies to prwide bv& of benetits to mmbem which .n, appmpriate for county resources and raaptnble poMcal)y. rscann .sick. wHhoU Intimate IwwMgo of specific ystern's history with resped to population size and post a d i m of the board of supenr im and board of retirement, and wlthout a system's plan wmmay descriFfion, It is virbralty impodbb for a reader of the 1937 Act Itself to determine, with masonable certainty, plan rnembedip or bensfit d@blW t y a .nd pmqedve benefit amounis for a parbicular 1937 A d system. Further complications arise out of the authority of the rairement boards to adopt pmvisions and make regulations which

spe.dfic adivllies are not apparent in the 1937 Ad blf.

'I , 1837 Act provides two methods by which a county may establish a 1937 A d retirement system: (1) an affirmative vote by a majoffty of the eiedors voting on the proposition at a general or special election, or (2) by a f w - f i h vote ofthe board of rupervkod. Once a munly elads to come under the 1837 Ad, the A& providom become operative on dthw the foliowing January 1, or July 1, but not owner than 60 days after the appmpri.1. eWon. A system &ahWd pursuant to the 1937 A d superseder any previously &Mished mun€y rdjmrnmt system.

Each county her a board of retirement which is charged with managing the system'. Theso boerds make administrative regulations, which must be approved by the board of supervisors. Thaw boards must have nine members and: in systems having both law enforcement and fire suppresson members, one alternate safely member, each serving a term of three years. Composition of each board is determined by statute sr fdlom':

1 county treasurer 4 qualified electors not in any way connected with county government, except one may k a cwnty

supewisor. These four members am appointed by the board of supervisors. 2 general members of the retirement assodation as eieded by its general members. 1 safety member (and one alternate safety member) of the rebrement &ation aieded by its safety

members. 1 retired member of the retirement assoaation elected by its retired members:

(%xcaption for Sanb Barbara County - add one altamate retiree member)

county in whi& the as& ofthe retiment syrtem exceed eight hundred million dollars ($800.000.000), the board of supewisors may, by resolution. establish a board of i m m e n k which shall be responsible for all imesbnenb of the retirement system'. I t s compmition and terms of office are basically the same as the board of retirement except W n t e d members ofthe board must have had significant experience in institutional investing. As of this wiling, only Los Angelmi County Employeas' Retirement h a a t i o n has a board of invecibnent..

The 1937 A d @lies certain fidudary duties of each board. Generally, with respct to investments, the board may invest in any form or t y p of invssbnent deemed prudent by tho board(s)'.

The board hss md&e & wwUm im- of tha mpkycm' retirement fund and k obligated to maintain the tn& fund for the exdusive purposes of providing benefik to partidpank and beneficiaries.

The board and its oofcen and employees must discharge thdr duties with resped to the system:

1. and for the of providing beneiiki to partidpants and thdr beneficiaries, minimidng employer contributions thereto, and defraying reasonable expense8 of administering Ute system:

2. M the cars. sldn.er tha arcurnstances then prevailing that a prudent p r w n e n g in a Pkm Espscity and familiar with these mattem woukl use in the mndud of an enterprim of 8 Eke ch.rader ud with lib aims; and must

3. of the system w m to minimize the risk of loss, and to maximize th. rate of W m , unlecs under the circumstances it is dearty prudent not to do so.

Relirarnent +em a d m i n i w e , technical and dericai staff may be ather appointed by the county treasurer or appointed by the respdve board of retirement or board of i~estment'~. When staff is appointed by the county

treasurer, the cost of adminishstion is paid out of county funds".

When gtaffts appdntad by taspadve bOwd6, the cost of adminisbation h paid out of t'dremnt system udng.. The maximum admnismve expenditure (exduding wst of investment) is statutority set at .18 percent of system ggets".

System pemnnel are county employaea am .ubJed to dvll service or metit -em rules of the county in *rN& the retirement *em is located. A boarbsppointed administrator, a Ghiaf investment offimr and -nt dmirjsbator, homrver, m y not be wbjed to avil service or merit system ~ l m but may serve at the pleasure Of the board".

In all c a w , personnel s~laries are induded in the 6alary ordinance or resolution adopted by the board of supsrvisors for the compensation of county officers and employees14.

Generally, the distrid attomey, or the county counsel if there is one, is the attomey for the board' on a county of the first dass (Los Angels), the respedve boards may eied to secure legal representation from other than the County Cwrsd?. Homver, the board may contract for the legal services of an attorney in private prpctica &tan the board debminea, a m cmawltation with the county counsel. that the county counsel cannot provide the W r d with legal eerviws due to a conflict of interest or other compelling reason". This provision nolwlthstand'~ng, the board may employ an attomey in private practice in fanying out its invctstment powers and dutiesu.

The county hearth offimr or designee advises the board on medical mattes". The board may also swum wch medical, invsstigetory and other serviw and advice as is necessary to make determinations on applidana for disability retirement or continuing disability of members previously retired for d i b i l i e .

Whenever, In m t o make a determination, it is necessary to have a hearing, the board may appoint aithm om of tts members; or, a member of the State Bar of California; to servo as a refere#.

Upon W i n g the proposed findings of fad and mcommendations of tho referee, the board has several opbiona which may indude: a m e and adopt the pmposed tindings and recommendations; or, require a tmnrcript or summary of all the tdmony, plus all other widenw mnsidered by the referee; or, refer the matter back with or without instructions; or. set the malier for hearing before itselfP.

Funding of benefits is provided from three mums: (1) investment income. (2) employee mntributiom, and (3) county and spe,cial disbid coM'butiorrs

I m m im gmmaky mfen to earnings derived from the i n v m e n t of o f e m aawts and m d d a of intomst, dividends, mh, and capital appredation.

Inveetmant earning. am usually exprssd as a percentage of UIO amount Imssted. Because of ma, the manner In which the valw of thew assets Is reported can have a significant Impact on the reported yield. Thma em twa common fWbds for nporting the valub of the m t a : (1) book value, or the value of the .srst bpsed upon its original pudum pice or acqrisition msf and (2) the market value, or the asset's cumnt valw. AIthwph marM value is gcmecaUy mnddered to be the more accurate way to report asset value for purpsee of determining Investment yield, for purpcses of valuing invesbnents and teporting earnings, tho book value Is g e n d l y usad becaw: (I) It -ides a simpler method of accounting, and (2) it does not fluctuate as doe8 market value.

1 1 ~ 1 9 8 4 . of of was limited and controlled pursuant to Government Code Sections 31595 through 31585.6. and by W o m 1372 of the CaMomia State Financial Code.

A u t h o M imesbnents included:

1 S.curitl6s which were legal for ravings bank investments.

2. Depodb at intamst in banks (if secured or collateralized at 110 percent of deposit).

3. Deposits in uvirtgs and loan a d a t i o m (If secured or collateralized at 110 m n t of depocit).

4. Regisbnd wsmnts of munidpalitieu

5. Real properly leased to counties in the State.

6. Deeds of trust and mortgages (not to rucsed 25 percent of all funds invested).

7. Real property or impmvemenb If acquired for oale or lease to a munty board of educltion.

8. Bonds issued pursuant to the Improvement Bond Act of 3815.

Q. The purchase of the right to receive rent from leases of ma1 property to a nilroad company.

10. Common stocks (not to excead 25 percent of the fund's assets, subject to reshietions).

11. Prefefmd stocks (not to exceed 5 percent of the fund's assets subject to rastridions).

12. Mutual funds (not to exceed 25 pensrd of ths fun& asak, accumulative vith mmmon stock totab).

13. Red .le and lees86 for business or residential purposes (not to exceed 10 percent of the fund's .cosb and mud have been approved by a unanimous vote of the retirement board).

14. Bonds, debentures. and notes legal for imestment in w ings banks in the stab of N w York or M ~ E z & M s E ~ ~ ~ or in securities in which commercial banks wen authorized to invest thmr funds.

Qn hmmu, C a h d a vvoten approved Propodlion 21, a Iegisiative constitutional amandrnant that signifimntly altered the constitutional limitations on imesbnents by ~ M i c e m ~ l w w retimmm4 funds. Amendments to h 1837 A d -re enacted on September 30 , l 884, to i f l e d the changes sppmved by the

of Pmposilim 21. ammhmk wNch wen enacted in Assemblv Bill No. 3508. Chapter 1736. Statutes of 1084, replaced the rrrsbidions on 1837 Act funds' imushnenb with more RexiMe guidelim.

These guidelines am primarily mted in Gwemment Code Sedion 31585 .r tollowe: Fxcept .s othomiu exprsssly M e e d by the CaUfomia Cowtitution and by iaw, the board may, In its discretion, im& or d e ~ a t e h authodty to i m e the .sbetE of the fund through the purchase, holding, or sale of any form or type of imesbnertt, firuncial inatnrmenf orfinanaal bansadion when w i n the informed opinion of the board.' (Emphasis added)

The 1837 Act rsqrirer dremcmt boards to employ an investment counsel, trust company, or trust d e p m n t of a bank to render sewiass to the imestment progmmP.

The fuhtm yield of Ute m ' s i m r - must b waded in older to determine the leval of employm and employer mnbibutions necessary to fund the system.

Gwemrnent Cod8 Ssctlon 7507 mquim countiln to secum the mwices of an enrolled actuary to pmvide actuarial wmiualionr of fulure annual costs before autholizing increases in public retirement plan bemlk. -on 31453 of Um 1837 Act reqtims that an actuarial vsluation be made at least arery three yearn to cover Um morCIIMy. s e ~ i m , compensation. and experience of tha membsrr and bnafiaaries, and to wmLuate the ~ssets and OablUtias of the rsbirement fund. Upon the basis of the imestigation, valustim, and recommendstions of the actuary, the bard of mtlrement must adopt an assumed rats of mum on syrhmL irn- fa purposm of M r r i n g the level of required mnbibutions and must recommend to the boud of supervisom such changes in the rates of interest applied to emplqm aaounk, the rptg of mnblbutiona of members. and changes in county end airbict appmpiialions os am necessary to fund the system.

With momt ~ca@iona for%& employems hired into the counties of the lof 10th. 13th. 1Bth. 2Uth and 25th d-, retirement sys&erns established pufsuant to the 1937 A d are contributory. Under this principle, a portion of the cost of the benefits to be derived is paid dire* by the employees in the form of a dedudon from each salary warrant The contributions made by the members are held in reserve and credited with interest to purchase an annuity at retirement. There contributions are knorm as 'basic' contributions.

The 1937 Act spedfies that cerLain basic rates of contributions be dependent upon the basic beneM formula sdopted. Th~se ratg a n set by the actuary to provide for an average annuity at a speafied age as a percant of final mmpemstion (the highest cumpensation earnable by a member over e specified period of time). Basic rate formulas may be established under the 1937 Act to provide an average annuity at speafied ages equal to fractions of final compensation for each year of service".

For the defined benefit plans, generally only three things affect the employee basic rate:

1. Inbrast ssurnption. Usad to h u n t h value of tha bsic benefit at retirement to prosant dab. The interest rate indudes two components: the anticipated future rate of inflation and the 'mar of Wrn, which is the investment earnings in excess of inflation. The higher the interest assumption - whether due to inflation or real returns - the bigger the discount and the lower the employee conbibution rate. The inflation component also effects future salaries a noted below.

2. Mortality after sawice retirement. Projected future mats of sewiw retirement am directly related to the number of years for which payments are to be made. Longer life expectanties tend to in- employee contribution rates.

3. Salsry &. Ulrs Um inbrast assumption, the salary scale Indudes two components: the antidpted fuhlre reto of inflation and the 'rear rate of salary increases, which ara salary increases in ex- of InMon. T M meansthst a higher inflation assumption will increase both the interest assumption end the s a w scale assumption. The higher the salary scale assumption, the higher the projected Mum final cornpnsation for retiring members, and the higher the employee contribution rate.

In addition to funding the basic annuity. employee contrfbutions are needed to fund annual d ~ f 4 v i n g i n a m a d . Rvle projected cost Is considered by the actuary in determining appropriate employee rates.

Unika lb besic mte, the mrd-of-living rate is affected by future experience, 1.e.. future sewice and dislblMy retirements, withdrawah, deatha before retirement, etc.

In many murdiq conblbutiom am a flat percentage of tho employee's entire salary. However, if the bneM formula is integmtd ~ Sodal Smni ty benefiis, the employee conbibutiom may be set at different ratem on porlions of Um wnpkyw'a W n g s above a d belarv h S a d Seawily Integration level. Typically, twPthi& of Um ratn is applied below the Social Security integration level, tho full rate is applied to the excess.

After p r o j d n g the income from retirement system investments and employee mntrlbutiom, the *em's .chmy detennirwrtha amwnt of employer contributions necessary to pmperiy fund the system. The ectuay fird projects the b ~ e l and Yrning of benefit payments and then recalculates the differen- between tha projected bemM payments and the w m of exisling asets plus d m a t e d Mure employee conbikrtions. ErnployercDnblkrtior6 are dependent upon f i e fadors: (1) the basic design of the plan. (2) funding melhod used, (3) a-al m o m used by UIE plan aGbJary in conjunction with the funding method; (4) experienw oftha plan relaWe to the actuarial assumptions used by the actuary; and (5) the maturity status of UIO adbe employees, 1.9.. average age and service.

A h q h undorUm 1937 Ad pwkle their members with income from sewiw retirement, nonsswicb connected disability. sewiebconnsded disability, cost-of-hing increawa, and death and survivor bmefrh, employee conhibution rat* u stated earlier, am calculated only wlttr consideration of provldinp annutty payments at rpedfied apes of nbimment and in consideration of subsequent cost-f-living Increases on all con t inu i~ benefrtr All other a d s of the system are borne by the employer, i.9.. the county and member

dads. Themfm, the gmaterthe benefit provided to m e h m andlor WNNOIS, the gnsterthe cumnt and projected liability to the employer. A h , the earlier the benetlt it pmided, the greater is the currant and pmjeded liability to the employer. Tho drement tmnefik, once vested, bemms mnbscblal obllpbom of the counties and must be pa~d.

To determine the Ievd of required contributions, the system's actuary must determine the valw of all fuhm benefits, and then allocate that value to the members' years of service to determine both the mst for the cummt year (the 'normal cmt3 and the liability for past service (the 'accrued l iab iw. The level of rystsm assets is an important part of this pmcas as well. This allocation is done using a runding methuT which k adopted by the board as part of the sys!emk fundicg policy. There are three general types of funding math& which may be used:

1. The aggregate cmt method assume that all pad and Mure benefik which are not covered by cumnt assets will be funded as a level percentage of salary over the fubrre working lifetimes of Uk active membem This future worlbng lifetime is typically about 15 years. That percentage of salaries is normal cost rate for the and makes-up the entire contribution requirement ior the year. T k a is no unfunded accrued liability under the aggregate cwt method.

2. Tha projeded unit credit method determines the normal cast for each year of sewim as the value of the beneM earned during mat year, but based on salaries 'project& to reti rement age. Similarly, th. a m e d liability is the value of benefik for service up to the valuation date, bu? again b n d on projected salaries, not current salaries. If thls accrued liability is greater than system mssoh, th. Me- is the unfunded accrued liability. The contribution requirement for the year is in two prk the rionnml msf plus M W o n a l payment to fund w 'anmike' the unfunded accrued liability (If any).

3. The anby qp normd mdhod by detmddng what pemdage of salary would h needed to fund th. mwnbets tarmiit m m n g that p m d a g e Q paid fmm hire Centry age3 to retirement .o.. Rut pmntap is the normal cast rate. The accrued liability is just the value today of the normal cad for dl psJt yeam Just with the projected unit credit method, the contribution mquirement for the you Is In two parts: the normal cost plus an additional payment to amortize any unfunded accrued PabiYty.

Compared to the pmjedd unit d i t method, the normal cost under the entry age normal method h higher in the aady y e ~ n of sewice. and lower in the later yeam. The accrued liability is always larger under the entry age normal method than under projected unit credit

For the projected unit wedit and entry age normal methods, part of the sytem's funding poliy h to a an amortization period, that is, to dedde how fast to fund any unfunded accrued liability. Historialty, mod sy&wm hsve d mdza t i on periods of 20 to 30 yean For such systems, generaliy the total contribution requremsntvrlU be kwsd udng the projected unit adt memod, and highest using the aggregate method, with the enby age normal method in the middle.

Mort 1837 Act counties we the entry age normal method, while a few use the project unit credit method.

The system achmy h mquired at blst wary t h m years to perform m wdurtion of the syrtem and to f w m m w d to bauds of mtinrmentthe do#on of an rate of investment return and an assumad mte of salary ineread'. Genenlly, the higher the assumed mte of invsstment return, tha lower the nqulnd employee end employer contrlbutlons. Slmilarty, bemuso retirement benefik and amounts are alculated M upon find mmpmsPlim, ud W o r n are reflected in salary scales (percentage inae~sec by attained age vvhich is used In pm jdng salaries), these projected salaries are in turn used for estimating the amounts of pension payable d drement T h q are alto used for estimating the pmjected liability on account of o h r occurrences, 1.0.. disability, d&, and withdrawal.

In detemdning projected Eabiiitim and assets necessary to fund the system, the actuary anahzsr the a p d - of the to detemrine the pmbabilitic~ of members leaving the system b e c a k of n&&ed ~ r p w a l , death, dsabiPty mtiremenf service retirement. and vested withdrawal. These probabilities depend

on the others, for example. If there is mom turnover. there will be fewer raiimmenk, etc.

Generally, the younger the age of a member at entry, and the greater the years of service at mtimment, the longer the employee and employer will have to contribute to the system in order to finance hidher futum benefrb. i-iowev~, tie yourger the member, the longer the period between entry and the payment of yr tem benefits.

Employer COI l~bu t i 0~ to the fund am usually provided from the county general fund which rourms indude pmperty tax revenues, various state andlor federal subventjons. and speaal funds.

Property tax revenues represent the major funding source.

Systems established purwant to the 1937 A d (wlth the noted exception of LACERA'S Genenl Plan F and Safety Plan F), offer defined benefit plans. Under a defined benefit plan, the sponsoring governmental unit undertakesto wide a stipulated set of benefits. es articulated in a benefit formula, to employees who meat certain age and service requirements.

Bmfr ls prmridd indude inmme for service mlimment, nonsewi-nnected and servicccconneded disability retimrnent, active duly and retired member death and sunrivor benefits, and funded andlor ad hoc Wof-living inmases.

Redprod r8tlremant bmetiQ am prwidd to me- who are entitled to retirement rights and k n e h fmm hwo or mom rstlmment sys4em gtabtished punusnt to tha 1837 A d and the Public Employaee' Retirement Swan?'. This Is to encourage career public sewim.

provided am ex- u I pmntage of the mmployee's final cornpansstion during a one-yrr or lJm+ycurconscrcutive period in vvhich wrings wen at their highest level. This is desciibed 8s a final overage sahy formula. The period length is made part of the plan provisions and is set by resolution of the board of w p e r v i ~ .

Sonm under the IS37 A d am Intagrated with Soaal Sewdty. This combination provides not only a retirement a l l u m m fmm tho counly mtimment sy&m, but also Soaal Security benefits upon meeting certain cribria and minimum quarters of awerage. The combination of retirement incomes from both system is designed to provide a replacement percentage of prwetirement income.

With n#wrt aceptiarfor ' n d amploy- hired into the counties of the If& 10th. 13th, 16th. 20th and 25th classes. and voluntary bansfen fmm some prwiousty himd employees in those countis, them am six padominantly svdlsble sewice retirement allowance formulas for nowsafety members and one for r a f w . Each county retirement System adopts the benefn formula(s) approved by the board of 6Upe~iSOn. That formula d m in offact for new members until pnother benefit formula is adopted. The terns of a retirement plan csnnd be dm@ twp& to present members unless the charge is necessary to protect the integrity of tho system or is accompded by comparable new advantages to its membsm.

As of 1981, the boa& of s u p w i ~ n of 13 counties had adopted at l e d 2 mandatory fonnul~c for their axirting miscellaneous mernbenhip: Alameda, ContR Costa, Lo8 Angeles, Marin, Mendodno, Orange, Saaamento. San Diego, San Matw. S a m Barbara, Stanidaus, Tulam. and Venturn. Mendodno, Loa Angek. Stanislaus and San Matea have adopted thrw.

Santa B a b r a Tvm.' StanIslam 'Three.' San Matw Three.' and Los Angales 'E' am either optional or noncontributory.

Service retirement formulas differ in three wap: (1) overall benefit level, (2) normal retirement age, and (3) maximum benefit level.

A .pedfied pwe4nlaps of final mmpensation is provided for each year with which the member h entitled to be credited at retirement. Service retirement formulas are commonly referred to acmrdiw to the Section of the 1837 A d b which they are desaibed, 0.0.. Sections 31676.1, 31676.11. 31676.12 31676.13.31676.14, and 31676.15 for non-cafeties. and 31664 for safety. It happens that for nontsfety. the higher the decimal number, the higher overall percentage of final compensation payable per ymr of service at retirement.

Percentages of final compensation provided within each benefit formula are higher at incnmanls of quattcir7e~n of age at retirement, until reaching an age at which the perwnt is maximized. This point h reached pursuant to Sections 31676.12.31676.13, and 31676.14, at age 62 Pursuant to Sections 31676.1, 31676.11, end 31676.15, the age of maximiration is65.

Normal relirement age is the iW age spedfied in a plan at which the employee may retire without the comsnt of the employer end receive retirement bene* based on service to date or retirement at the full rate for such service set forth in the plan. Normal retirement ages are 86 follows:

As statad earlier, tha pwpota of the 1937 Ad k to recognize a public obligation to employees who b m e incapadtated by q e or long service and tts accompanying physical disatility; and, to provide a maam by which puMc employees who -ma incapadtated may be replaced without prejudice and without inflicting a hardship upon the employees mmwed.

To promote this objedbe, the 1937 Act pmvldra for disabilMy m~rement when employees are inapdtated by injury or -. Them are two kinds of disability retirement (1) nonsarvickconneded disatility, and wwicbcannocted disabilitf'.

Them is no mga mqlrement for nonse~icsconnected disability retirement Howwar. a member mud hova ww h e y a m of audited service to qualify.

A member mud also pmve the existence of a permanent disability Wch renden himlher I n m p M of performing the substantial portion of hizlher duties as listed in the position dass spedfication for which empioyed (under one plan for Contra Coda County only. 'substantial portion of duties' Is replamd by 'gainful employment?.

In rost instsnces, the benefit is calculated pursuant wlth either Section 31727 w %&on 31127.7 ofthe 1037 Ad

Pursuant to Section 31727, the normal benefit for 'norcsafety' members Is the produd of 1.5 perwnt of final compensation muliiplied by the number of yeam of credited service. If the product is equal to or greater than one-ttrird of final compensation. If the produd is less than onbthird of final mmperaration,

tho n o m l benefit Q the produd of 1.5 percent of final compnsation multiplied by the number of yean d c h vrwid be u u d h b l ~ to the member were hi-r nnricr, to continue until attainment of age BS, but in such casa the allowanca may not exceed onbthird of final cornpensetion. For 'safely' members, the 1 .S percent above is 1.8 percent, and age 65 Is s. Pursuant tD SeLtion 31727.7, the normal benefit is in accordanw with a graduated scale c o m w to the number of years of d i t e d senrim. as indicated in Table Ill, on page 15.

Them is no age or yea16 of wnrice requirement The member must prove the existence of a permanent disabling mndition and that such condition exists as a resutt of illness or disease either c a d by the job or aggravated to the point of sgnificamUy conbibuting to the resuhng disability. Case law now requires )ob causati on to be at lead 'real and measurable.'

The normal benefit to a sewi#cconnected disability retiree is one-half of final compensalion or the mcrmbeh senrim retirement allmanca, whichever is greater. The senrim-wnnaded disability retiree atso can w i d e without penalty, for a higher allowance to be provided to a sunriving spouse upon the ret i r~ 'S death.

Vdous poht-reIimmmt adjm4menb em provided under the 1837 Act in general, these pmvide for an annrul i- in retirement allowancafor retired members and M u m retired members and benefidaries. qwl to ths change in the Consumer Pdco Index, but these changer may not exceed e fixed percentage established by the county board of supenrisors. If the Index is in mccass of this fued percentage, the excess h armmulated and applied to future changes. Under no drcurnstanurs may the allowance be r e d u d b e h that initially paid to the rstiree on the effective day of retirement

Upon the death of a nwrnbar while an active employean or .s a retireeP, celtain benefits may become payable toe surviving spouse or minor chlldren or to whomever may be designated benefiaary. These benefrts may be in me fonn ofe lump sum payment or a mntinuing periodic payment, or both. Ufetime continuing payment8 are calculated as a percentage of the mernbeh final compensation.

Germally qmaldrg, mcrmtacship is mandatory for permanent employees for all systems. Not all systems indude psrmalwnt pait-time employees in dhment system membership, and the retirement board in its regulatiom may exdude from membership temporary, seasonal and intermittent employees.

Y w m n &mdwize the 1037 Act and ibi rydems as being somewhat Uka moving targeb. Just as you think you know enough to .hoot the BULLS M!? out of any question asked of you, someone 'moves the tag& by amending tho 1937 A 4 pa!sing a federal bill with new mmplianco requiremenis, expectorating a new or nwel interpretation. orb/ ppeldirg sane other but aimlariy Qstsrd, deed. Sometimes, however, you amply forget. By this presentation, I hope to provide you with the overview intended. However, befom acting on thls infanation or when in doubt mfer to the 1937 Ad. your fellow trustees, or your retirement system admini.bst~ and counul.

' Chapt.r 3, Title 3, Division 4 of the CaUfomia Government Code. All article and wetion mfemncu a n to ihe Gwemrnent Code unless otherwise indicated.

= Stab of CaUfomia b g i i e Analyst rn (Sacramento. Califorma: 1878).

a S M o n 31451.

' Sedion 31525.

Sedion 31500.

a Section 31520.

' Sodion 31520.1., Sedion 31520.3 and Section 31520.5.

' Section 315202

Section 31585.

Section 315221.

" Saction 31580.

" Sodion 31!3802.

" Sedion 315222. and Section 31522.3.

" Ibid., Section 31522.1, Sadion 315222, and Section 31522.3.

* Section 31529.

* Section 31529.1.

" Sadion 31529.5.

" Section 31607.

Sadion 31530.

Section 31732.

" S d o n 31533.

a S d o n 31534.

Section 31588.

M d e 6 and Artide 6.8.

Mda 16.5 ud ArtIda 16.6.

a Sadion 31453.

" Md. 15.

Section 316?6.1. -on 31676.11, Sedion 31676.12. Section 31676.13, Section 31676.14, Sedion 31676.15 and Section 318M.

12

* Atljde 10.

a Altide 16.5. Atlids 16.8, Section 31681.8 and Sedon 31739.5.

Ariicle 12

Article 11.

Count*. Contrrcting With Tho Cllifornu Public Employees' Retimmant System

GQum

Alpine Amador Butte Calavens Cdusa Del Norte El Dorado Glenn Hurnboldt lnyo Kings Lpka Lassan M d e n Maripasst Modoc Mono Montemy N a ~ a Nevada Phuu Plurnas Riverside San Benito Sen Fnndra, City & County Santa Clan Sante Cna Shasta Siem swyou Sdano Sutler Tehama Tdn[ty Tudumm Yo& Yub.

NO. Of Mcmben - 86 - 5% - 2 . m - U 3 - 351 - 508 - 1.857 - 510 - 1,9S3 - 463 - 1.323 - 905 - 453 - 1,1811 - 315 - 396 - 308 - 4 . m - 1,229 - 977 - 2381 - 457 - 13,084 - 454 - 1261 - 14.888 - 2.767 - 1,857 - 132 - 808 - '2.984 - 987 - 891 - 542 - 1 . m - 1.781) - 047

'Out of a total TIB,333 mc4jve and inacllve CalPERS members. Total number of retirees, su~ ivwr and beneficiaries is 337.418.

- =wwrpted from CaIPERS ' lW8 Annual Report'

4lameda :onh Costa %sno rnperial <ern AS Angeies ularin Mendodno Gerced 3range Sacramento 3an Bernardino San Diego San Joaquin San Mateo Santa Barbara Sonoma Stanislaus Tulare Ventura

TOTALS

I&L!Lu

1937 ACT RETIREMENT SYSTEMS

E!wmha

S 3 Blllion 2.5 Billion 1.3 Billion

238 Miiiion 1.4 Billion 25 Billion

799 Million 142 Million 291 Million 4 2 Billion

3 Billion 3 Billion

3.6 Billion 12 Billion 12 Billion

1 Blllion 757 Million 828 Million 514 Mlilion 1 .Q Billion

S 65 Billion

- Excerpted from State Association of County Retirement Systems 199699 Membership Roster.

Nonsr~u-Conneltsd Diibikity Retiramant &nafhs Pursuant tn S a d o n 31727.7

Yaan of C d b d Ss-

Fm years. tut 1- than 4i yean

CK yea- but less than sawn yean

Swan pars, but less than aipnt yaan

E=ht yean, but less than nine years

Nine yean. but less man ten yean

Ten p a n , but less man eleven years

E e w n years. but l e s s than h i v e years

?wake years, less man m i e n ysarz

Tniiaen yaars, but la= k n burteen ye-

Fourteen ymam but less than =an yea=

F*n cr more yean

don Onr T l l ~ Ti x. -1 k k- a d m y bc ziudn 7 h c S;llmmia -om Ar oi199Z-

d o n T n n n d l n l =nd Dehrtdolrr Ihc Pcopic eiB. S ~ l c a i m - a r n i . + findme k* 7.7 foilow

(a:8 Rrvd cri+r;. +- u-n the= pcn'an kriu la m e Guic ~Sryric. ui ss food m i s h e s Ihc = h e n : r c For -y ti&= ma s ant ciidoic ?r, in S=.il SF*, p M a n b e c k ic ch& m i c

.if-sA ~ y p m a d scUnry.

(b) T& k5- p o i i c m d orb= i o c i sc5cjo.i a d y.

-ioya *=ti an pmanb i p-om b n s : i l r 4u& m u a bc v-i h m miiric: ziuu -d m L p p r n * & n ~

(e: a;ih kr p o i i t i s ; ! ~ on pubiic )-ion %niir .riii b k c c - ~ + y c . .riU W , " C L 7 kc- in Ihc

(k) In ore : . prate :-*on b s c S u a d la ivaidIhc p m m c mi%emcr.~- 15: ?;.pi= n u ac. n o r to rrir:d r%c jcrraon hn& o i h s r w e bon 3hu.c ;,~n.ic a d poiit iei c=mdytton

P ) To mLc; Ihc a qFIOC= :*Se in Ihe ~ornoosi~icn uTXcLre==.: &YCI sonkninq c i e ~ i rc--:r or q i u y c . mmbe=

( c ) To ~ O L C Z : .he oiihiz =e :-M hmre 2. incrs rirzc: viii bc p m i r e i i i c t e z-6 i o d p i i r i c i w =: : ~ i u d la divc. pubiis j r i t o n

(07 TL, e s r r *z t h e =ri 0i;ubiic ;eziun nn- xr uwi e=;iuxirci? lor rr.c ;unure o i r 3 & c d y m d ;rornpuy ?mriCL?q bnc:iu a d irris= LO

;:-J&~=,,Y oi::sc --A =ad mat for olhc pur;usc

(ri To give h e snie m d r -~ ius ive puc o r c Ur m q c m c r c a d hvcuncrr oi;ubiic penon fund.? to Us Z c e k n t Boa?& e i l e i d or a.pointri for rh;l purpusz I. r-,dy G r i t h LL?isi;nrrc's pow= o r e mci fun& =ti LO pmhibic h. Cuw-or a ;nl rxr--ziw= n !+siatire hi:, o iu l y p a i i t i d d d i - i o n o i h s ria k r n l;llpcr:nx wirh pb i i c ?czton iln&

(0 'io e s r r b dl rz4i de-4nuian. m e - 7 I. u r e ~ z - t i thr om.ccr( of jubiic :=aim hnk - svdr u ~ d c I h c roic and r;kir.

d i r c i o n oi.hr r 4 0 M b i . XL-GL PI

~ ~ N l i l b n u r i i n q =y a h c p G i o m ai1.u ~ n r ~ l - 0 " la ihc shiil 98- -hmriv ind 6- ~ - i . i r i c y id

b ~ a i m m i ~ a m d -dm aitk .-~.sYI 4 ilih roi Imin5 (a! The X c r C a r ~ Boyd e i z Dyhlic ? d o n a r & e z m : % bye-&

roic a d r-e-vc b--niiiv wc ihe ~PU O ~ B C ,-on = Thc % k c 1 sinil &a h v c mie a d GU~YC

(b 'b Tne m-- airhc-u b- ai~pubi icpc; io~ or=-=: s k i i dt-e BC;= DUYc Yich -C_P BC ai=? in h e bx==

o i md forrhc e n i x i v c :was= o i m v i d i c js&u irr. -& -ad the

(ci Tnc z ~ b " .PAS P&ML hi m i : jubiic ;=+en UI :L~=G:

n*c= ziril " z ; k ~ r vl& dvvc +Ih re=* ih. NM wirh Ltr Z S . a. p~dc;: aurd d i i i g = ~ u n d r .ha ~iurra%::= k- prr ia i inq . k z p ~ ~ n zing in. iir. - x i 4 smii*r =iri ~h- - .ouiti ur n th. c=n&r. o i m c n t q h . of I&: :n* viU 1%: aims.

Id1 Tnr m - b e o i h c .Pc-a 5- of. wbic m c i i ~ n or r c . j e . a t

(g! To U c i e r i Wzk?ic tku : Rc..jcce.t h a d , hrry 10 ir p-.x&nu ;-xi a c te&S;-:~ tiCe ~ ~ l d r _ C = ."C a y oIhe duly.

S k n n Four. d o n 17 * r A r ~ + d ~ YY1 nrlhc Cdifnmi: Cnnnirudnn b hr-3- 3mradrd la m d roUom: S e x o n I;. 7- 9' .mil not in an?. -c 1- iu cAr nor siul it .uh.c:nr m. or br i n d - Ihr nc& o i m j = r n ~ y . - & d o n or : q r a i n l ~ ezcqt us U c r% i d cc5 poi iuc i vb&.Gion & u k muni&%iic,. r-.d pubiic ~ = q i W i k h c j y zuBa&ei la -ire =d hoid h af thc =pic1 rack n i r m - m i w- so- or =arnor2toc! vnerr (kc so& k .a z c u i r 4 or h d d . . fcrthr ;ur~- of.%mkhinq a v?p i y ai-2e for pubiic munid;-i a p v c m c t 5 ~ 0 . c m d ihr hoidms o i h c mi; rh;n r k d c .hr ho idc thcsi

zm u t u u e ;-2icd -rim-d by hwu-n a U c hide;. a<& br h i ==ad -LC ;;~-ny or - o r L o n in w i i c k c re& is so hi&

mat pr"drt to do so.

(c) Tnc ae.&mnt E d o i r p u b i i ~ pc. im or r r r i r n n c rlnc;- c---~ -%h Ihe .rrd&vc rcrtoruioiiilic r-ed in i~ YVil LYC a. :oie a u cciusive powe rm pmndc for 2-md -a== h order ro =c %s ;smpn-iL:: o i z c zuez oiIhc public jc?zion or E:~-C=CJ

(0 WiU r c r z d la m e Rs%-t--c~ Eesfd oi: pubiic peaion a .y.ca wniC7 i n c i u d ~ in i ~ 1 i:rx=usi~ian ncr.:: epioyc: mcabc- ar zurnbr.

a d m e h d o i u i ~ 4 . n or xrnmci e i s ~ ~ 2 . p o o l U c ?.rirc.r=i L o z d ubc w c c r- ird b r ku or ~ U c r i s c B r ? ~ om Julv I. 1991. sk i1 no< 5c . c-=?q& :mrndel or rn.diii." >y the L:-,:r;r-. unie= Ih. .k,~. L.T~~.C~C-L ar zodi~i-on e c d by Ur L ; ? u h r c is.-;Ced by r mjeTiry W- Oi*e

(h) .b wed in ihir e i m n ~ 3 r .n 'lcz=r-t r k i l n c uz 3 u d o i A L r n ~ n i - ~ i ~ n Evird afT-zr i So* r i 3 ~ ~ ; : o n or mmcr znrcrJnq hrdy or bod o i r pubiic a p i o y e s ' pcuion o r ; r . r m e t 3- prowi&i h-wrrrr. thz Ihs *m -i(crLc;ncn E m - s k i 1 not be j yrrd LO mcrn or incixdr kv&q body or b d c-rcd ac Jui? !. :591 ukih d o c net &a?i* pcuivn or r e l c a n t bc.s:irr a s i e d :eli;Y*. b+ a i a j U T . l i ~ - ; m w h l ~ " i o ~ pani&pnu in 2 pubiic -iorc=' ;=,on or r c m c ~ 3 - c -

- I n n i x . Cun(Uefn- L=r . t a c c . r e t 2-. 5 s a-n x d .nu&-- > c u r ,

a a- d n n q I. ICr jubtxc ?-aim XU r c i m e z : ~m o f z r r::. x z y ei;\e- s k i 1 z p p c r on :nc --.c.xitir cic.-~on 'hilac on Sorcz!cc :. 199: Ihc ~ r i r i a . o i r i d m=-nc sk i1 bc e . e d :c be in sinnic- ii: er c c t L%Z me- i'iill rc-.ire 3 I c e =mi= e f z m A r c m e . L:r prnvisionr ai.his m-c sk i1 p . s i i in .nc= -mcy zed a: :rn+sions o i r i d 0,- mervrc nr a - z r r dl bc nuil a d x i C ic Uc e r c L tk;i =id m h c m w : or m a r c d l r e = v c a ~ c : e :urr=c e i a i T c A v c v o c c 'Ce

p n n i m m ";;his m u u c Wl 'zi: ::T:c. a 2~ :=c: ;-irrcl by ku.

S d n n C r r n S-rr_biZn. U:? *_;ir.&im afthis ;c 4 1 bc iaund or k i d = r=un e ic rnpee ' j t xkd i c lmn I. bc hr-d i~ar.cnr.iwtiorL for x y rAJn x r ~ by., dhnxv - or ~ ~ ~ i ~ ~ t i ~ ~ ~ : i ~ : + ~ ' i ao, Z-~C hs =2ss , m ~ ~ m =i ihu ec-ze and LO ihL cd u.c p r i r i u l u a i . 5 r c v c r-: r c r - 8 i r

THE MPLJCATIONS OF PROPOmON 162, "'IBJ3 CALIFORNIA PENSION PROTECITON ACI" FOR CALIFORNIA PUBLIC PENSION SYSlXhB

M P r i o n & b&rc the S@g S A W Conferm~ on May 7, 1993. at South L;rh Tahoc, California, by Joe W F tnd M Toumuurff of H u h d k , &us and Etdnger.

~frhc~~ormry~ymmr.f i f tcmhrvczgrredlo~thccoaof th ir tp ldy'rrgrrdine "

thc impLicaims of thc W n pa+Pd by the ~~ votm in November, 1992. -. Pmpaddon 162, ?hcWd Pasion P r o w M', k a hot top& smong poliridaru . . a s w d l a s p h Y ' and bcntiidaricr ?hop who fought against irs parage u c w u e h i n g c a d y , ~ g f o r ~ m m a h a m i m h ~ , i f a r e d o , thereishe disicm p o m b i of anotbu wm's Wyt which muld take awry any of the cuntnt

language - and more.

Tbcpurposc of thispram* is m rhcd somclighron b p m h n s ofthePmposkionin ' p k i n W ~ t h r n i n l c g a l P c I ~ t h y m i r n y o f y o u ~ v e n o t h a d t h e ~ t y m mcl our dm% report, so m will p d m review in major findings with you.

I t i s h r i p f u l t o r r m e m k r t h e r i t l e o f c h e v o m ' s ~ ~ ~ i s R o p o s i t i D n 1 6 2 , ~ CaIifOrnia Pendon Pmlsrion Act'.

THE SEARCE FOR THE UNDTlNG PRMCKPLE

1) W Y AUTFIORITY, wtiid is iimited by, or ried m, FIDUCIARY RESPONSIBZTY to others. In othrr words, as pfan boards and . . amisc thdr plnury or ulrimare authority, they must do so rerpondbly -

2) D U N OF LOYAL= - rhit duty rahr prradcna over (that is, it is the fm k g ) a PmfPZiOll of dufk for hate who have the authority and n!qK&biij.foridmuusmvl . .

' ghsysrurrr.

A -nON OF OUR FACT--DIG

- Voters want NO MORE POLmCAL NEWERENG with the . . admmm&n and opendon of public pension lunds md inv~~mmrs.

- In general, plan adminisuators arc independPlt and with this inclcstcd f d o m comes more rrsponsibility.

- F o r o t h a s t o ~ a u i o u s o f p i a u ' " , is aecqmbk for than to ovcmk is nor Remember, 'People will be wauhhg youm, and this isasitsttouldbc.

- B e h ~e of The California Pension Pmtuion Act', public @on pm

, . . wu governed by the body of daision law riong with the

mnrrcs. After in pacsagc, they arc governed by the body of deddon law, the rppliElbk sran~m and, firs and forcmoq the Starc Consdolrion. Remember. the '37 Ad law still rxLn

WHAT ABOUT TBE CONSlnQTION?

Tbc courts lih: rn avoid Casr imha l issncs, or tan of consriatdonaliq. If they must address such iuuu. thy wiU uy to haxmonizc the Consdmrion with the xarurcs. Two ideas shddbehpt inmind-

- Fir% the ckim rht a snrurc is facidly 4%. on iu face) unamiaitional must a vay high sfandud - if there is m y sa of faas on which the mum can

find thu it can smd, it is not unmnsimrionat on in f a e Fur example, if thaz is a saute which seeks to 8h away the Board's final decision-makiag Purhoriry, it doan't mctr the C o ~ W M

- Ssoond, there is the he of 'applicuion imnlidiry'. If the mmrc would 'unduly burdm rhc Board in caq+ing out its Muciary duty, it en be found to k un-d to that cmmt as appappIicd. (Sac m e 33 of the opinion.)

The ~IUIICU of p d g either of thPc rm, amdusions will be upon you, should you choose to osl.fhc ~ ~ \ a l i d i t y o f any statute Tba! means that you mun pick your case. cndully. For c x ~ p I r , nh the provision in sfamrc which limiu your adminimadve tqmdhuca to -18% of If you ue going to test the mtory limit, do it (for ~ ) a n a n c c d t o m z k d i n b i ~ . .

iu lcsJ than two years. Don't test it by prying cnmrnncr bii salry.

Some couw rrtirrmcnt systems arc subjst to annual appropriadon (Govanmat Code S& 31580). wide others arc funded from their own rcriremat fund earnings (Cwannmt Ccde Ssdon 315802). This vcand p u p of xuircmmt systems alnady had a prerrn degree of budgmry independmot. m a bcfon passage of Thk California Pension ProreaiDn Act-.

Any s ~ ~ ~ w h i c h ~ r h t c ~ u n r y t r c r n r r e r ~ d ~ v c r r h t b u d g a f o r r h c r y s e m hUsinmCakgay 1 b c a n ~ ~ k s t c b t ~ n h a ~ p t h e h c r r d r r m m t ' t finrllulhdy. The treaamr may p%k@tc in the budget proan but cannot bavc final wthonry.

H-, rhc boad's budga amhcuiry k not J ~ - * ~ ~ Y P ~ Y ~ Y rcrsDMbltaps=s. ( 3 0 m w h i & d o n a t p a s s t h e t c n o f ~ ~ b C i a a r n a l & the p m i s i ~ l ~ ~ of ?he Cdifmia Pmdon Proteerim Aa'.

A public pxim banrd cannot 9 the crnrsc of thc .la% ep on erpiPdinna for ncm- compliance - 'it ain't no cxauc for non-. If you hrve to s p d more than . 1 8 % i n c r r d c r t o ~ m p l i s h ~ W O r + y 0 u ~ y b e f o h c d t o ~ t h e ~ s p ~ YOU mua fccus on PROCESS. Emblkh rht -ty of your &CIS and a p c n b , thm prarcd. Prwc, through an amnmBblc proces, that the applicaxion of mirmhinisg the .18% u p is sn u m s w b I c blndm and that it k, thcrrforr.

Whm I speak of 'pmau', I don't mern lou of paper or a r i d k i c pr#a~ Makc the proemnasrmabk. ArPILricpr#mariIlgui&pumapmpcr&urton.

F r w ! g m n r l ~ i r w , thmckagmeralprineiplcrhuam knotgiwnadutywirhout roars m ?he a a u s a y took H w w . it k yuur d q (O show, through an q p q x k e pm=s, *you ~ a n e e d f o r t h e t o o l r - in tbishsmm, rhetool is d o h .

Under thc law, the m r y ucanmr has d y of the asva of the miremar fund, subjca to board appmd Under thc provisions of the pmposiria, this is invrliducd only if the cuoDdirn uiu to inurfcrc with the board da5sion.

F ~ a t m p l c , ~ ~ w t e : ~ f f i c e r s h o u l d h h r p C m w r i O & e c l a m p a y f o t ( a ~ ) i n ~ U U , which brvc bem ordered by the baard, this haaim would be iruppmpriare lmdcr ?he cdifontki Pmdoa PrOt&On Act' and, theh f~ , ~ 1 1 1 ~ 1 ~ ~ o n a l . Bopnv+r, it would be much- m wmk such diagrrmDmn out through ncgmhim rarhn than m rake thargmautothecane

' I h r r i snocc l ammd . . problem until thc W ' s hl authority is 'not only ticked, but

lampled uponL. liu am will dwys uy m '& thc mtrh WOIY whm authorities cLm

Rammba, once @, tba! a mang aucntian m meaningful promr will not only mhana your legal pDzirion u m r m ~ ; it is marc WPly m guide you to an appmprirp resolution. We*= learning. as we an in a sate of m l u k

The requirement m Govmunmt Code S ~ M I 31593 that the county aadimr mmplecc an v r n a a l l u d i t o f t h e ~ s y m m i s n o t f a c i a l l y invatid. T h e p u r p a w o f t h e h c n i s m -the-, whicb &icm rhtame goalsas t h ~ t c o f theldmiaimulmsandbwrd Mmkrs. Y o u ~ n s e a n e r v d c v i c C i f y o u ~ n p m v e t h a t i t i s a ~ a n y m ~ . A m . foau on the pmzs you use ro reach your d u d o n . The purpose of the audit rrqakmrmr is in harmony with CThc California Pasion PmpcdDn Act' ad, iu orda to not . . . rclc&youmprrzhDw~itgcninthe~yofldmrmzrmngthcrynem. I fpupaca problem, it is ka dealt with by negotirtion. Topics m address if y q ~ n t to change the way the audit is annplcrcd would be to show that a new p m c s saw money, minimim &ueioPr, or crpeditcr member servim - aIl p a of yuur commmd . .

duties.

G o v e n u n m t C o d e S e c r i O n 3 ~ 9 m a h t t h e ~ ~ y o r t h e c o m t y ~ t h e mcmcy for the h a i t boatd. Lsrr it that any, until therr is a e o d i i a A t ~ y s manrlr with the designated m e y - you should consult, but you don't have rn obey. If, after ~~, you donat agree, make the deckon yourself. This might arur a f r a you mnaJt an indcpmdmt cDlmscL If you've got a good working rrl+riodq with county cowsel, you shouldn't give rhis up. If t h e is confli4 seek hdqmdent ~IUUSCI to d y e

an anbiased Opinion. THE IS YOUR RESPONSIEIInY. .

P o n ' t go nmning off Ef he mum-for way dispne You n c w know about judges. Seek h a y s to humond'

It was not the intadon of ?he W a m i a P d n Rotation Act' to t tmw rdde civil pryiQ A @ , y o u r r m S t ~ t h a t r h e @ & d t f o f a ~ ~ o f k avil scnriee pram an burdmsomc Thm, mak an accpwn. but maintiin the body of t h c c i v i l t e r v i c e ~ i

m A L COMMFNTS ABOUT BUD= CRUNCHES

~ ,Boudrhvethcrole ,h ighcstrrsponrib i l i ry . Hkcgoodhdpandmnridcr cndully. 'Ihcn au Again, PRO(ZDURE IS KEY. De5sions may b m c dimntlr For ~ i f , ~ i n N ~ ~ Y o r k C i t y , p ~ ~ r r r q r r i r r d m r m h : a n i n v c m n m r , i t r x f f y b e i n t h e bcs inmm of the plan @eipanrs m do so - if in not doing to, you an jeopardizing the fmmc of the*

Yon must wuch for poririnl intufama or p o W m. which the h c t i o n now pmhibin. BuS YOUR CASE with cM. in consulQaon with SAGS. Communicazc lhrargh SA(=RS with the o t k rtdrcmmt symcmt md hang tog*.

- -

An individual who 6 eumIIUy in nt0I'i'lbadIip unploymant and is a member of* plan. - - - - -- -

- - ha&amhhnofa p a n s i o n p l p n 0 d ~ m n n o * m ~ w ~ m ~ ~ a m r m ~ d a ~ a r W . r d O d m o f r r r d s o r d d v l r i i e h h ~ b w b b ~ b . p i d w h ~ d u a . T h a v n l u P t b n ~ t h o a M ~

.. f me plan and me appkabia r ruhpCERS Mluntbrrs am, pwrubto b o d poky, pdomad annuallyJ ' -- . . -

4 prsDn minod in mat ha^ a(irtics and kgrl acraunling methods and in me prindples of round opudbn of - ~ ~ , a 1 ~ 1 r 6 t a s a n d ~ p B m . w h o ~ ~ ~ ~ ~ 6 n d pmjestiom,and m W d 8 t a nmefundingandmanngemsrbofa~mtplPn -.

4 arias of pmb& w n b hf a b d mmd or for fi. That p o M of a SCERS M m e n t allowanca m d a &I hmdr m m by ma member. - ...

9 person who 6 meeking a anlinhg monthly ollwana fonc4ng me dsath of a memkr before or attar tho mombets rdmmant

i3#& ofma munbar or to either Bob or senhces altar mwling me e m requireme- of the padon ptDh

Th ptbE mhmerksWmm .rpsgd * bw 0 h Pub& Employeas' RslZrament Law (TERLI) for Sbb of Califomis am@- and a m p h p ~ ~ of agendsr mrdradng wiU'~ WPERS.

Any payma& made by tho .mplopr or member under a ntinmMlt plan to pmvide ben-

4 rs dabwnind by a b o d of retimm- M on tho avoraga number of days 0- ~ b y ~ a ~ ~ a r ~ ~ B i b n a t m a - n l a ~ P p Y .

- .- - A typ. of ddayed rotimment whereby a m b a r , who lembs membership W N I ~ a m crrmphting five ye a n r k s o r w h o k s v a s ~ a m c w n b a ~ ~ m d w i t h i n 180 daysbocornssa m ~ o f ~ s y ~ undor red-, may elect in wdng tn leave rnemtmr mntribrdians m tho rehmmsnt fund d b. granted a d o f d ~ ~ i m n t i m Pllowancs tn boama effadive a fW the rn& f i d bsm- eligible and doc&& mcaive a raimmant allcwancs.

a -. -. i - - ..... .-- . . . . A mljnmsrt plan tM pm- a spadied bemR amount at miifamtub orduth dadatad in -ca a r fonnulm which bkg into miderat ion a rnemban' age at retimmenf years of creditad plan sanria end final m p e d o n . .- . .... :. 22

. . . . :, . A:::---.-

.:. -.- . . .- -. - .- An arnourd basd upon M achraiidty determined pefcmtage rate which k applied to 8 mombod m h m m t dedudiM FW C-on -97 and pmvided by membarship arnployws in order to fund bmefib pmjd.edsd by the plan.

. . . . . . . . ' 7 -

Fiduciarv " . . :. J ; :

. . .. . . . . . . . . . . - ,_. . = -.-. .......... lndcrtsr the d o n s h i p of tn& and mnfidenca whom one persan (the fiduauy) holds or conboh prom forthe b o n d of andher pecsoh For example, the relatiocship bawwn the Membars of the SCERS B d and SCERS Msmban a d Rltirssr Members ofthe SCERS Board and staff who have discretionary autholity wrsspondbi in the .dminishPtion ofthe ystam am ansidetad fiduciaries

- . . . - . . .. .- . -.:. . .

A bgd st a Mudvy s m duties with am, r#U, prudenu, diUgonm end in tho s d u i v e in, of plan parliapaMs and banofiaaries

5 . .- . . .- .. ..a . - - .

'The mwaga annual m r n p e d o n earnable earned over a one or thm year period whih suvsr rr lhe bo?ds for dotemining raimmnt benem -- - A member who has terminated fmm membership employment but who is eligible for and h o s e to k m e he,- mombar mnbibu&iom on deposit with SCERS.

.. > - . . . . . ...

A type of d m h r d n a disability retirement appGcant who has mat the digibiiity m q u i m w for rn sodm direma hs o#db irrsuocahiy a m a wrrvica retirement allowana pMdina tho outcame of h i h r d i d W

. . . . - .. An amount basad upon an a U a l l y determined percentage ratn which is applied tn a m k t k m ' mttmment dedudble ppy Ccompansalion ePmable3 for m n t senrim cndit or paid into the dmmont sysbm for

zenria in a Lump sum or through payroll deducfions. - ..- - -

A statement h a d annually to each 1937 Act yrtam mombor usady indicrting the mom- . m r m L conbibulions, aaumulated iribraJf amdited ssnria and ~CED- receivable balance, among othorinfoMon.

'lsnm&lsmk -

&,,nember who ia in mernbsrship isone ofthe Mi l laneous m o r i s s . Firrt3w. Second Tier ar Third - of SCERS mmbscship Gemally. a memberwho is not ampl~ysd in adive law enfommant wactive fim w o n . In.srwne wrm.MlscatPnm~~ k re fend to a 'General--

m u y , a ~ y p a af dmwtvuhscin an aiigibb membsr k found to be permanently incapa- (~sbled) fmm h-ng the suktardjai portion of harthis dubs.

hn, su& as SCERS, that h intanml %wka Pppmvar rr medng the mquinmants of Sudon U)l(a) he lnternrl Revenue Coda. Such plan5 -e tax advantagas for the employer and employeaq such a the rtaabiIity of plan eaminpo on imdmenk, and nontuability of contributions and intersst enQted to member ounis until benefib m paid

- nember who h a met eGgibiMy nquimments for a s s ~ i c a mtimment or disability ntinment anf is m i n g a 4inuing monthly m5immant allowanca.

ontinling s0wm pid ta a d r w mrrsisling of a currant senrim annuity, a currant snwica pornion. 1, when appliable. a cost-of-hring in-.

mber who K in mambefship in one Of the eGdbie Safety categories Generally, a inembsrwho is employed dive law enforcement or active fim rupprsssion.

mmmtn County Employ-' R d r i m d System. Synonymously n f d to as the 'systam.'tha 'plan.' and Yund.'

s Saammto County Employns' M m m e n t System Board. Synonymously referred to as tha Sacr;lmmt~ unty '8d of Ratinmenf' R.timment Board,' the 'plan and the fidudariar'

W Y I P t

(ps of ralirsmad gmkd by the B a d after a member has pmvidsd pmof to the B a d ' s sltirhdion that (s)h ~nnanent ly i n c ~ p s M fmm performing the rubEbnlial portion of herhis duties and that the inapacity ability) - in the c r r w ud sopa of the membets employment and was submntially caused by the job.

-Y- .* m f d to as an 1ndurbiPP disakEty retirement

An hour o f adt in the ratimrnant yotam for membership satvia prfomcd or for purchPlObk W m ud firr wtkh a numh's ~~ mnbibrdlon has bem mads GanedIy, for %enmardo County crmpbyeg who work tulWme, them am eighty =Nim udk m s d in a bi-weekty pay mad, one hundmd ssv- in a mprcsentntive month, and two thousand eighty-eight in a rapreJantalive YEW. Tohl setvim udit k wmd in estaMing diMbiMy forntlmment bane* and the amount ofsuch benstlk.

A type of ntimment grmtsd by the SCERS Board after a member has mat m(l age and amvim wbitily and has shmdttd an applltatlon for m ~ i m mfhmant

A SCERS member who miirar for -im priorto the age of h m i r y l dgibie for ntlmment.bmdkund.rth. MemI m m - ( S o d a l Saatrity) and who attlma o f Rtiririg for semi- is fuUy maturd undmrth. fdrnl ryrbm may, w i th the apprwal of the SCERS Board, el- to have herhis fatiment allowanm i n c r e d priorto such &@Me age and reduced after wch age by amounts which have equivalent aEhprial VPIUBE Ttis 1110dlfjedon /L farthe pnposs d d r n t i n g a rnembeft retirement aUomna with benefits receivable from th. fedad

An elodd aappoinW mmnbar of a board empowered to manage the fun& and Qmd the policy of an 1-011.

A bmmit phn mkiion thut a putidparbmi drip cartnin requiromenk, d n e rigM to the kdik (s)b hP acawd (or- @an oflhm) wan if empbymant under the pian terminates before d m m a n t EmployW anhibutions am fully veste!d.