BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 973
Nell Soto, Chair Hearing date: May 9, 2005
SB 973 (Kuehl) as introduced FISCAL: YES
PERS, STRS and '37 ACT: CONFORMITY WITH CHAPTER 421 OF 2003
HISTORY :
Sponsor: Equality California (EqCa)
Prior legislation: AB 205 (Goldberg)
Chapter 421 of 2003
SUMMARY :
Would be a vehicle for any changes needed to bring the
statutes containing the Public Employees Retirement System
(PERS), the State Teachers Retirement System (STRS) and the
County Employees Retirement Act of 1937 ('37 Act) into
conformity with Chapter 421 of 2003 , which gave domestic
partners of public employees the same retirement survivor
rights as spouses.
BACKGROUND :
1) Spousal survivor benefits
The committee is advised that most public retirement systems
in California have an 'automatic' spousal survivor benefit
with an unmodified benefit. For example, if a state employee
who participates in Social Security dies after retirement,
their spouse receives a lifetime monthly benefit of 25% of
the member's benefit. If, before retirement, the member
chooses to provide more than 25% to the spouse upon the
member's death, the member can elect to take a permanent
actuarial reduction in their monthly benefit (based on the
age and sex of the beneficiary) to provide an optional
survivor benefit of 50% or 100% of the member's actuarially
reduced benefit.
2) Non-spousal survivor benefits
David Felderstein
Date: April 21, 2005 Page 1
Retirement system members who are not married may also
provide survivor benefits to non-spousal beneficiaries.
However, any election of an option of a beneficiary requires
an actuarial reduction of the members benefit based on the
age and sex of the beneficiary.
In addition, the actuarial reduction charged to a non-married
member for providing a survivor continuance to a beneficiary
is significantly greater than the corresponding reduction
experienced by a married member, because the 'automatic'
spousal survivor continuance is factored into the actuarial
reduction calculations made for married members when they
choose an optional survivor continuance for their spouses.
David Felderstein
Date: April 21, 2005 Page 2
3) Chapter 421 of 2003 provides spousal survivor benefits
The committee is advised that Chapter 421 of 2003 , among
other changes in law, provided that registered domestic
partners of public employees have the same retirement
survivor rights as the spouses of married public employees.
The provisions of Chapter 421 of 2003 took effect January 1,
2005, as the legislation contained a one-year implementation
period.
Chapter 421 of 2003 provides that, as of January 1, 2005,
domestic partners of public employee members have a right to
an 'automatic' survivor benefit even if the member retires
with an unmodified benefit (meaning the member retired
without choosing an option to make their domestic partner a
beneficiary).
4) Questions have arisen about the application of Chapter
421 of 2003 to retirement system survivor continuance
benefits
The committee is advised that California retirement systems
generally provide that when a member is not married when they
retire, but who marries after retirement, is allowed to
choose an optional survivor benefit (and experience an
actuarial reduction in their monthly benefit prospectively)
as long as the member does not die within 12 months of the
marriage. Under these circumstances, the new spouse is also
eligible for the 'automatic' survivor benefit if the member
does not choose an optional survivor benefit.
Chapter 421 of 2003 provides the same rights to public
employees, but there are uneven interpretations of the new
law as it relates to:
a) public employees with registered domestic partners who
retired before January 1, 2005, and
b) single public employees who retired before January 1,
2005, who subsequently enter into domestic partnerships.
David Felderstein
Date: April 21, 2005 Page 3
ANALYSIS :
1) As currently drafted, this bill provides that PERS, STRS
and the '37 Act county retirement laws would be amended to
entitle retired members to elect to change optional
retirement allowances to provide for their domestic partners.
David Felderstein
Date: April 21, 2005 Page 4
COMMENTS :
1) STRS is the exception and does not provide 'automatic'
survivor benefits
To add to the confusion, the committee is advised that
existing STRS law does not contain any 'automatic' survivor
benefit.
If a married STRS member retires with an "unmodified"
benefit, even the spouse would get no survivor benefit
(however, because the STRS benefit is community property, the
spouse has to sign the member's STRS retirement application,
confirming approval that the STRS member is not to providing
a survivor benefit).
In order for the spouse of a STRS member to receive a
survivor benefit, the STRS member must choose one of the
optional benefits and have the actuarial reduction apply to
their monthly benefit. Optional survivor benefits can be
chosen by the STRS member for any person, but if the STRS
member is married and wants to provide a survivor benefit to
someone other than the spouse, the spouse must sign the
election form.
2) This bill is a vehicle for bringing PERS, STRS and the
'37 Act into conformity with Chapter 421 of 2003
The committee is advised that this bill was introduced to be
a legislative vehicle for any statutory changes needed to
bring PERS, STRS and the '37 Act into conformity with Chapter
421 of 2003 .
The sponsor states that it is necessary to move this bill
along the legislative process while conducting meetings with
representatives of the retirement systems to clarify what
statutory changes are needed to bring the retirement statutes
into conformity with Chapter 421 of 2003 .
3) SUPPORT :
California School Employees Association
American Civil Liberties Union (ACLU)
David Felderstein
Date: April 21, 2005 Page 5
American Federation of State, County, and Municipal
Employees (AFSCME)
California State Employees Association (CSEA)
California Federation of Teachers
4) OPPOSITION :
None to date
# # # # #
David Felderstein
Date: April 21, 2005 Page 6