BILL NUMBER: AB 2982 CHAPTERED 09/05/02 CHAPTER 375 FILED WITH SECRETARY OF STATE SEPTEMBER 5, 2002 APPROVED BY GOVERNOR SEPTEMBER 4, 2002 PASSED THE ASSEMBLY AUGUST 15, 2002 PASSED THE SENATE AUGUST 12, 2002 AMENDED IN SENATE AUGUST 7, 2002 AMENDED IN SENATE JUNE 28, 2002 AMENDED IN ASSEMBLY APRIL 8, 2002 INTRODUCED BY Committee on Public Employees, Retirement and Social Security (Havice (Chair), Canciamilla (Vice Chair), Briggs, Pescetti, and Strom-Martin) FEBRUARY 28, 2002 An act to amend Sections 22119.5, 22138.5, 22140, 22515, 22657, 22664, 22713, 22905, 24002, 24010, 24012, 24102, 24109, 24111, 24114, 24209.3, 24216, 24705, 24950, 24975, 25007, 25011, 25012, 25017, 25018, 25020, 25021, 25022, 25023, 25940, 26400, and 27004 of, to add Sections 24221, 25000.9, 25018.5, 25022.5, and 25955 to, and to repeal Chapter 27.1 (commencing with Section 24230) of Part 13 of Division 1 of Title 1 of, the Education Code, relating to state teachers' retirement. LEGISLATIVE COUNSEL'S DIGEST AB 2982, Committee on Public Employees, Retirement and Social Security. State teachers' retirement. (1) Under existing law, "creditable service," for purposes of calculating retirement benefits under the Defined Benefit Program of the State Teachers' Retirement Plan, is defined to include, among other things, performance of certain school activities related to the instructional and guidance program of a school, if those activities are performed within normal work hours, as specified. This bill would include those activities within the definition of creditable service, irrespective of when the activities are performed. (2) The Teachers' Retirement Law defines "full time" as the days or hours of creditable service the employer requires to be performed by a specified class of employees in order to earn "earnable compensation," as specified. Existing law further defines "improvement factor" for the purposes of the Defined Benefit Supplement Program to mean an increase of 2% in monthly annuities, to be applied as specified. This bill would require certain collective bargaining agreements or employment agreements to specify the number of hours of creditable service that equals "full time" and make reference to certain provisions. This bill would delete the definition of improvement factor with regard to the Defined Benefit Supplement Program. (3) Existing law authorizes substitute teachers and other part-time employees who perform creditable service, as defined, to elect membership in the Defined Benefit Program of the State Teachers' Retirement Plan, which election is irrevocable and remains in effect until the member terminates employment and receives a refund of accumulated contributions. This bill would provide that the membership election remains in effect only until the member terminates employment. (4) Under existing law, specified provisions of the Teachers' Retirement Law relating to the Defined Benefit Program apply to a nonmember spouse, as defined, as if he or she were a member of the program. This bill would additionally make specified provisions of that law relating to the Defined Benefit Supplement Program applicable to a nonmember spouse, as defined. This bill would also clarify that, upon service retirement, a nonmember spouse is entitled to receive a retirement benefit based on the balance of credits in the nonmember spouse's Defined Benefit Supplement account, as specified. The bill would also make explicit the amount and procedure for payment of annuities upon the death of a member, a nonmember spouse, or an annuity beneficiary under the Defined Benefit Supplement Program. (5) Existing law authorizes school boards to establish regulations to allow an employee to reduce his or her workload to part time and still receive full-time service credit under the Defined Benefit Program of the State Teachers' Retirement Plan if, among other things, the employee has not had a break in service during the 5 years immediately preceding the reduction in workload. This bill would require that an employee have a minimum of 10 years of credited service, and would provide that, with respect to an employee who reinstates from retirement, his or her period of retirement shall be considered a break in service. (6) Existing law provides for a disability allowance and disability retirement allowance for specified members of the Defined Benefit Program of the State Teachers' Retirement Plan. Existing law allows the Teachers' Retirement Board to authorize payment of a disability allowance, and permits the member to apply for a disability retirement allowance, if, among other things, the application is made during specified periods. Existing law requires that specified disability allowances and disability retirement allowances be reduced in relation to specified benefits paid by other public systems. This bill would clarify when application may be made for a disability allowance or a disability retirement allowance and would clarify the circumstances under which these payments may be reduced. The bill would also make technical changes regarding how supplemental earnings of a member retired for disability are calculated. The bill would also require that a member who is receiving a disability allowance or a disability retirement allowance also receive a disability benefit under the Defined Benefit Supplement Program, as specified. The bill would specify the circumstances under which certain forms of payment may be made when the member elects to receive a disability benefit as an annuity. The bill would clarify the calculation of the date upon which a member first became disabled when the member attempts to return to work and has a recurrence of the original disability. (7) The Teachers' Retirement Law prescribes the requirements a member must satisfy, until January 1, 2003, for a service retirement and provides exemptions from the postretirement earning limitation for a member who is appointed to certain positions. This bill would extend the operation of these provisions to January 1, 2008. (8) Existing law requires that an annuity contract and custodial account be offered to specified employees who are members of the Defined Benefit Program of the State Teachers' Retirement Plan. Existing law permits the Teachers' Retirement Board to develop one or more deferred compensation plans, as specified. This bill would clarify the circumstances under which a 3rd-party administrator may provide investment options and the employees to whom a deferred compensation plan may be offered. (9) Existing law provides a Medicare Premium Payment Program for specified retired members of the Defined Benefit Program of the State Teachers' Retirement Plan. This bill would authorize the reduction, as specified, of a member' s benefit under the Defined Benefit Program to recover an overpayment under the Medicare Premium Payment Program and would make a technical change. (10) Existing law prescribes service retirement and disability retirement benefits for members of the Defined Benefit and Defined Benefit Supplement Programs of the State Teachers' Retirement Plan who retire following reinstatement and for members of those programs who were formerly members of the San Francisco local system. Existing law also provides a Cash Balance Benefit Program for certain part-time employees. This bill would make technical and clarifying changes to those provisions. (11) Existing law establishes, until January 1, 2011, the Retirement Option Program within the Defined Benefit Program of the State Teachers' Retirement Plan. This program permits a member who retires for service on or after January 1, 2002, and who has reached normal retirement age to elect to receive a lump-sum payment and an actuarially reduced monthly allowance pursuant to its provisions. This bill would revise and recast these provisions. The bill would prohibit the application of the lump-sum payment for the purpose of redepositing previously refunded retirement contributions, as specified, with a certain exception. (12) This bill would provide that any other act enacted during the 2002 calendar year that amends, adds, renumbers, or repeals a provision that this bill also amends, adds, renumbers, or repeals shall supersede this bill. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 22119.5 of the Education Code, as amended by Chapter 608 of the Statutes of 1996, is amended to read: 22119.5. (a) "Creditable service" means any of the following activities performed for an employer in a position requiring a credential, certificate, or permit pursuant to this code or under the appropriate minimum standards adopted by the Board of Governors of the California Community Colleges or under the provisions of an approved charter for the operation of a charter school for which the employer is eligible to receive state apportionment or pursuant to a contract between a community college district and the United States Department of Defense to provide vocational training: (1) The work of teachers, instructors, district interns, and academic employees employed in the instructional program for pupils, including special programs such as adult education, regional occupation programs, child care centers, and prekindergarten programs pursuant to Section 22161. (2) Education or vocational counseling, guidance, and placement services. (3) The work of directors, coordinators, and assistant administrators who plan courses of study to be used in California public schools, or research connected with the evaluation or efficiency of the instructional program. (4) The selection, collection, preparation, classification, demonstration, or evaluation of instructional materials of any course of study for use in the development of the instructional program in California public schools, or other services related to school curriculum. (5) The examination, selection, in-service training, or assignment of teachers, principals or other similar personnel involved in the instructional program. (6) School activities related to, and an outgrowth of, the instructional and guidance program of the school when performed in addition to other activities described in this section. (7) The work of nurses, physicians, speech therapists, psychologists, audiometrists, audiologists, and other school health professionals. (8) Services as a school librarian. (9) The work of employees who are responsible for the supervision of persons or administration of the duties described in this section. (b) "Creditable service" also means the work of superintendents of California public schools. (c) The board shall have final authority for determining creditable service to cover any activities not already specified. SEC. 2. Section 22138.5 of the Education Code is amended to read: 22138.5. (a) "Full time" means the days or hours of creditable service the employer requires to be performed by a class of employees in a school year in order to earn the compensation earnable as defined in Section 22115 and specified under the terms of a collective bargaining agreement or employment agreement. For the purpose of crediting service under this part, "full time" shall not be less than the minimum standards specified in this section. Each collective bargaining agreement or employment agreement that applies to a member subject to the minimum standard specified in paragraph (5) of subdivision (c) shall specify the number of hours of creditable service that equal "full time" pursuant to this section, and shall make specific reference to this section. (b) The minimum standard for full time in kindergarten through grade 12 shall be: (1) One hundred seventy-five days per year or 1,050 hours per year, except as provided in paragraphs (2) and (3). (2) (A) One hundred ninety days per year or 1,520 hours per year for all principals and program managers, including advisers, coordinators, consultants, and developers or planners of curricula, instructional materials, or programs, and for administrators, except as provided in subparagraph (B). (B) Two hundred fifteen days per year or 1,720 hours per year including school and legal holidays pursuant to the policy adopted by the employer's governing board for administrators at a county office of education. (3) One thousand fifty hours per year for teachers in adult education programs. (c) The minimum standard for full time in community colleges shall be: (1) One hundred seventy-five days per year or 1,050 hours per year, except as provided in paragraphs (2), (3), (4), (5), and (6). Full time shall include time for duties the employer requires to be performed as part of the full-time assignment for a particular class of employees. (2) One hundred ninety days per year or 1,520 hours per year for all program managers and for administrators, except as provided in paragraph (3). (3) Two hundred fifteen days per year or 1,720 hours per year including school and legal holidays pursuant to the policy adopted by the employer's governing board for administrators at a district office. (4) One hundred seventy-five days per year or 1,050 hours per year for all counselors and librarians. (5) Five hundred twenty-five instructional hours per school year for all instructors employed on a part-time basis, except instructors specified in paragraph (6). If an instructor receives compensation for office hours pursuant to Article 10 (commencing with Section 87880) of Chapter 3 of Part 51, then the minimum standard established herein shall be increased appropriately by the number of office hours required annually for the class of employees. (6) Eight hundred seventy-five instructional hours per school year for all instructors employed in adult education programs. If an instructor receives compensation for office hours pursuant to Article 10 (commencing with Section 87880) of Chapter 3 of Part 51, then the minimum standard established herein shall be increased appropriately by the number of office hours required annually for the class of employees. (d) The board shall have final authority to determine full time for purposes of crediting service under this part if full time is not otherwise specified herein. SEC. 3. Section 22140 of the Education Code is amended to read: 22140. (a) "Improvement factor," with respect to the Defined Benefit Program, means an increase of 2 percent in monthly allowances. The improvement factor shall be added to a monthly allowance each year on September 1, commencing on September 1 following the first anniversary of the effective date of retirement, or the date on which the monthly allowance commenced to accrue to any beneficiary, or other periods specifically stated in this part. (b) The improvement factor may not be compounded nor shall it be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions. The Legislature reserves the right to adjust the amount of the improvement factor up or down as economic conditions dictate. Any adjustment of the improvement factor may not reduce the monthly retirement allowance or annuity below that which would be payable to the recipient under this part had this section not been enacted. SEC. 4. Section 22515 of the Education Code is amended to read: 22515. Persons excluded from membership pursuant to Sections 22601.5, 22602, and 22604 may elect membership in the Defined Benefit Program at any time while employed to perform creditable service subject to coverage under that program. The election shall be in writing on a form prescribed by this system and shall be filed in the office of this system prior to submission of contributions. The amendments to this section enacted during the 1995-96 Regular Session shall be deemed to have become operative on July 1, 1996. SEC. 5. Section 22657 of the Education Code is amended to read: 22657. (a) The following provisions shall apply to a nonmember spouse as if he or she were a member under this part: Sections 22107, 22306, 22906, and 23802, subdivisions (a) and (b) of Section 24600, and Sections 24601, 24602, 24603, 24605, 24606, 24607, 24608, 24611, 24612, 24613, 24616, 24617, 25009, 25010, 25011, 25013, 25020, 25021, and 25022. (b) Notwithstanding subdivision (a), this section shall not be construed to establish any right for the nonmember spouse under this part that is not explicitly established in Sections 22650 to 22655, inclusive, and Sections 22658 to 22665, inclusive. SEC. 6. Section 22664 of the Education Code is amended to read: 22664. The nonmember spouse who is awarded a separate account shall have the right to a service retirement allowance and, if applicable, a retirement benefit under this part. (a) The nonmember spouse shall be eligible to retire for service under this part if the following conditions are satisfied: (1) The member had at least five years of credited service during the period of marriage, at least one year of which had been performed subsequent to the most recent refund to the member of accumulated retirement contributions. The credited service may include service credited to the account of the member as of the date of the dissolution or legal separation, previously refunded service, out-of-state service, and permissive service credit that the member is eligible to purchase at the time of the dissolution or legal separation. (2) The nonmember spouse has at least 2 1/2 years of credited service in his or her separate account. (3) The nonmember spouse has attained the age of 55 years or more. (b) A service retirement allowance of a nonmember spouse under this part shall become effective upon any date designated by the nonmember spouse, provided: (1) The requirements of subdivision (a) are satisfied. (2) The nonmember spouse has filed an application for service retirement on a form provided by the system, that is executed no earlier than six months before the effective date of the retirement allowance. (3) The effective date is no earlier than the first day of the month in which the application is received at the system's office in Sacramento and the effective date is after the date the judgment or court order pursuant to Section 22652 was entered. (c) (1) Upon service retirement at normal retirement age under this part, the nonmember spouse shall receive a retirement allowance that shall consist of an annual allowance payable in monthly installments equal to 2 percent of final compensation for each year of credited service. (2) If the nonmember spouse's retirement is effective at less than normal retirement age and between early retirement age under this part and normal retirement age, the retirement allowance shall be reduced by one-half of 1 percent for each full month, or fraction of a month, that will elapse until the nonmember spouse would have reached normal retirement age. (3) If the nonmember spouse's service retirement is effective at an age greater than normal retirement age and is effective on or after January 1, 1999, the percentage of final compensation for each year of credited service shall be determined pursuant to the following table: Age at Retirement Percentage 60 1/4 ........................ 2.033 60 1/2 ........................ 2.067 60 3/4 ........................ 2.10 61 ............................ 2.133 61 1/4 ........................ 2.167 61 1/2 ........................ 2.20 61 3/4 ........................ 2.233 62 ............................ 2.267 62 1/4 ........................ 2.30 62 1/2 ........................ 2.333 62 3/4 ........................ 2.367 63 and over ................... 2.40 (4) In computing the retirement allowance of the nonmember spouse, the age of the nonmember spouse on the last day of the month in which the retirement allowance begins to accrue shall be used. (5) Final compensation, for purposes of calculating the service retirement allowance of the nonmember spouse under this subdivision, shall be calculated according to the definition of final compensation in Section 22134, 22134.5, 22135, or 22136, whichever is applicable, and shall be based on the member's compensation earnable up to the date the parties separated, as established in the judgment or court order pursuant to Section 22652. The nonmember spouse shall not be entitled to use any other calculation of final compensation. (d) Upon service retirement under this part, the nonmember spouse shall receive a retirement benefit based on an amount equal to the balance of credits in the nonmember spouse's Defined Benefit Supplement account on the date the retirement benefit becomes payable. (1) A retirement benefit shall be a lump-sum payment, or an annuity payable in monthly installments, or a combination of both a lump-sum payment and an annuity, as elected by the nonmember spouse on the application for a retirement benefit. Any retirement benefit paid as an annuity under this chapter shall be subject to Sections 22660 and 25011. (2) Upon distribution of the entire retirement benefit in a lump-sum payment, no other benefit shall be payable to the nonmember spouse or the nonmember spouse's beneficiary under the Defined Benefit Supplement Program. (e) If the member is or was receiving a disability allowance under this part with an effective date before or on the date the parties separated as established in the judgment or court order pursuant to Section 22652, or at any time applies for and receives a disability allowance with an effective date that is before or coincides with the date the parties separated as established in the judgment or court order pursuant to Section 22652, the nonmember spouse shall not be eligible to retire until after the disability allowance of the member terminates. If the member who is or was receiving a disability allowance returns to employment to perform creditable service subject to coverage under the Defined Benefit Program or has his or her allowance terminated under Section 24015, the nonmember spouse may not be paid a retirement allowance until at least six months after termination of the disability allowance and the return of the member to employment to perform creditable service subject to coverage under the Defined Benefit Program, or the termination of the disability allowance and the employment or self-employment of the member in any capacity, notwithstanding Section 22132. If at the end of the six-month period, the member has not had a recurrence of the original disability or has not had his or her earnings fall below the amounts described in Section 24015, the nonmember spouse may be paid a retirement allowance if all other eligibility requirements are met. (1) The retirement allowance of the nonmember spouse under this subdivision shall be calculated as follows: the disability allowance the member was receiving, exclusive of the portion for dependent children, shall be divided between the share of the member and the share of the nonmember spouse. The share of the nonmember spouse shall be the amount obtained by multiplying the disability allowance, exclusive of the portion for dependent children, by the years of service credited to the separate account of the nonmember spouse, including service projected to the date of separation, and dividing by the projected service of the member. The nonmember spouse's retirement allowance shall be the lesser of the share of the nonmember spouse under this subdivision or the retirement allowance under subdivision (c). (2) The share of the member shall be the total disability allowance reduced by the share of the nonmember spouse. The share of the member shall be considered the disability allowance of the member for purposes of Section 24213. (f) The nonmember spouse who receives a retirement allowance is not a retired member under this part. However, the allowance of the nonmember spouse shall be increased by application of the improvement factor and shall be eligible for the application of supplemental increases and other benefit maintenance provisions under this part, including, but not limited to, Sections 24411, 24412, and 24415 based on the same criteria used for the application of these benefit maintenance increases to the service retirement allowances of members. SEC. 7. Section 22713 of the Education Code is amended to read: 22713. (a) Notwithstanding any other provision of this chapter, the governing board of a school district or a community college district or a county superintendent of schools may establish regulations that allow an employee who is a member of the Defined Benefit Program to reduce his or her workload from full time to part time, and receive the service credit the member would have received if the member had been employed on a full-time basis and have his or her retirement allowance, as well as other benefits that the member is entitled to under this part, based, in part, on final compensation determined from the compensation earnable the member would have been entitled to if the member had been employed on a full-time basis. (b) The regulations shall include, but may not be limited to, the following: (1) The option to reduce the member's workload shall be exercised at the request of the member and may be revoked only with the mutual consent of the employer and the member. (2) The member shall have been employed full time to perform creditable service subject to coverage under the Defined Benefit Program for at least 10 years including five years of full-time employment immediately preceding the reduction in workload and have a minimum of 10 years of credited service. (3) The member may not have had a break in service during the five years immediately preceding the reduction in workload. For purposes of this subdivision, sabbaticals and other approved leaves of absence may not constitute a break in service. For purposes of this subdivision, the period of time during which a member is retired for service shall constitute a break in service and a member who reinstates from retirement shall be required to perform at least five years of full-time creditable service immediately preceding the reduction in workload. (4) The member shall have reached the age of 55 years prior to the reduction in workload. (5) The reduced workload shall be performed for a period of time, as specified in the regulations, up to and including 10 years. The period of time specified in the regulations may not exceed 10 years. (6) The reduced workload shall be equal to at least one-half of the full-time equivalent required by the member's contract of employment during his or her final year of full-time employment. (7) The member shall be paid creditable compensation that is the pro rata share of the creditable compensation the member would have been paid had the member not reduced his or her workload. (c) Prior to the reduction of a member's workload under this section, the employer in conjunction with the administrative staff of the State Teachers' Retirement System and the Public Employees' Retirement System, shall verify the member's eligibility for the reduced workload program. (d) The member shall make contributions to the Teachers' Retirement Fund in the amount that the member would have contributed had the member performed creditable service on a full-time basis subject to coverage under the Defined Benefit Program. (e) The employer shall contribute to the Teachers' Retirement Fund at a rate adopted by the board as a plan amendment with respect to the Defined Benefit Program an amount based upon the creditable compensation that would have been paid to the member had the member performed creditable service on a full-time basis subject to coverage under the Defined Benefit Program. (f) The employer shall maintain the necessary records to separately identify each member who participates in the reduced workload program pursuant to this section. SEC. 8. Section 22905 of the Education Code, as amended by Section 2 of Chapter 115 of the Statutes of 2002, is amended to read: 22905. (a) Member contributions pursuant to Section 22901, employer contributions pursuant to Section 22903 or 22904, and member contributions made by an employer pursuant to Section 22909 shall be credited to the member's individual account under the Defined Benefit Program or the Defined Benefit Supplement Program, whichever is applicable pursuant to the provisions of this part. (b) Member and employer contributions on a member's compensation under the following circumstances shall be credited to the member's Defined Benefit Supplement account: (1) Compensation for creditable service that exceeds one year in a school year. (2) Compensation that is consistent with subdivision (b) of Section 22119.2. (3) Compensation that is payable for a specified number of times as limited by law, a collective bargaining agreement, or an employment agreement. (c) A member shall not make voluntary pretax or posttax contributions under the Defined Benefit Supplement Program, except as provided in subdivision (d), nor shall a member redeposit amounts previously distributed based on the balance in the member's Defined Benefit Supplement account. (d) Member and employer contributions under the Defined Benefit Supplement Program shall be credited to the accounts of members as of July 1 each year following a determination by the system under the provisions of this part that those contributions should be credited to the Defined Benefit Supplement Program. Contributions to a member' s Defined Benefit Supplement account shall be identified separately from the member's contributions credited under the Defined Benefit Program. (e) The provisions of this section shall become operative on July 1, 2002, if the revenue limit cost-of-living adjustment computed by the Superintendent of Public Instruction for the 2001-02 fiscal year is equal to or greater than 3.5 percent. Otherwise this section shall become operative on July 1, 2003. SEC. 9. Section 24002 of the Education Code is amended to read: 24002. The board may authorize payment of a disability allowance to any member who is qualified upon application under this part by the member, the member's guardian or conservator, or the member's employer, if the application is made during any one of the following periods: (a) While the member is employed or on a compensated leave of absence. (b) While the member is physically or mentally incapacitated for performance of service and the incapacity has been continuous from the last day of actual performance of service for which compensation is payable to the member. (c) While the member is on a leave of absence without compensation, granted for reason other than mental or physical incapacity for performance of service, and within four months after the last day of actual performance of service for which compensation is payable to the member, or within 12 months of that date if the member is on an employer-approved leave to study at an approved college or university. (d) Within four months after the termination of the member's employment subject to coverage under the Defined Benefit Program, if the application was not made under subdivision (b) and was not made more than four months after the last day of actual performance of service for which compensation is payable to the member. (e) A member, with a dependent child, who becomes disabled prior to normal retirement age, and whose sick leave will extend beyond normal retirement age, may be awarded a disability allowance with an effective date after normal retirement age, if application is filed prior to attaining normal retirement age. (f) The member is not applying for a disability allowance because of a physical or mental condition that existed at the time the most recent membership in the Defined Benefit Program commenced and which remains substantially unchanged at the time of application. SEC. 10. Section 24010 of the Education Code is amended to read: 24010. Allowances payable under Sections 24006 and 24007 shall be reduced by an amount equal to the unmodified benefits paid or payable under other public systems for the same impairment or impairments that qualify the member for a disability allowance under this part. With respect to workers' compensation payments that are subject to liens under Section 4903 of the Labor Code, "unmodified benefits," for purposes of this section, shall only include payments for temporary disability, vocational rehabilitation monthly allowance, and permanent disability. SEC. 11. Section 24012 of the Education Code is amended to read: 24012. (a) A member who is receiving a disability allowance pursuant to this chapter who is determined by the board to have a mental, physical, or vocational rehabilitation potential that could be expected to restore the member's ability to perform service in the member's former position of employment or a comparable level position shall participate in an appropriate rehabilitation program approved by the board. The board shall pay all reasonable costs of the approved program. Willful failure to initiate and continue participation in the rehabilitation program shall cause the disability allowance to be terminated. In determining whether a member has good cause for failure to participate in the program the board shall take into account whether the participation would abridge the member's right to the free exercise of religion or whether the member's physical or mental condition has worsened, as determined by the member's treating physician and substantiated by medical evidence. (b) Any cost for the approved rehabilitation program prescribed by the board shall be paid directly by the system from the fund. SEC. 12. Section 24102 of the Education Code is amended to read: 24102. The board may authorize payment of a disability retirement allowance under this part to any member who is qualified upon application by the member, the member's guardian or conservator, or the member's employer, if the application is made during any one of the following periods: (a) While the member is employed or on a compensated leave of absence. (b) While the member is physically or mentally incapacitated for performance of service and the incapacity has been continuous from the last day of actual performance of service for which compensation is payable to the member. (c) While the member is on a leave of absence without compensation, granted for reason other than mental or physical incapacity for performance of service, and within four months after the last day of actual performance of service for which compensation is payable to the member, or within 12 months of that date if the member was on an employer-approved leave to study at an approved college or university. (d) Within four months after the termination of the member's employment subject to coverage under the Defined Benefit Program, if the application was not made under subdivision (b) and was not made more than four months after the last day of actual performance of service for which compensation is payable to the member. (e) The member is not applying for a disability retirement allowance because of a physical or mental condition that existed at the time the most recent membership in the Defined Benefit Program commenced and which remains substantially unchanged at the time of application. SEC. 13. Section 24109 of the Education Code is amended to read: 24109. Retirement allowances payable pursuant to subdivision (a) of Section 24106 shall be reduced by an amount equal to the unmodified benefits paid or payable under a workers' compensation program for the same impairment or impairments that qualify the member for a disability retirement allowance under this part. For purposes of this section, unmodified benefits are limited to benefits for either a temporary or permanent disability or for vocational rehabilitation paid or payable under the Workers' Compensation Act. SEC. 14. Section 24111 of the Education Code is amended to read: 24111. (a) A member who is receiving a disability retirement allowance under this part pursuant to this chapter who is determined by the board to have a mental, physical, or vocational rehabilitation potential that could be expected to restore the member's ability to perform service in the member's former position of employment or in a comparable level position shall participate in an appropriate rehabilitation program approved by the board. The board shall pay all reasonable costs of the approved program. Willful failure to initiate and continue participation in the rehabilitation program shall cause the disability retirement allowance under this part to be terminated. In determining whether a member has good cause for failure to participate in the program the board shall take into account whether the participation would abridge the member's right to the free exercise of religion or whether the member's physical or mental condition has worsened as determined by the member's treating physician and substantiated by medical evidence. (b) Any cost for the approved rehabilitation program prescribed by the board shall be paid directly by the system from the fund. SEC. 15. Section 24114 of the Education Code is amended to read: 24114. (a) A member retired for disability under this part may be employed or self-employed in any capacity, notwithstanding Section 22132, but may not make contributions to the retirement fund with respect to the Defined Benefit Program or accrue service credit under this part based on earnings from any employment. (b) A member retired for disability under this part may earn in any one calendar year up to the limitation specified in subdivision (c) without a reduction in his or her disability retirement allowance. (c) The limitation that shall apply to the earnings of a member retired for disability under this part shall be fifteen thousand dollars ($15,000), in any one calendar year, adjusted annually by the board effective each January 1 by the annual amount of increase in the All Urban California Consumer Price Index using December 1989 as the base. (d) If a member retired for disability under this part earns in excess of the limitation specified in subdivision (c) from all employment in any calendar year, notwithstanding Section 22132, his or her retirement allowance shall be reduced by the amount of the excess earnings. The amount of the reduction may be equal to the monthly allowance payable but may not exceed the amount of the annual allowance payable under this part for the calendar year in which the excess compensation was earned. (e) The earnings limitation specified in this section shall not be applicable to a member retired for disability under this part who is participating in an approved rehabilitation program pursuant to Section 24111. (f) This section does not apply to a member retired for disability under this part who began receiving a disability retirement allowance prior to October 16, 1992. SEC. 16. Section 24209.3 of the Education Code is amended to read: 24209.3. (a) Notwithstanding subdivision (a) of Section 24209 and subdivision (d) of Section 24204, and exclusive of any amounts payable during the prior retirement for service pursuant to Section 22714 or 22715: (1) A member who retired, other than pursuant to Section 24210, 24211, 24212, or 24213, and who reinstates and performs creditable service, as defined in Section 22119.5, after the most recent reinstatement, in an amount equal to two or more years of credited service, shall, upon retirement for service on or after the effective date of this section, receive a service retirement allowance equal to the sum of the following: (A) An amount calculated pursuant to this chapter based on credited service performed prior to the most recent reinstatement, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation. (B) An amount calculated pursuant to this chapter based on credited service performed subsequent to the most recent reinstatement, using the member's age at the subsequent service retirement, and final compensation. (2) A member who retired pursuant to Section 24210 and who reinstates and performs creditable service, as defined in Section 22119.5, after the most recent reinstatement, in an amount equal to two or more years of credited service, shall, upon retirement for service on or after the effective date of this section, receive a service retirement allowance equal to the sum of the following: (A) An amount calculated pursuant to this chapter based on service credit accrued prior to the effective date of the disability retirement, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and indexed final compensation to the effective date of the initial service retirement. (B) An amount calculated pursuant to this chapter based on the service credit accrued after termination of the disability retirement, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation. (C) An amount calculated pursuant to this chapter based on credited service performed subsequent to the most recent reinstatement, using the member's age at the subsequent service retirement, and final compensation. (3) A member who retired pursuant to Section 24211 and who reinstates and performs creditable service, as defined in Section 22119.5, after the most recent reinstatement, in an amount equal to two or more years of credited service, shall, upon retirement for service on or after the effective date of this section, receive a service retirement allowance equal to the sum of the following: (A) The greater of (i) the disability allowance the member was receiving immediately prior to termination of that allowance, excluding the children's portion, or (ii) an amount calculated pursuant to this chapter based on service credit accrued prior to the effective date of the disability retirement, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation using compensation earnable or projected final compensation or a combination of both. (B) An amount equal to either of the following: (i) For a member who was receiving a benefit pursuant to subdivision (a) of Section 24211, the member's credited service at the time of the retirement pursuant to Section 24211, excluding service credited pursuant to Section 22717 or 22717.5 or Chapter 14 (commencing with Section 22800) or Chapter 14.2 (commencing with Section 22820). (ii) For a member who was receiving a benefit pursuant to subdivision (b) of Section 24211, the member's projected service, excluding service credited pursuant to Section 22717 or 22717.5 or Chapter 14 (commencing with Section 22800) or Chapter 14.2 (commencing with Section 22820). (C) An amount calculated pursuant to this chapter based on credited service performed subsequent to the most recent reinstatement, using the member's age at the subsequent service retirement, and final compensation using compensation earnable or projected final compensation or a combination of both. (D) An amount based on any service credited pursuant to Chapter 14 (commencing with Section 22800) or Chapter 14.2 (commencing with Section 22820) or, for credited service performed during the most recent reinstatement, Section 22714, 22715, 22717, or 22717.5, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation using compensation earnable, or projected final compensation, or a combination of both. (4) A member who retired pursuant to Section 24212 or 24213 and who reinstates and performs creditable service, as defined in Section 22119.5, after the most recent reinstatement, in an amount equal to two or more years of credited service, shall, upon retirement for service on or after the effective date of this section, receive a service retirement allowance equal to the sum of the following: (A) An amount calculated pursuant to this chapter based on the member's projected service credit, excluding service credited pursuant to Section 22717, 22717.5, or Chapter 14 (commencing with Section 22800) or Chapter 14.2 (commencing with Section 22820), using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation using compensation earnable or projected final compensation or a combination of both. (B) An amount calculated pursuant to this chapter based on credited service performed subsequent to the most recent reinstatement, using the member's age at the subsequent service retirement, and final compensation, using compensation earnable or projected final compensation or a combination of both. (C) An amount based on any service credited pursuant to Chapter 14 (commencing with Section 22800) or Chapter 14.2 (commencing with Section 22820) or, for credited service performed during the most recent reinstatement, Section 22714, 22715, 22717, or 22717.5, using the member's age at the subsequent service retirement, from which age shall be deducted the total time during which the member was retired for service, and final compensation using compensation earnable, or projected final compensation, or a combination of both. (b) If the total amount of credited service, other than that accrued pursuant to Sections 22714, 22715, 22717, 22717.5, and 22826, is equal to or greater than the number of years required to be eligible for an increased allowance pursuant to this chapter or Section 22134.5, the amounts identified in this section shall be calculated pursuant to the section authorizing the increased benefit. (c) For members receiving an allowance pursuant to Section 24410.5 or 24410.6, the amount payable pursuant to this section shall not be less than the amount payable to the member as of the effective date of reinstatement. (d) The amount payable pursuant to this section shall not be less than the amount that would be payable to the member pursuant to Section 24209. (e) For purposes of determining an allowance increase pursuant to Sections 24415 and 24417, the calendar year of retirement shall be the year of the subsequent retirement if the final compensation used to calculate the allowance pursuant to this section is higher than the final compensation used to calculate the allowance for the prior retirement. (f) The allowance paid pursuant to this section to a member receiving a lump-sum payment pursuant to Section 24221 shall be actuarially reduced to reflect that lump-sum payment. SEC. 17. Section 24216 of the Education Code is amended to read: 24216. (a) (1) A member retired for service under this part who is appointed as a trustee or administrator by the Superintendent of Public Instruction pursuant to Section 41320.1, or a member retired for service who is assigned by a county superintendent of schools pursuant to Article 2 (commencing with Section 42120) of Chapter 6 of Part 24, shall be exempt from subdivisions (d) and (f) of Section 24214 for a maximum period of two years. (2) The period of exemption shall commence on the date the member retired for service is appointed or assigned and shall end no more than two calendar years from that date, after which the limitation specified in subdivisions (d) and (f) of Section 24214 shall apply. (3) An exemption under this subdivision shall be granted by the system providing that the Superintendent of Public Instruction or the county superintendent of schools submits documentation required by the system to substantiate the eligibility of the member retired for service for an exemption under this subdivision. (b) (1) A member retired for service under this part who is employed by an employer to perform creditable service in an emergency situation to fill a vacant administrative position requiring highly specialized skills shall be exempt from the provisions of subdivisions (d) and (f) of Section 24214 for creditable service performed up to one-half of the full-time equivalent for that position, if the vacancy occurred due to circumstances beyond the control of the employer. The limitation specified in subdivisions (d) and (f) of Section 24214 shall apply to creditable service performed beyond the specified exemption. (2) An exemption under this subdivision shall be granted by the system subject to the following conditions: (A) The recruitment process to fill the vacancy on a permanent basis is expected to extend over several months. (B) The employment is reported in a public meeting of the governing body of the employer. (C) The employer submits documentation required by the system to substantiate the eligibility of the member retired for service for an exemption under this subdivision. (c) This section does not apply to any person who has received additional service credit pursuant to Section 22715 or 22716. (d) A person who has received additional service credit pursuant to Section 22714 shall be ineligible for one year from the effective date of retirement for the exemption provided in this section for service performed in the district from which he or she retired. (e) This section shall become operative on January 1, 2001, and shall remain in effect only until January 1, 2008, and as of that date is repealed, unless a later enacted statute, which is enacted before January 1, 2008, deletes or extends that date. SEC. 18. Section 24221 is added to the Education Code, to read: 24221. (a) A member who retires for service on or after April 1, 2002, and prior to January 1, 2011, and who has reached normal retirement age may elect, on a form prescribed by the system, to receive a lump-sum payment and an actuarially reduced monthly allowance pursuant to this section in lieu of the monthly allowance that would otherwise be payable to the member pursuant to this chapter. (b) A member who makes the election described in subdivision (a) shall receive a one-time, lump-sum payment in an amount that equals or does not exceed the lesser of the following amounts: (1) The actuarial present value of the difference between (A) the monthly allowance payable to the member pursuant to this chapter, and (B) an amount equal to 2 percent of the member's final compensation multiplied by the number of years of credited service and divided by 12. (2) Fifteen percent of the actuarial present value of the monthly allowance payable to the member under this chapter. (c) Notwithstanding any other provision of this part, a member who makes the election described in subdivision (a) shall receive a monthly allowance, pursuant to this chapter, that shall be actuarially reduced to reflect the lump-sum amount paid under subdivision (b). (d) A member may not apply a lump-sum payment made pursuant to this section for the purposes of redepositing previously refunded retirement contributions pursuant to Chapter 19 (commencing with Section 23200) or purchasing service credit pursuant to Chapter 14 (commencing with Section 22800), Chapter 14.2 (commencing with Section 22820) or Chapter 14.5 (commencing with Section 22850). The Legislature hereby finds and declares that if a member who elects to receive a partial lump-sum payment also elects to redeposit previously refunded contributions or purchase service credit as a result of the receipt of the lump-sum payment, the Defined Benefit Program may experience a net actuarial impact. (e) The Legislature reserves the right to modify the provisions of this section to further the objective of permitting eligible members to receive a lump-sum distribution of a portion of their benefits, with a corresponding actuarial reduction in their monthly allowance, so that there is no net actuarial impact to the Defined Benefit Program. SEC. 19. Chapter 27.1 (commencing with Section 24230) of Part 13 of Division 1 of Title 1 of the Education Code is repealed. SEC. 20. Section 24705 of the Education Code is amended to read: 24705. Notwithstanding the provisions in Section 24201, a member of the San Francisco local system may retire concurrently and receive credit for service performed in other states of the United States, its territories and possessions, and in Canada. SEC. 21. Section 24950 of the Education Code is amended to read: 24950. An annuity contract and custodial account as described in Section 403(b) of the Internal Revenue Code of 1986 shall be offered to all employees of any state agency who are members of the plan under this part or any employee of a local public agency or political subdivision of this state that employs persons to perform creditable service subject to coverage by the plan under this part. The following criteria shall apply to that annuity contract and custodial account: (a) The annuity contract and custodial account shall be offered for at least five years. (b) The annuity contract and custodial account may be administered by a qualified third-party administrator that shall, under agreement with the system, provide custodial, investment, recordkeeping, or administrative services, or any combination thereof. The third-party administrator may not provide investment options other than pursuant to a shareholders' services agreement between the third-party administrator and the investment manager. (c) The investment options offered shall be determined by the board consistent with those annuity contract and custodial accounts described in Section 403(b) of the Internal Revenue Code of 1986. (d) The system's investment staff shall make recommendations to the board as to the appropriate investment options. At a minimum, the board shall offer at least three investment options. The board shall have sole responsibility for the selection of service providers. (e) All contributions made in accordance with the provisions of Section 403(b) of the Internal Revenue Code of 1986 and this section shall be remitted directly to the administrator and held by the administrator in a custodial account on behalf of the employee. Any investment gains or losses shall be credited to those accounts. The forms of payment and disbursement procedure shall be consistent with those generally offered by similar annuity contracts and custodial accounts and applicable federal and state statutes governing those contracts and accounts. (f) Any employer, other than the state, may elect to make contributions to the employee's annuity contract and custodial account on behalf of the employee. The employer shall take whatever action is necessary to implement this section, including the adoption of an annuity contract and custodial account, or provide the appropriate authorization in accordance with the provision of Section 403(b) of the Internal Revenue Code of 1986. Employer contributions made under this section are excluded from the definition of creditable compensation as provided in Section 22119.2. (g) The design and administration of the annuity contract and custodial account shall comply with the applicable provisions of the Internal Revenue Code of 1986 and the Revenue and Taxation Code. Section 770.3 of the Insurance Code shall not be applicable. SEC. 22. Section 24975 of the Education Code is amended to read: 24975. (a) The board may develop one or more deferred compensation plans under Section 457 of the Internal Revenue Code that an employer may choose to establish and offer to its employees who are members of the plan under this part or Part 14 (commencing with Section 26000) or any employee of a local public agency or political subdivision of this state that employs persons to perform creditable service subject to coverage by the plan under this part. (b) If an employer adopts a deferred compensation plan described in subdivision (a): (1) The employer shall enter into a written contractual arrangement with the system under which the system, or a third-party administrator acting on behalf of the system, shall provide investment, recordkeeping, and administrative services for the deferred compensation plan. (2) The initial period of the contractual arrangement described in paragraph (1) shall be for a term of five years. (3) The deferred compensation plan shall continue to constitute a separate plan established and maintained by the adopting employer. (4) The system shall be treated as acting on behalf of the employer in administering the deferred compensation plan. (5) The terms and administration of the deferred compensation plan shall be in accordance with the applicable provisions of Section 457 of the Internal Revenue Code. (6) In administering the deferred compensation plan on behalf of the employer, the board shall have the same investment authority and discretion and be subject to the same fiduciary standards pursuant to Chapter 4 (commencing with Section 22250), with respect to amounts deferred under the deferred compensation plan as applied by the system with respect to the Teachers' Retirement Fund. (c) If an employer establishes and maintains a deferred compensation plan described in subdivision (a), the deferred compensation plan shall be offered to all of its employees. (d) An employee participating in a deferred compensation plan established by an employer under this section shall enter into a written agreement with the employer for the deferral of compensation prior to the performance of the services to which that compensation relates. (e) If an employer chooses to establish and maintain a deferred compensation plan described in subdivision (a) that is to be administered by the system, the employer shall take all necessary or appropriate action to implement this section in cooperation with the system. SEC. 23. Section 25000.9 is added to the Education Code, to read: 25000.9. For purposes of this chapter, "nonmember spouse" means a member's spouse or former spouse who is being or has been awarded a community property interest in the service credit, accumulated retirement contributions, accumulated Defined Benefit Supplement account balance, or benefits of the member under this part. A nonmember spouse may not be considered a member based upon his or her receipt of any of the following being awarded to the nonmember spouse as a result of legal separation or dissolution of marriage: (a) A separate account of service credit and accumulated retirement contributions, a retirement allowance, or an interest in the member's retirement allowance under the Defined Benefit Program. (b) A separate account based on the member's Defined Benefit Supplement account balance, a retirement benefit, or an interest in the member's retirement benefit under the Defined Benefit Supplement Program. SEC. 24. Section 25007 of the Education Code is amended to read: 25007. When the board declares an additional earnings credit for a plan year, the board also may declare by plan amendment an additional annuity credit, for members and annuity beneficiaries who are receiving an annuity as of the date specified by the board pursuant to Section 25006, based on the balance of credits transferred from the member's Defined Benefit Supplement account to the Annuitant Reserve. The additional annuity credit, if declared by the board, shall be paid in a lump sum. In addition to the considerations specified in Section 25006, prior to declaring an additional earnings credit, the board shall consider both of the following: (a) The amount required for the plan year to apply the additional earnings credit to the Defined Benefit Supplement accounts of members who are not receiving an annuity under the Defined Benefit Supplement Program for the plan year. (b) Any other obligations incurred by the plan with respect to the Defined Benefit Supplement Program. SEC. 25. Section 25011 of the Education Code is amended to read: 25011. (a) A member or nonmember spouse may elect to receive the retirement benefit as an annuity payable in monthly installments, provided the balance of credits in the member's or nonmember spouse's respective Defined Benefit Supplement account on the date the retirement benefit becomes payable equals at least three thousand five hundred dollars ($3,500) after any lump-sum payments have been made from the account. (b) If the member elects to receive the retirement benefit as an annuity, the member shall elect one of the following forms of payment: (1) A single life annuity without a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the member if the member elected to receive the retirement benefit in a lump-sum payment. Upon the death of the member, no other benefit shall be payable to the member's beneficiary under the Defined Benefit Supplement Program. (2) A single life annuity with a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the member if the member elected to receive the retirement benefit in a lump-sum payment. Upon the death of the member, an amount equal to the remaining balance, if any, of credits transferred from the member's Defined Benefit Supplement account to the Annuitant Reserve shall be returned in a lump-sum payment to the member's beneficiary. (3) A 100-percent joint and survivor annuity with a "pop-up" feature. This form of payment is the actuarial equivalent of the lump-sum payment modified to be payable over the combined lives of the member and the member's annuity beneficiary. Upon the death of the member, the same monthly amount that was payable to the member shall be paid monthly to the member's surviving annuity beneficiary. If the annuity beneficiary predeceases the member, the annuity payable to the member shall be the single life annuity with a cash refund feature that would have been payable had the member selected that form of payment at the commencement of the benefit. That single life annuity shall be payable as of the day following the date of the annuity beneficiary's death upon receipt by the system of proof of the annuity beneficiary's death. (4) A 50-percent joint and survivor annuity with a "pop-up" feature. This form of payment is the actuarial equivalent of the lump-sum payment modified to be payable over the combined lives of the member and the member's annuity beneficiary. Upon the death of the member, one-half of the monthly amount that was payable to the member shall be paid monthly to the member's surviving annuity beneficiary. If the annuity beneficiary predeceases the member, the annuity payable to the member shall be the single life annuity with a cash refund feature that would have been payable had the member selected that form of payment at the commencement of the benefit. That single life annuity shall be payable as of the day following the date of the annuity beneficiary's death upon receipt by the system of proof of the annuity beneficiary's death. (5) A period certain annuity. This form of payment is an annuity equal to the actuarial equivalent of the balance of credits in the member's Defined Benefit Supplement account on the date the retirement benefit becomes payable. The annuity shall be payable in whole year increments over a period of years specified by the member, from a minimum of three years to a maximum of 10 years. However, the annuity period may not exceed the life expectancy of the member, or the life expectancy of the member and the member's annuity beneficiary. If the member's death occurs prior to the end of the period certain, the remaining balance of payments shall be paid to the member's annuity beneficiary pursuant to Section 25022. (c) If a nonmember spouse elects to receive the retirement benefit as an annuity, the nonmember spouse shall elect the form of payment specified in paragraph (1), (2), or (5) of subdivision (b), and in those paragraphs, references to a "member" shall apply to the nonmember spouse. SEC. 26. Section 25012 of the Education Code is amended to read: 25012. (a) An annuity payable under the Defined Benefit Supplement Program shall be determined as a value actuarially equivalent to the balance of credits in the member's Defined Benefit Supplement account on the date the benefit becomes payable and after any lump-sum payment. If a single life annuity is elected, the annuity shall be calculated using the age of the member on the date the benefit becomes payable. A member may elect a single life annuity only if the member did not elect to receive a modified allowance pursuant to Section 24300. If a joint and survivor annuity is elected, the annuity shall be calculated using the age of the member and the age of the member's beneficiary on the date the benefit becomes payable. A member may elect a joint and survivor annuity only if the member elected to receive a modified allowance pursuant to Section 24300. (b) The beneficiary designation made pursuant to Section 24307 is not applicable to benefits payable under this chapter. SEC. 27. Section 25017 of the Education Code is amended to read: 25017. (a) A member shall receive a disability benefit under the Defined Benefit Supplement Program beginning on the effective date of the member's disability allowance pursuant to Chapter 25 (commencing with Section 24001) or a disability retirement allowance pursuant to Chapter 26 (commencing with Section 24100) under the Defined Benefit Program. (b) The member, or the member's employer or conservator on behalf of the member, shall submit an application for a disability benefit on a form prescribed by the system. SEC. 28. Section 25018 of the Education Code is amended to read: 25018. (a) A member may elect to receive the disability benefit as an annuity, payable in monthly installments, provided the balance of credits in the member's Defined Benefit Supplement account on the date the disability benefit becomes payable equals at least three thousand five hundred dollars ($3,500) after any lump-sum payment has been made from this account. (b) If the member elects to receive the disability benefit as an annuity, the member shall elect one of the following forms of payment: (1) A single life annuity without a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the member if the member elected to receive the disability benefit in a lump-sum payment. Upon the death of the member, no other benefit shall be payable to the member's beneficiary under the Defined Benefit Supplement Program. (2) A single life annuity with a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the member if the member elected to receive the disability benefit in a lump-sum payment. Upon the death of the member, an amount equal to the remaining balance of credits, if any, transferred from the member's Defined Benefit Supplement account to the Annuitant Reserve shall be returned in a lump-sum payment to the member's beneficiary. (3) For a member receiving a disability retirement allowance pursuant to Chapter 26 (commencing with Section 24100), a 100-percent joint and survivor annuity with a "pop-up" feature. This form of payment is the actuarial equivalent of the lump-sum payment modified to be payable over the combined lives of the member and the member's annuity beneficiary. Upon the death of the member, the same monthly amount that was payable to the member shall be paid monthly to the member's surviving annuity beneficiary. If the annuity beneficiary predeceases the member, the annuity payable to the member shall be the single life annuity with a cash refund feature that would have been payable had the member selected that form of payment at the commencement of the benefit. That single life annuity shall be payable as of the day following the date of the annuity beneficiary's death upon receipt by the system of proof of the annuity beneficiary' s death. (4) For a member receiving a disability retirement allowance pursuant to Chapter 26 (commencing with Section 24100), a 50-percent joint and survivor annuity with a "pop-up" feature. This form of payment is the actuarial equivalent of the lump-sum payment modified to be payable over the combined lives of the member and the member's annuity beneficiary. Upon the death of the member, one-half of the monthly amount that was payable to the member shall be paid monthly to the member's surviving annuity beneficiary. If the annuity beneficiary predeceases the member, the annuity payable to the member shall be the single life annuity with a cash refund feature that would have been payable had the member selected that form of payment at the commencement of the benefit. That single life annuity shall be payable as of the day following the date of the annuity beneficiary's death upon receipt by the system of proof of the annuity beneficiary's death. (5) A period certain annuity. This form of payment is an annuity equal to the actuarial equivalent of the balance of credits in the member's Defined Benefit Supplement account on the date the disability benefit becomes payable. The annuity shall be payable in whole year increments over a period of years specified by the member, from a minimum of three years to a maximum of 10 years. However, the annuity period may not exceed the life expectancy of the member, or the life expectancy of the member and the member's annuity beneficiary. If the member's death occurs prior to the end of the period certain, the remaining balance of payments shall be paid to the member's annuity beneficiary pursuant to Section 25022. SEC. 29. Section 25018.5 is added to the Education Code, to read: 25018.5. When a disabled member returns to work in his or her former position of employment or in a comparable level position and within six months of return experiences a recurrence of the original disability, it shall be considered, for the purpose of determining the duration of the disability, that the condition had its onset as of the date the member first became disabled. The former Defined Benefit Supplement disability benefit under this chapter shall again become payable as of the later of the first day of the month in which the recurrence of the disability occurred or the last day of service for which compensation is payable to the member provided the member complies with the provisions of Section 24003. SEC. 30. Section 25020 of the Education Code is amended to read: 25020. (a) A final benefit under the Defined Benefit Supplement Program shall become payable when the system receives proof of the member's death. (b) If the member's death occurs before an annuity under the Defined Benefit Supplement Program becomes payable, the final benefit shall be an amount equal to the balance of credits in the member's Defined Benefit Supplement account on the date of the member's death, plus minimum interest credited through the date of payment. (c) Upon distribution of a final benefit in a lump-sum payment, no other benefit shall be payable under the Defined Benefit Supplement Program to the member's beneficiary. SEC. 31. Section 25021 of the Education Code is amended to read: 25021. (a) A beneficiary, other than an entity, may elect to receive the final benefit payable under the Defined Benefit Supplement Program as an annuity payable in monthly installments provided the balance of credits in the member's Defined Benefit Supplement account that is payable to that beneficiary equals at least three thousand five hundred dollars ($3,500). (b) A beneficiary who elects to receive an annuity shall elect one of the following forms of payment: (1) A single life annuity without a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the beneficiary if the beneficiary elected to receive the final benefit in a lump-sum payment. The annuity shall cease to be payable upon the death of the beneficiary, and no other benefit is payable under the Defined Benefit Supplement Program on account of the death of the member or the member's beneficiary. (2) A period certain annuity. This form of payment is an annuity equal to the actuarial equivalent of the balance of credits in the member's Defined Benefit Supplement account on the date of the member' s death. The annuity shall be payable in whole year increments over a period of years specified by the beneficiary, from a minimum of three years to a maximum of 10 years, but not to exceed the life expectancy of the beneficiary. The beneficiary may designate a payee to receive the remaining balance of payments if the beneficiary's death occurs prior to the end of the period certain. (c) A beneficiary may designate a payee who would, upon the death of the beneficiary, be entitled to receive the beneficiary's accrued annuity allowance. SEC. 32. Section 25022 of the Education Code is amended to read: 25022. (a) If the death of a member occurs while the member is receiving an annuity under the Defined Benefit Supplement Program, the final benefit shall be payable in accordance with the terms of the annuity elected by the member. (b) If the member was receiving a single life annuity without a cash refund feature, a final benefit is not payable other than the accrued annuity for the month in which the member's death occurred, which shall be paid in a lump sum to the beneficiary designated by the member pursuant to Section 23300. (c) If the member was receiving a single life annuity with a cash refund feature, the final benefit shall be payable in a lump sum to the beneficiary designated by the member pursuant to Section 23300. (d) If the member was receiving a joint and survivor annuity, the annuity shall continue to be paid to the surviving designated annuity beneficiary. If the designated annuity beneficiary predeceases the member, a final benefit is not payable. (e) If the member was receiving a period certain annuity, the remaining balance of payments shall be paid to the beneficiary designated by the member pursuant to Section 23300. (f) A member may designate a beneficiary who would, upon the death of the member, be entitled to the member's accrued annuity allowance. SEC. 33. Section 25022.5 is added to the Education Code, to read: 25022.5. (a) If the death of a nonmember spouse occurs while the nonmember spouse is receiving an annuity under the Defined Benefit Supplement Program, the final benefit shall be payable in accordance with the terms of the annuity elected by the nonmember spouse. (b) If the nonmember spouse was receiving a single life annuity without a cash refund feature, a final benefit is not payable. (c) If the nonmember spouse was receiving a single life annuity with a cash refund feature, the final benefit shall be payable in a lump sum to the nonmember spouse's beneficiary. (d) If the nonmember spouse was receiving a period certain annuity, the remaining balance of payments shall be paid to the payee designated by the nonmember spouse pursuant to Section 22660. SEC. 34. Section 25023 of the Education Code is amended to read: 25023. (a) Upon the death of an annuity beneficiary who was receiving an annuity under a joint and survivor annuity elected by the member no further payment shall be made other than the accrued annuity for the month in which the annuity beneficiary's death occurred, which shall be paid in a lump sum to the payee designated by the annuity beneficiary. (b) Upon the death of a beneficiary who was receiving a single life annuity without a cash refund feature, no further payment shall be made other than the accrued annuity for the month in which the beneficiary's death occurred, which shall be paid in a lump sum to the payee designated by the beneficiary. (c) Upon the death of a beneficiary who was receiving a period certain annuity, the actuarial equivalent of the remaining balance of payments shall be paid in a lump sum to the payee designated by the beneficiary pursuant to subdivision (c) of Section 25015. SEC. 35. Section 25940 of the Education Code is amended to read: 25940. (a) Effective July 1, 2001, the system shall pay to the federal Center for Medicare and Medicaid Services or a successor agency the premiums associated with Medicare Part A for retired members described in this section. (b) This section shall apply only to a retired member of the Defined Benefit Program who: (1) retired prior to January 1, 2001, (2) is not eligible for Medicare Part A without payment of a premium, (3) is at least 65 years of age, and (4) enrolled in Medicare Parts A and B. (c) The board may extend eligibility for the payments described in this section to members of the Defined Benefit Program who meet the requirements of subdivision (d) and who retire on or after January 1, 2001, within a school year specified by the board, if the board finds that the cost of the payments for members retiring during the specified school year may be paid within the anticipated resources available in the fund, as determined by the actuarial valuation of the program established by this chapter. Any extension of eligibility to members who retire on or after January 1, 2001, shall be provided equally to any member who meets the requirements of subdivision (d) and retires during the school year specified by the board. (d) (1) Eligibility for the payments described in this section pursuant to subdivision (c) shall be limited to members of the Defined Benefit Program who retire from an employer that either: (A) completed a division pursuant to Section 22156 of the Government Code prior to January 1, 2001; or (B) completed or is conducting a division pursuant to that section on or after January 1, 2001, and, if the member was less than 58 years of age at the time of the division, the member elected to be covered by Medicare. (2) For purposes of paragraph (1), a division occurs during the 10-day period during which the member has the opportunity to elect to be covered by Medicare pursuant to Section 22156 of the Government Code. (3) This subdivision shall not apply to a member who retires from a district that either (A) as of January 1, 2001, had no members who were less than 58 years of age and who were hired prior to April 1, 1986, or (B) was created pursuant to a formation or a reorganization on or after April 1, 1986, and prior to January 1, 2001. (e) The amount paid to the federal Center for Medicare and Medicaid Services or a successor agency pursuant to this section shall include any surcharges applicable to enrollment in Medicare Part A or Part B by members who retired prior to January 1, 2001, and who enrolled in Medicare Parts A and B after the age of 65 years and prior to July 1, 2001. If the system pays the Part A premium and Part B surcharges on behalf of a member and that member later becomes eligible for Part A coverage without payment of a premium, the system shall continue to pay any applicable Part B surcharges on behalf of that member. The board may require a member on whose behalf a surcharge would be paid pursuant to this subdivision to authorize the system to deduct the Part B premium from the member's retirement allowance as a condition of having the system pay the Part A premium pursuant to this section. SEC. 36. Section 25955 is added to the Education Code, to read: 25955. To recover an amount overpaid under this part, the monthly allowance payable under the Defined Benefit Program may be reduced by the amount of the overpayment. If the overpayment is not due to fraud or intentional misrepresentation of facts by the recipient of the allowance or benefit, the monthly allowance may be reduced by no more than 5 percent if the overpayment was due to error by the system, the county superintendent of schools, a school district, or a community college district, and by no more than 15 percent if the error was due to inaccurate or omitted information from the recipient of the allowance or benefit. SEC. 37. Section 26400 of the Education Code is amended to read: 26400. (a) A person employed to perform creditable service for less than 50 percent of the full-time equivalent for the position shall become a participant on the later of the first day on which creditable service is performed for an employer that provides the Cash Balance Benefit Program or the effective date of the employer's governing board's action to provide the Cash Balance Benefit Program, provided the person is not subject to mandatory membership in the Defined Benefit Program. (b) If the employer's governing board's action to provide the Cash Balance Benefit Program gives employees the right to elect coverage under social security or an alternative retirement plan offered by the employer in addition to the Cash Balance Benefit Program, the employee may elect within 60 calendar days of the later of the first day on which creditable service is performed, the date of the employer's governing board's action to provide the Cash Balance Benefit Program, or the effective date of the employer's governing board's action to provide the Cash Balance Benefit Program to be covered by social security or to participate in the alternative retirement plan in lieu of participating in the Cash Balance Benefit Program. Any election shall not preclude an employee from participating in the Cash Balance Benefit Program at a later date so long as the Cash Balance Benefit Program is provided by the employer and the employee is eligible to participate in the Cash Balance Benefit Program. (c) If subdivision (b) is applicable, the employer shall inform employees pursuant to subdivision (c) of Section 26300 of their right to make an election and the election shall be made on a form prescribed by the system and filed with the employer. The election shall become effective on the later of the first day on which creditable service is performed or the effective date of the employer' s governing board's action to provide the Cash Balance Benefit Program. (d) If the participant's basis of employment with an employer that provides the Cash Balance Benefit Program changes to employment to perform creditable service for 50 percent or more of the full-time equivalent for the position, contributions to the Cash Balance Benefit Program on behalf of the participant shall no longer be made and creditable service performed for that employer shall be subject to coverage by the Defined Benefit Program as of the first day of the pay period in which the change in the participant's basis of employment occurred. SEC. 38. Section 27004 of the Education Code is amended to read: 27004. (a) A beneficiary, other than an entity, may elect to receive the final benefit payable under the Cash Balance Benefit Program as an annuity payable in monthly installments provided that sum of the employee account and the employer account equals at least three thousand five hundred dollars ($3,500). (b) A beneficiary who elects to receive an annuity pursuant to this section shall elect one of the following forms of payment: (1) A single life annuity without a cash refund feature. This form of payment is the actuarial equivalent of the amount that would be payable to the beneficiary if the beneficiary elected to receive the final benefit in a lump-sum payment. This benefit shall be payable for the life of the beneficiary. Upon the death of the beneficiary, no other benefit shall be payable under this part. (2) A period certain annuity. This form of payment is an annuity equal to the actuarial equivalent of the sum of the balance of the employee account and the employer account on the date of the participant's death. The annuity shall be payable in whole year increments over a period of years specified by the beneficiary, from a minimum of three years to a maximum of 10 years. However, the annuity period shall not exceed the life expectancy of the beneficiary. The beneficiary may designate a payee to receive the remaining balance of payments if the beneficiary dies prior to the end of the period certain. SEC. 39. Any section of any act enacted by the Legislature during the 2002 calendar year that takes effect on or before the effective date of this act, and that amends, amends and renumbers, adds, repeals and adds, or repeals a section that is amended, amended and renumbered, added, repealed and added, or repealed by this act, shall prevail over this act, whether that act is enacted prior to, or subsequent to, the enactment of this act.