BILL NUMBER: SB 1105 CHAPTERED 08/11/04 CHAPTER 214 FILED WITH SECRETARY OF STATE AUGUST 11, 2004 APPROVED BY GOVERNOR AUGUST 11, 2004 PASSED THE SENATE JULY 29, 2004 PASSED THE ASSEMBLY JULY 28, 2004 AMENDED IN ASSEMBLY JULY 27, 2004 AMENDED IN ASSEMBLY JUNE 29, 2004 INTRODUCED BY Committee on Budget and Fiscal Review JANUARY 12, 2004 An act to amend Sections 19999.5, 20303, 20340, 20822, 20824, 20894, 21060, 21070.5, 21547, 22874, 22875, and 22877 of, to add Sections 20281.5 and 20908 to, and to add Chapter 8.6 (commencing with Section 19999.3) to Part 2.6 of Division 5 of Title 2 of, the Government Code, relating to public employees' retirement, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1105, Committee on Budget and Fiscal Review. Public employees' retirement: state employees. Existing law authorizes the Department of Personnel Administration to establish and administer tax-deferred savings plans for state employees in accordance with federal tax law. Existing law, the Public Employees' Retirement Law, provides that state employees, subject to certain exceptions, become members of the Public Employees' Retirement System upon entry into employment. Upon becoming members of the system, those employees make contributions to the system and the state employer makes contributions to the system on their behalf. Benefits payable at retirement by the system are based in part upon the employee's years of credited state service, as specified. This bill would provide that state employees who become members of the Public Employees' Retirement System after the effective date of the bill shall not make contributions to the system, nor receive service credit for their service, and the state employer shall not make contributions on their behalf, during their first 24 months of employment. Instead, the bill would require those employees to contribute 5% of their monthly compensation to an alternate retirement program, to be developed by the Department of Personnel Administration pursuant to the provisions of the bill. The bill would further provide that the member may elect to receive service credit for that 24-month period of service and transfer his or her accumulated contributions in the alternate retirement program from that program to the retirement system. The bill would provide that the member's service to the state, for which he or she does not receive service credit, will nevertheless be treated as state service for specified purposes. The provisions of this bill would not apply to employees of the California State University or the legislative or judicial branches of government, or other specified state employees. The bill would make related conforming changes. Until January 1, 2005, or earlier, as specified, the Rural Health Care Equity Program, as administered by the Department of Personnel Administration, provides subsidies and reimbursements for certain health care premiums and health care costs incurred by state employees and annuitants in rural areas in which there is no board-approved health maintenance organization plan available for enrollment. This bill would extend the operation of the Rural Health Care Equity Program to January 1, 2008. The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Chapter 8.6 (commencing with Section 19999.3) is added to Part 2.6 of Division 5 of Title 2 of the Government Code, to read: CHAPTER 8.6. ALTERNATE RETIREMENT PROGRAM FOR NEW EMPLOYEES EXEMPTED FROM CONTRIBUTIONS TO THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM 19999.3. (a) The Legislature finds and declares that this chapter is intended to provide an alternate retirement program for new state employees who are members of the Public Employees' Retirement System pursuant to Section 20281.5 and who, during the 24 months of employment following the date they qualify for membership in the system pursuant to that section, do not make contributions into the defined benefit retirement program. (b) The Legislature hereby authorizes the development of a retirement program under the Deferred Compensation Plan, the tax-deferred Savings Plan, or any other acceptable defined contribution plan. (c) The state employees described in subdivision (a) who are employed in positions that are subject to the federal system, as defined in Section 20033, shall contribute to the retirement program 5 percent of compensation, as set forth in Part 3 (commencing with Section 20000), in excess of five hundred thirteen dollars ($513) per month paid that member for service rendered. The state employer shall pick up the contribution, as authorized by Section 414(h) of the Internal Revenue Code, and shall deduct the contribution from the employee's compensation. The contributions required by this subdivision shall cease when the state employee begins making contributions to the defined benefit retirement program. (d) (1) "State employees," as used in this section, include employees, as defined in Section 19815. (2) This section shall not apply to employees of the California State University, the University of California, or the legislative or judicial branch. (e) If the retirement program authorized by this section is inconsistent with federal laws or rules or becomes unnecessary under state or federal law, this section shall become inoperative. 19999.31. The Department of Personnel Administration shall administer the retirement program established by this chapter. The department shall provide the method by which benefit payments shall be made to eligible recipients. The department shall establish the program, the transfer of contributions to the Public Employees' Retirement System upon qualification and election by the member, continued participation in the program, and other provisions necessary for the implementation of the retirement program. The department may assess each state agency a fee for the costs associated with administration of this program. SEC. 2. Section 19999.5 of the Government Code is amended to read: 19999.5. In order to encourage savings and increase the savings options available to state employees, the department may establish and administer tax-deferred savings plans in accordance with Section 401(a) of the Internal Revenue Code, including cash or deferral arrangements under Section 401(k) of the Internal Revenue Code. The department may develop specifications and contract for the administration of the plans to the extent necessary to carry out this section. These plans shall be provided in addition to the retirement and deferred compensation programs currently authorized, shall offer the maximum flexibility available under current federal law, and may provide for employer as well as employee contributions. SEC. 3. Section 20281.5 is added to the Government Code, to read: 20281.5. (a) Notwithstanding Section 20281, a person who becomes a state miscellaneous or state industrial member of the system on or after the effective date of this section because the person is first employed by the state and qualifies for membership shall be subject to the provisions of this section. (b) Members subject to this section shall not accrue credit for service in the system and shall not make employee contributions to the system, including the contributions set forth in Section 20677.4, for employment with the state until the first day of the first pay period commencing 24 months after becoming a member of the system. (c) Notwithstanding subdivision (a), this section shall not apply to any of the following: (1) Persons who are already members or annuitants of the system at the time they are first employed by the state. (2) Employees of the California State University, or the legislative or judicial branch of state government. (3) Members of the Judges' Retirement System, the Judges' Retirement System II, the Legislators' Retirement System, the State Teachers' Retirement System, or the University of California Retirement Plan. (4) Persons who are members of a reciprocal retirement system and whose employment was subject to a reciprocal retirement system within the six months prior to membership in this system. (5) Persons whose service is not included in the federal system. (6) Persons who are employed by the Department of the California Highway Patrol as students at the department's training school established pursuant to Section 2262 of the Vehicle Code. (7) Persons who had ceased to be members pursuant to Section 20340 or 21075. (d) Any regulations adopted by the board to implement the requirements of this section shall not be subject to the review and approval of the Office of Administrative Law, pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3. The regulations shall become effective immediately upon filing with the Secretary of State. SEC. 4. Section 20303 of the Government Code is amended to read: 20303. (a) Persons who are members of any other retirement or pension system supported wholly or in part by funds of the United States government, any state government, or any political subdivision thereof and who are receiving credit in the other system for service are, as to that service, excluded from this system. (b) (1) For the purpose of this section only, persons who are receiving pensions, retirement allowances, or other payments, from any source whatever, on account of service rendered to an employer other than the state and while they were not in state service, are not, because of that receipt, members of any other retirement or pension system. (2) For the purposes of this section only, persons who participate in a deferred compensation plan established pursuant to Chapter 4 (commencing with Section 19993) or Chapter 8.6 (commencing with Section 19999.3) of Part 2.6 or pursuant to Article 1.1 (commencing with Section 53212) of Chapter 2 of Part 1 of Division 2 of Title 5, are not, because of that participation, members of any other retirement or pension system. (3) For the purposes of this section only, persons who participate in a money purchase pension plan and trust that meets the requirements of Section 401(a) of Title 26 of the United States Code are not, because of that participation, members of any other retirement or pension system, so long as the contracting agency has received a ruling from the Internal Revenue Service stating that the money purchase pension plan and trust qualifies under Section 401(a) and furnishes proof thereof upon request by the board. (4) For the purposes of this section only, persons who participate in a supplemental defined benefit plan maintained by their employer that meets the requirements of Section 401(a) of Title 26 of the United States Code are not, because of that participation, members of another retirement or pension system, provided that all of the following conditions exist: (A) The defined benefit plan provided under this part has been designated as the employer's primary plan for the person. (B) The supplemental defined benefit plan has received a ruling from the Internal Revenue Service stating that the plan qualifies under Section 401(a) of Title 26 of the United States Code, and has furnished proof thereof to the employer and, upon request, to the board. (C) The person's participation in the supplemental defined benefit plan does not, in any way, interfere with the person's rights to membership in the defined benefit plan, or any benefit provided, under this part. SEC. 5. Section 20340 of the Government Code is amended to read: 20340. A person ceases to be a member: (a) Upon retirement, except while participating in reduced worktime for partial service retirement. (b) If he or she is paid his or her normal contributions, unless payment of contributions is the result of an election pursuant to paragraph (1) of subdivision (b) of Section 21070, or unless, after reducing the member's credited service by the service applicable to the contributions being withdrawn, the member meets the requirements of Section 21075 or if he or she is paid a portion of his or her normal contributions where more than one payment is made, or these contributions are held pursuant to Section 21500. For the purposes of this subdivision, deposit in the United States mail of a warrant drawn in favor of a member, addressed to the latest address of the member on file in the office of this system, electronic fund transfer to the person's bank, savings and loan association, or credit union account, constitutes payment to the person of the amount for which the warrant is drawn or electronically transferred. (c) If the member has less than five years of service credit and no accumulated contributions in the retirement fund at the time of termination of service, unless the member establishes membership in the Judges' Retirement System, the Judges' Retirement System II, the Legislators' Retirement System, the State Teachers' Retirement System, or the University of California Retirement System, or establishes reciprocity with a reciprocal retirement system. SEC. 6. Section 20822 of the Government Code is amended to read: 20822. (a) From the General Fund in the State Treasury there is appropriated quarterly, to the retirement fund, the state's contribution for all of the following: (1) All state miscellaneous members and all other categories of members whose compensation is paid from the General Fund. (2) All university members whose compensation is paid from funds of, or funds appropriated to, the university. (3) All state miscellaneous members who are employed by the State Department of Education or the Department of Rehabilitation and whose compensation is paid from the Vocational Education Federal Fund, the Vocational Rehabilitation Federal Fund, or any other fund received, in whole or in part, as a donation to the state under restrictions preventing its use for state contributions to the retirement system. (4) All state miscellaneous members and all other categories of members whose compensation is paid from the Senate Operating Fund or the Assembly Operating Fund or the Operating Funds of the Assembly and Senate. (b) No appropriation shall be required pursuant to this section with respect to any state member who, pursuant to Section 20281.5, is not accruing service credit during the first 24 months of service, unless and until that service credit is credited to the member. SEC. 7. Section 20824 of the Government Code is amended to read: 20824. (a) From each other fund in the State Treasury there is appropriated quarterly to the retirement fund the state's contribution for all members whose compensation is paid from that fund and in respect to which compensation the state's contribution is not required to be made from the General Fund. (b) No appropriation shall be required pursuant to this section with respect to any state member who, pursuant to Section 20281.5, is not accruing service credit during the first 24 months of service, unless and until that service credit is credited to the member. SEC. 8. Section 20894 of the Government Code is amended to read: 20894. (a) A person shall not receive credit for the same service in two retirement systems supported wholly or in part by public funds under any circumstance. (b) Nothing in this section shall preclude concurrent participation and credit for service in a public retirement system and in a deferred compensation plan established pursuant to Chapter 4 (commencing with Section 19993) or Chapter 8.6 (commencing with Section 19999.3) of Part 2.6 or pursuant to Article 1.1 (commencing with Section 53212) of Chapter 2 of Part 1 of Division 2 of Title 5, a tax-deferred retirement plan that meets the requirements of Section 40l(k) of Title 26 of the United States Code, or a money purchase pension plan and trust that meets the requirements of Section 401(a) of Title 26 of the United States Code. (c) Nothing in this section shall preclude concurrent participation and credit for service in the defined benefit plan provided under this part and in a supplemental defined benefit plan maintained by the employer that meets the requirements of Section 401 (a) of Title 26 of the United States Code, provided all of the following conditions exist: (1) The defined benefit plan provided under this part has been designated as the employer's primary plan for the person. (2) The supplemental defined benefit plan has received a ruling from the Internal Revenue Service stating that the plan qualifies under Section 401(a) of Title 26 of the United States Code, and has furnished proof thereof to the employer and, upon request, to the board. (3) The person's participation in the supplemental defined benefit plan does not, in any way, interfere with the person's rights to membership in the defined benefit plan, or any benefit provided, under this part. SEC. 9. Section 20908 is added to the Government Code, to read: 20908. (a) A member who, pursuant to Section 20281.5, did not accrue service credit with respect to his or her service to the state may elect to receive credit for that service within the period of time beginning on the first day of the 47th month and ending on the last day of the 49th month after the date on which the member became a member of the system. (b) Any member electing to receive credit for service under this section shall cause to be transferred to the system the accumulated contributions, including earnings, standing to the member's credit in the retirement program established pursuant to Chapter 8.6 (commencing with Section 19999.3) of Part 2.6. Upon transfer of the accumulated contributions, including earnings, the member shall receive credit for all service that, pursuant to Section 20281.5, was not credited. (c) A member who does not make the election within the period specified in subdivision (a), may elect at any time prior to retirement to receive credit for the service that, pursuant to Section 20281.5, was not credited by making the contributions specified in Sections 21050 and 21052. SEC. 10. Section 21060 of the Government Code is amended to read: 21060. (a) A member shall be retired for service upon his or her written application to the board if he or she has attained age 50 and is credited with five years of state service, except as provided in Sections 21061, 21062, and 21074. (b) For purposes of this section, "state service" includes service to the state for which the member, pursuant to Section 20281.5, did not receive credit. SEC. 11. Section 21070.5 of the Government Code is amended to read: 21070.5. (a) Notwithstanding any other provision of this article, a person who, on or after January 1, 2000, becomes a state miscellaneous or state industrial member of the system because the person (1) is first employed by the state, (2) returns to employment with the state from a break in service of more than 90 days, or (3) returns to employment with the state after ceasing to be a member pursuant to Section 20340 or 21075, shall be subject to the benefits provided by Section 21354.1, unless the person elects within 180 days of membership as a state miscellaneous or state industrial member to be subject to the Second Tier benefits provided for in Section 21076. This section shall only apply to state miscellaneous and state industrial members who are (1) excluded from the definition of state employee in subdivision (c) of Section 3513, (2) employed by the executive branch of government and are not members of the civil service, or (3) included in the definition of state employee in subdivision (c) of Section 3513. (b) The effective date of the election shall be the first day of the month following the date the election is received by the system and shall be applicable to state service rendered on and after that date. Any election filed with the board pursuant to this section shall also be signed by the spouse of the member. (c) A member who makes an election authorized by this section shall not be precluded from making a subsequent election pursuant to Section 21073.7 to be subject to the benefits provided by Section 21354.1. (d) Operation and application of this section are subject to the limitations set forth in Section 21251.13. (e) For a member subject to Section 20281.5, the 180-day election period shall not commence until the first day of the first pay period commencing 24 months after becoming a member of the system. SEC. 12. Section 21547 of the Government Code is amended to read: 21547. (a) Notwithstanding any other provision of this article requiring attainment of the minimum age for voluntary service retirement to the member in his or her last employment preceding death, upon the death of a state member on or after January 1, 1993, who is credited with 20 years or more of state service, the surviving spouse, or eligible children if there is no surviving spouse, may receive a monthly allowance in lieu of the basic death benefit. The board shall notify the eligible survivor, as defined in Section 21546, of this alternate death benefit. The board shall calculate the monthly allowance that shall be payable as follows: (1) To the member's surviving spouse, an amount equal to the amount the member would have received if the member had retired for service at minimum retirement age on the date of death and had elected optional settlement 2 and Section 21459. (2) If the member made a specific beneficiary designation under Section 21490, the monthly allowance shall be based only on that portion of the amount the member would have received described in paragraph (1) that would have been derived from the nonmember spouse' s community property interest in the member's contributions and service credit. (3) If there is no surviving spouse or the spouse dies before all of the children of the deceased member attain the age of 18 years, to the surviving children, under the age of 18 years, collectively, an amount equal to one-half of, and derived from the same source as, the unmodified allowance the member would have received if he or she had retired for service at minimum retirement age on the date of death. No child shall receive any allowance after marrying or attaining the age of 18 years. As used in this paragraph, "surviving children" includes a posthumously born child or children of the member. (b) This section shall only apply to members employed in state bargaining units for which a memorandum of understanding has been agreed to by the state employer and the recognized employee organization to become subject to this section, members who are excluded from the definition of state employees in subdivision (c) of Section 3513, and members employed by the executive branch of government who are not members of the civil service. (c) For purposes of this section, "state service" means service rendered as a state employee, as defined in Section 19815. This section shall not apply to any contracting agency nor to the employees of any contracting agency. (d) For purposes of this section, "state service" includes service to the state for which the member, pursuant to Section 20281.5, did not receive credit. SEC. 13. Section 22874 of the Government Code is amended to read: 22874. (a) Notwithstanding Sections 22870, 22871, and 22873, a state employee, defined by subdivision (c) of Section 3513, who becomes a state member of the system after January 1, 1989, may not receive any portion of the employer contribution payable for annuitants unless the person is credited with 10 years of state service at the time of retirement. This section shall apply only to state employees that retire for service. For purposes of this section, "state service" means service rendered as an employee of the state or an appointed or elected officer of the state for compensation. Notwithstanding Section 22826, for purposes of this section, credited state service includes service to the state for which the employee, pursuant to Section 20281.5, did not receive credit. (b) This section does not apply to employees of the California State University or the Legislature. SEC. 14. Section 22875 of the Government Code is amended to read: 22875. (a) Notwithstanding Sections 22870, 22871, 22873, and 22874, a state employee who becomes a state member of the system after January 1, 1990, and is either excluded from the definition of a state employee in subdivision (c) of Section 3513, or a nonelected officer or employee of the executive branch of government who is not a member of the civil service, may not receive any portion of the employer contribution payable for annuitants, unless the employee is credited with 10 years of state service, as defined by this section, at the time of retirement. (b) The percentage of the employer contribution payable for postretirement health benefits for an employee subject to this section shall be based on the completed years of credited state service at retirement as shown in the following table: Credited Years Percentage of Employer of Service Contribution 10 50 11 55 12 60 13 65 14 70 15 75 16 80 17 85 18 90 19 95 20 or more 100 (c) This section shall apply only to state employees who retire for service. (d) Benefits provided to an employee subject to this section shall be applicable to all future state service. (e) For the purposes of this section, "state service" means service rendered as an employee or an appointed or elected officer of the state for compensation. Notwithstanding Section 22826, for purposes of this section, credited state service includes service to the state for which the employee, pursuant to Section 20281.5, did not receive credit. (f) This section does not apply to employees of the California State University or the Legislature. SECTION 15. Section 22877 of the Government Code, as added by Section 22 of Chapter 69 of the Statutes of 2004, is amended to read: 22877. (a) As used in this section, the following definitions shall apply: (1) "Coinsurance" means the provision of a health benefit plan design that requires the health benefit plan and state employee or annuitant to share the cost of hospital or medical expenses at a specified ratio. (2) "Deductible" means the annual amount of out-of-pocket medical expenses that a state employee or annuitant must pay before the health benefit plan begins paying for expenses. (3) "Program" means the Rural Health Care Equity Program. (4) "Rural area" means an area in which there is no board-approved health maintenance organization plan available for enrollment by state employees or annuitants residing in the area. (b) (1) The Rural Health Care Equity Program is hereby established for the purpose of funding the subsidization and reimbursement of premium costs, deductibles, coinsurance, and other out-of-pocket health care expenses paid by employees and annuitants living in rural areas that would otherwise be covered if the state employee or annuitant was enrolled in a board-approved health maintenance organization plan. The program shall be administered by the Department of Personnel Administration or by a third-party administrator approved by the Department of Personnel Administration in a manner consistent with all applicable state and federal laws. The board shall determine the rural area for each subsequent fiscal year, at the same time that premiums for health maintenance organization plans are approved. (2) Separate accounts shall be maintained within the program for all of the following: (A) Employees, as defined in subdivision (c) of Section 3513. (B) Excluded employees, as defined in subdivision (b) of Section 3527. (C) State annuitants. (c) Moneys in the program shall be allocated to the respective accounts as follows: (1) The contribution provided by the state with respect to each employee, as defined in subdivision (c) of Section 3513, who lives in a rural area and is otherwise eligible, shall be an amount determined through the collective bargaining process. (2) The contribution provided by the state with respect to each excluded employee, as defined in subdivision (b) of Section 3527, who lives in a rural area and is otherwise eligible, shall be an amount equal to, but not to exceed, the amount contributed pursuant to paragraph (1). (3) The contribution provided by the state with respect to each state annuitant who lives in a rural area, is not a Medicare participant, resides in California, and is otherwise eligible, shall be an amount not to exceed five hundred dollars ($500) per year. (4) The contribution provided by the state with respect to each state annuitant who lives in a rural area, resides in California, participates in a supplement Medicare health benefit plan, and is otherwise eligible, shall be an amount equal to the Medicare Part B premiums incurred by the annuitant, not to exceed seventy-five dollars ($75) per month. The program may not reimburse for penalty amounts. (5) If an employee enters or leaves service with the state during a fiscal year, contributions for the employee shall be made on a pro rata basis. A similar computation shall be used for anyone entering or leaving the bargaining unit, including a person who enters the bargaining unit by promotion during a fiscal year. (d) Each fund of the State Treasury, other than the General Fund, shall reimburse the General Fund for any sums allocated pursuant to subdivision (c) for employees whose compensation is paid from that fund. That reimbursement shall be accomplished using the following methodology: (1) On or before December 1 of each year, the Department of Personnel Administration shall provide a list of active state employees who participated in the program during the previous fiscal year to each employing department. (2) On or before January 15 of each year, each department that employed an active state employee identified by the Department of Personnel Administration as a participant in the program shall provide the Department of Personnel Administration with a list of the funds used to pay each employee's salary, along with the proportion of each employee's salary attributable to each fund. (3) Using the information provided by the employing departments, the Department of Personnel Administration shall compile a list of program payments attributable to each fund. On or before February 15 of each year, the Department of Personnel Administration shall transmit this list to the Department of Finance. (4) The Department of Finance shall certify to the Controller the amount to be transferred from the unencumbered balance of each fund to the General Fund. (5) The Controller shall transfer to the General Fund from the unencumbered balance of each impacted fund the amount specified by the Department of Finance. (6) To ensure the equitable allocation of costs, the Director of the Department of Personnel Administration or the Director of Finance may require an audit of departmental reports. (e) For any sums allocated pursuant to subdivision (c) for annuitants, funds, other than the General Fund, shall be charged a fair share of the contribution provided by the state in accordance with the provisions of Article 2 (commencing with Section 11270) of Chapter 3 of Part 1 of Division 3. On or before July 31 of each year, the Department of Personnel Administration shall provide the Department of Finance with the total costs allocated for annuitants in the previous fiscal year. The reported costs may not include expenses that have been incurred but not claimed as of July 31. (f) Notwithstanding any other provision of law and subject to the availability of funds, moneys within the program shall be disbursed for the benefit of eligible employees. The disbursements shall subsidize the preferred provider plan premiums for the employee by an amount equal to the difference between the weighted average of board-approved health maintenance organization premiums and the lowest board-approved preferred provider plan premium available under this part, and reimburse the employee for a portion or all of his or her incurred deductible, coinsurance, and other out-of-pocket health-related expenses that would otherwise be covered if the employee and his or her family members were enrolled in a board-approved health maintenance organization plan. These subsidies and reimbursements shall be provided as determined by the Department of Personnel Administration, which may include, but is not limited to, a supplemental insurance plan, a medical reimbursement account, or a medical spending account plan. (g) Notwithstanding any other provision of law and subject to the availability of funds, moneys within the program shall be disbursed for the benefit of eligible annuitants. The disbursements shall either reimburse the annuitant, if not a Medicare participant, for some or all of the deductible incurred by the annuitant or a family member, not to exceed five hundred dollars ($500) per fiscal year, or reimburse the annuitant, if a Medicare participant, for Medicare Part B premiums incurred by the annuitant, not to exceed seventy-five dollars ($75) per month. The program may not reimburse for penalty amounts. These reimbursements shall be provided by the Department of Personnel Administration. Notwithstanding any other provision of law, any annuitant who cannot be located within a period of three months and whose disbursement is returned to the Controller as unclaimed is ineligible to participate in the program. (h) Moneys remaining in an account of the program at the end of any fiscal year shall remain in the account for use in subsequent fiscal years, until the account is terminated. Moneys remaining in a program account upon termination, after payment of all expenses and claims incurred prior to the date of termination, shall be deposited in the General Fund. (i) The Legislature finds and declares that the program is established for the exclusive benefit of employees, annuitants, and family members. (j) This section shall cease to be operative on January 1, 2008, or on an earlier date if the board makes a formal determination that health maintenance organization plans are no longer the most cost-effective health benefit plans offered by the board. SEC. 16. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to enact the statutory changes necessary to implement the Budget Act of 2004, it is necessary that this act take effect immediately.