TO: Board of Supervisors
FROM: Ryan J. Alsop, Chief Executive Officer
REPORT BY: Andrew M. Mize, Senior Legislative & Policy Advocate
SUBJECT: Assembly Bill 1383
RECOMMENDATION
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Approve transmission of an “Oppose Unless Amended” position to the passage of Assembly Bill 1383 based upon the recommendation of the County’s Pension, OPEB, and Section 115 Trust Advisory Committee.
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BACKGROUND
CalPERS
The Public Employees’ Retirement Law governs defined retirement benefits, pension costs, and employer contributions for public employees and establishes the Public Employees’ Retirement System (PERS) to provide a defined benefit based on final compensation, credited service, and retirement age. The California Public Employees’ Pension Reform Act (PEPRA) made changes to such pension plans and took effect on January 1, 2013.
AB 1383
Assemblymember Tina McKinnor (D-Inglewood) this year authored Assembly Bill (AB) 1383, which makes several changes to PEPRA.
In current form (reflecting amendments from July 1, 2026), AB 1383 does three things:
1. Lowers the retirement age for firefighters and police officers from 57 to 55;
2. Introduces new pension compensation formulas (known as the McKinnor formulas); and
3. Increases the maximum compensation cap for both non-safety and safety members, with the net effect of raising pensions for those employees who are above existing PEPRA caps.
The new formulas provide for either 2%, 2.5%, 2.7%, or an optional 3% of maximum compensation at age 55. The bill raises the maximum compensation cap, with the effect of increasing pension compensation for employees whose compensation is above existing PEPRA caps. Specifically, the bill resets the existing PEPRA bases to new McKinnor PEPRA bases. The CalPERS pensionable compensation limit for PEPRA members for the 2025 calendar year is currently $155,081 for social security participants and $186,096 for non-social security participants. In contrast, the limit for classic members is $350,000. This bill would increase the pensionable compensation limit for PEPRA members. The comparable limits for 2026, according to CalPERS, would be $184,000 for social security participants and $249,075 for non-social security participants under the proposed bill. Increasing the compensation cap ultimately increases the future retirement benefit for PEPRA members who earn in excess of the existing cap.
Statewide, CalPERS estimates that imposing the 2%, 2.5%, and 2.7% formulas and new maximum compensation cap would raise the system’s normal cost by $282 million annually. The 3% formula is bargainable, and CalPERS estimates that it would raise the system’s normal cost by $353 million annually, meaning the optional 3% formula is roughly 25% more expensive than the other three formulas.
AB 1383 additionally may amend the employer-employee defined benefit contribution cost sharing provisions, currently split evenly between employer and employee, for new safety employees, though the bill is unclear as to whether employees are subject to the cost sharing provisions after the bill goes into effect.
Impact to Napa County of Passage of AB 1383
Napa County maintains a Pension, OPEB, and Section 115 Trust Advisory Committee (“Committee”) which meets from time to time to consider the organization’s pension costs and liabilities and expected future impacts thereto. The Committee is composed of the CEO, Assistant CEO, the Chief Human Resources Officer, the County Counsel, the Treasurer-Tax Collector, and the Auditor-Controller. In response to the proposals contained in AB 1383, staff convened a meeting of the Committee, minutes of which are attached to this item. The Committee carefully considered the impact of the legislation to Napa County’s future fiscal position. Because Napa County struggles to recruit public safety personnel, the Committee concluded that offering the optional 3% option would likely be necessary to maintain a competitive position relative to other, more populated counties. The Senate Committee on Labor, Public Employment and Retirement conservatively estimates that the use of the fourth formula would add roughly $1 million in contributions over the retirement period of a safety employee. While Napa County’s pension obligations are presently well-managed, the Committee found that these new obligations would substantially increase annual normal costs. With local revenues relatively flat, the Committee concluded that the new obligations would put the County in a significantly more difficult financial position to start each year that could adversely impact the organization’s ability to provide mandated services funded by local revenues.
Thus, the Committee voted to recommend an “Oppose Unless Amended” position to the Board of Supervisors.
The bill is not within the Board’s approved Legislative & Regulatory Platform, and full public consideration by the Board of the bill is required.
Requested Amendments
From a policy perspective, the Committee found that AB 1383’s proposed change to a retirement age of 55 is a net positive for the County’s fiscal position, as it reduces the number of safety employees who remain in the work force past the age of 55 because their pension does not provide for a livable retirement. There is a significant risk to the County of increased disability claims from this population, and reducing the retirement age serves to reduce this risk.
However, the increases to the PEPRA base and safety member premium, as well as the uncertainty about cost sharing, present substantial and unknown increased annual costs for the County moving forward. The Committee recommends amendments removing the increases and clarifying that new PEPRA safety members continue to be subject to an even split of normal cost sharing provisions with employers.
Requested action: Approve transmission of an “Oppose Unless Amended” position to the passage of AB 1383 as outlined above.
FISCAL IMPACT
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Is there a Fiscal Impact? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Approval of the requested action will allow staff to advocate against the passage of AB 1383 through the California Legislature and submit a veto request to the Governor should the measure pass. |
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Consequences if not approved: |
Staff will not transmit any position letters in opposition to AB 1383, nor will staff substantively engage with policymakers on the bill or its impact to the County of Napa’s fiscal position. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15379 (State CEQA Guidelines) and therefore CEQA is not applicable.