AB 569 changes the California Public Employees’ Pension Reform Act (PEPRA) by carving out a narrowly phrased bargaining exception to the statute’s longstanding prohibition on new supplemental defined‑benefit (DB) plans. Specifically, the bill amends Government Code section 7522.18 to allow a public employer to bargain over contributions for supplemental retirement benefits that are administered by, or on behalf of, an exclusive bargaining representative for one or more bargaining units.
That single sentence alters how unions and public employers can structure supplemental benefits. Instead of relying on a public retirement system to adopt a new DB plan, bargaining units could secure employer-funded contributions to union‑administered supplemental DB arrangements.
The change creates practical and legal questions about whether this is a permissible narrow exception or an avenue to reintroduce costlier pension arrangements that PEPRA sought to block.
At a Glance
What It Does
The bill amends §7522.18 to add an exception that lets public employers negotiate employer contributions to supplemental DB benefits administered by or on behalf of an exclusive bargaining representative, explicitly stating this is “notwithstanding subdivisions (a) and (b).” The authorization is limited to bargaining over contributions; it does not specify benefit formulas, funding standards, or oversight mechanisms.
Who It Affects
The change directly affects public employers defined under §7522.04(i)(2), exclusive bargaining representatives (public‑sector unions), union‑administered or private supplemental DB providers, and the employees represented by those units. State and local retirement systems (CalPERS, CalSTRS and others) will feel the indirect effects through potential plan fragmentation and shifts in funding flows.
Why It Matters
By allowing negotiated employer contributions into union‑administered supplemental DBs, the bill could shift retirement costs and risks outside traditional public pension systems and give unions a new negotiation lever. That raises budgetary, actuarial, and legal issues for employers and pension administrators and creates oversight gaps the statute does not address.
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What This Bill Actually Does
PEPRA, enacted in 2013, established a clear prohibition: public employers could not create new supplemental defined‑benefit pension plans after January 1, 2013, and employers that already offered such plans could not extend them to additional employee groups. AB 569 adjusts that posture by adding a narrowly worded exception to Government Code section 7522.18.
The exception says that, notwithstanding the pre‑2013 bans, a public employer may bargain over contributions for supplemental retirement benefits administered by, or on behalf of, an exclusive bargaining representative for one or more bargaining units.
The text matters because it limits the employer’s activity to bargaining over contributions rather than expressly authorizing the employer to adopt a new pension formula or to directly offer a supplemental DB plan. In practice, however, bargaining over employer contributions can achieve a similar economic effect: negotiated employer payments can fund a supplemental DB arrangement that is administered outside the public retirement system, for example by a union‑sponsored trust or a private provider acting “on behalf of” the exclusive representative.The bill leaves several operational gaps.
It does not impose actuarial funding standards, vesting rules, disclosure or reporting requirements, or specify which entity bears longevity or investment risk. It also preserves other specific limits in the statute: the subsection addressing employees hired on or after January 1, 2013, remains in place (with limited education code exceptions).
These omissions mean employers and unions could negotiate contribution arrangements that create future unfunded liabilities or administrative complexity without a clear supervisory regime.Because the carve‑out references the definition of “public employer” in §7522.04(i)(2), its scope is tied to the statute’s existing coverage rules; it does not automatically apply to every quasi‑public body unless that body fits the statutory definition. The practical upshot: unions gain a new bargaining target (employer contributions to supplemental DBs run by or for the union), employers gain a tool to settle labor disputes, and pension administrators face the prospect of parallel retirement vehicles of unknown fiscal size and risk allocation.
The Five Things You Need to Know
AB 569 amends Government Code §7522.18 to add a new subsection that permits a public employer to bargain over contributions for supplemental retirement benefits administered by, or on behalf of, an exclusive bargaining representative.
The new language is explicitly “notwithstanding subdivisions (a) and (b),” creating a carve‑out to PEPRA’s prior ban on offering new supplemental defined‑benefit plans or extending existing plans to additional employee groups.
The bill limits the authorized activity to bargaining over contributions; it does not itself authorize changes to statutory retirement formulas, require public systems to adopt new benefits, or prescribe funding or actuarial standards.
Section 7522.18(c) remains: the statute still bars offering supplemental DB plans to employees hired on or after January 1, 2013 (except where another Education Code provision applies), so the carve‑out does not explicitly erase that hire‑date restriction.
The exception applies only to entities that meet the statute’s definition of “public employer” (see §7522.04(i)(2)), tying the change to the existing statutory coverage framework rather than expanding it to all employers.
Section-by-Section Breakdown
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Baseline ban on creating new supplemental DB plans after Jan 1, 2013
This subdivision prohibits any public employer that did not offer a supplemental defined‑benefit plan before January 1, 2013 from offering one on or after that date. Practically, this shut the door on new employer‑sponsored DB add‑ons intended to increase retirement generosity. Compliance officers use this clause to block proposals that would have public employers create parallel DB obligations after PEPRA’s effective date.
Prohibition on extending existing plans to additional groups
Subdivision (b) prevents employers that already had a supplemental DB plan before January 1, 2013 from extending that plan to employee groups not covered before that date. This protected PEPRA’s grandfathering approach to limit growth in DB coverage. The provision forced employers and unions to rely on bargaining over non‑DB forms of compensation if they wanted new benefits for previously excluded groups.
Hire‑date exclusion remains intact
Subdivision (c) continues to forbid offering or providing a supplemental DB plan to any employee hired on or after January 1, 2013, except where a narrow Education Code exception applies. That hire‑date cutoff remains the clearest substantive limit on expanding DB coverage to newer hires, and it constrains any bargaining result that would effectively create DB benefits for post‑2013 hires.
New bargaining exception: contributions to union‑administered supplemental benefits
The amendment adds (d), which—‘notwithstanding subdivisions (a) and (b)’—permits public employers to bargain over contributions for supplemental retirement benefits administered by, or on behalf of, an exclusive bargaining representative. Mechanically, this allows the negotiation of employer payments that could fund supplemental DB arrangements run outside the public pension system. The subsection is narrowly drafted (it speaks to bargaining over contributions and to plans administered by or for the bargaining representative) but it does not include funding rules, oversight duties, or explicit prohibitions against back‑dating or benefit enhancements, leaving implementation questions for negotiators and courts.
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Who Benefits
- Exclusive bargaining representatives (public‑sector unions): They gain a recognized bargaining target—employer contributions to supplemental retirement vehicles administered by or for the union—giving them a new lever to secure retiree income beyond base public pensions.
- Current employees in covered bargaining units: Members could receive additional retirement funding if their union negotiates employer contributions to a supplemental DB arrangement, potentially increasing lifetime retirement income for those in the covered units.
- Union‑affiliated or private supplemental DB providers: Organizations that administer union trusts or private supplementary DB plans could see increased demand and new revenue streams if employers agree to make contributions.
- Employers with active labor negotiations: Public employers gain an additional tool to resolve disputes—funding a union‑administered supplemental arrangement can be a bargaining chip that avoids altering statutory public pension formulas.
Who Bears the Cost
- Public employers and local governments: Employer contributions negotiated into collective bargaining agreements create recurring budget obligations and potential unfunded liabilities that must be absorbed by employer budgets or local taxpayers.
- Taxpayers and municipal budgets: Additional employer contributions reduce available general fund dollars or increase long‑term obligations, with fiscal pressure falling on taxpayers when costs escalate or investment returns underperform.
- Public retirement systems (CalPERS, CalSTRS and smaller systems): These systems face fragmentation of retirement arrangements, possible adverse selection, and complications in actuarial modeling if parallel supplemental DB vehicles siphon off certain cohorts or shift risk outside the main system.
- Compliance officers and counsel for employers and unions: Parties will incur legal, actuarial and administrative costs to structure, document and defend negotiated contribution arrangements in the absence of statutory funding or oversight standards.
Key Issues
The Core Tension
The central dilemma is whether to prioritize PEPRA’s objective of containing public DB liabilities or to respect collective bargaining rights that allow unions to negotiate employer contributions that, in effect, restore DB‑like benefits outside public pension systems; the bill preserves both goals in tension without prescribing how to reconcile increased bargaining leverage with fiscal and actuarial safeguards.
The statute’s new carve‑out is compact but leaves open major implementation questions. First, the boundary between bargaining over contributions and “offering” a supplemental DB plan is legally thin.
Employers and unions may treat negotiated employer payments as effectively creating a supplemental DB benefit even if the plan is run by a union trust; courts or regulators may ultimately decide whether that circumvents PEPRA’s aims. AB 569 does not define key terms—what constitutes a contribution, how an arrangement is “administered by or on behalf of” a bargaining representative, or whether employer contributions trigger any public reporting or actuarial funding obligations.
Second, the bill imposes no funding standards, vesting rules, benefit protections, or risk‑sharing norms. That omission creates fiscal risk: employer contributions could fund arrangements that leave investment or longevity risk on the employer via contractual obligations, or conversely leave those risks entirely with the plan (and members) while the employer has no backstop.
The potential for adverse selection—where only certain cohorts or classifications receive supplemental funding—could increase costs for public systems and raise equity concerns. Finally, regulatory overlap (ERISA applicability for private plans, state pension law for public plans, and collective bargaining law) could create disputes over preemption, oversight and enforcement that the statute does not resolve.
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