BILL ANALYSIS SB 973 Page 1 SENATE THIRD READING SB 973 (Kuehl) As Amended June 30, 2005 Majority vote SENATE VOTE :24-15 PUBLIC EMPLOYEES 4-2 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Torrico, Jones, Mullin, |Ayes:|Chu, Bass, Berg, | | |Negrete McLeod | |Calderon, Laird, Klehs, | | | | |Leno, Nation, Levine, | | | | |Saldana, Yee, Mullin | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Huff, Niello |Nays:|Sharon Runner, Emmerson, | | | | |Haynes, Nakanishi, | | | | |Walters | | | | | | ----------------------------------------------------------------- SUMMARY : Amends the various laws governing the California Public Employees' Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS), and the 20 County Employees Retirement Systems to entitle retired members to elect to change optional retirement allowances to provide for their domestic partners. Specifically, this bill : 1)Revises and recasts the provisions of the State Teachers Retirement Law regarding pre-retirement elections to require the form include the signature of the member's spouse or domestic partner, as specified, and be received at the system's headquarters. 2)Provides that a spouse or registered domestic partner who fails to meet specified criteria are prohibited from receiving a distribution of contributions until the member separates from employment. 3)Provides, for purpose of the provision of certain postretirement death benefits under CalPERS, that a surviving domestic partner shall be treated in the same manner as a surviving spouse if the domestic partner is in a registered domestic partnership that meets specified criteria or if the SB 973 Page 2 retired member and his or her domestic partner, who are currently in a registered domestic partnership, sign an affidavit that makes specified statements. Because moneys in the Public Employees' Retirement Fund would be used for a new purpose, this bill would make an appropriation. 4)Revises and recasts the provisions in the Public Employees' Medical and Hospital Care Act (PEMHCA) regarding the extension of the rights and duties of marriage to domestic partnerships on and after 2005. Because moneys in the Public Employees' Health Care Fund would be used for a new purpose, this bill would make an appropriation. 5)Entitles a retired member and his or her domestic partner to the same entitlements as described above, if specified criteria are satisfied, including providing an affidavit signed by the member and domestic partner under penalty of perjury relative to the member's service retirement effective date or disability retirement date. 6)Expands provisions regarding conservatorship to provide that a conservatee retains the capacity to enter into a domestic partnership, as specified. 7)Provides that no reimbursement is required by this bill. 8)States legislative intent regarding the implementation of AB 205 (Goldberg) Chapter 421 Statutes of 2003. 9)Makes various minor technical changes to existing law regarding domestic partners. EXISTING LAW : 1)Provides that any member retiring from service may elect to receive his or her retirement allowance pursuant to specified options. A member may make a pre-retirement election by filing a form with the system's office in Sacramento within 30 days of the date of signature. 2)Requires a court to address certain community property issues and rights under the CalPERS system upon the legal separation or dissolution of marriage of a member. SB 973 Page 3 3)Defines the term surviving spouse for the purpose of providing postretirement death benefits. These benefits are funded by the Public Employees' Retirement Fund, a continuously appropriated fund. 4)Extends the rights and duties of marriage to persons registered as domestic partners on and after January 1, 2005. 5)Authorizes, under PEMHCA, the Board of Administration of CalPERS to contract with carriers for health benefit plans and major medical plans for employees and annuitants, as defined, and approve other plans. PEMHCA defines domestic partnership for these purposes and provides that a domestic partner is a family member for specified purposes. PEMHCA permits certain persons are eligible to enroll their domestic partners as family members in health plans, subject to collective bargaining, as specified. PEMHCA allows an employer to require an employee or annuitant to be responsible for certain increased costs or associated with covering the domestic partner, as specified. PEMHCA permits a contracting agency to offer health benefits to domestic partners of employees and annuitants at its option. The benefits provided under the act are funded by the Public Employees' Health Care Fund, a continuously appropriated fund. 6)Provides under the County Employees Retirement Law of 1937 ('37 Act), any member retiring from service may elect to receive his or her retirement allowance pursuant to specified options. 7)Specifies the capacity of a conservatee and the powers of a conservator and, among other things, provides that a conservatee retains the capacity to marry. 8)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. FISCAL EFFECT : All of the retirement systems affected by this bill report minor or no costs created by the provisions of the bill. COMMENTS : SB 973 Page 4 1)Spousal survivor benefits: CalPERS and the '37 Act 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% to 100% of the member's actuarially reduced benefit. 2)Non-spousal survivor benefits: CalPERS and '37 Act 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. 3)CalSTRS is the exception and does not provide "automatic" survivor benefits. Existing CalSTRS law does not contain any automatic survivor benefit. If a married CalSTRS member retires with an "unmodified" benefit, even the spouse would get no survivor benefit. However, because the CalSTRS benefit is community property, the spouse has to sign the member's CalSTRS retirement application, confirming approval that the CalSTRS member is not to providing a survivor benefit). In order for the spouse of a CalSTRS member to receive a survivor benefit, the CalSTRS 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 CalSTRS member for any person, but if the CalSTRS member is married and wants to provide a survivor benefit to someone other than the spouse, the spouse must sign the election form. 4)Argument in support: According to the author, with the passage of AB 205 in 2003 and which went into full effect in SB 973 Page 5 January of 2004, domestic partners in the state of California now have many of the same benefits and responsibilities afforded under state law to married couples. SB 973 is a simple clean-up bill to bring certain provisions of our retirement law and our probate code into compliance with AB 205. Analysis Prepared by : Clem Meredith / P.E., R. & S.S. / (916) 319-3957 FN: 0012082