BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 973| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 973 Author: Kuehl (D), et al Amended: 8/25/05 Vote: 21 SENATE PUBLIC EMP. & RET. COMMITTEE : 3-2, 5/09/05 AYES: Soto, Alarcon, Dunn NOES: Ashburn, Hollingsworth SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SENATE FLOOR : AYES: Alarcon, Alquist, Bowen, Cedillo, Chesbro, Ducheny, Dunn, Escutia, Figueroa, Kehoe, Kuehl, Lowenthal, Machado, Migden, Murray, Ortiz, Perata, Romero, Scott, Simitian, Soto, Speier, Torlakson, Vincent NOES: Aanestad, Ackerman, Ashburn, Battin, Campbell, Cox, Denham, Dutton, Florez, Hollingsworth, Maldonado, Margett, McClintock, Poochigian, Runner NO VOTE RECORDED: Morrow ASSEMBLY FLOOR : Not available SUBJECT : Public employees retirement: domestic partners SOURCE : Equality California DIGEST : This bill amends the Public Employees Retirement System (PERS), the State Teachers Retirement System (STRS), and the County Employees Retirement Act of 1937 to entitle CONTINUED SB 973 Page 2 retired members to elect to change optional retirement allowances to provide for their domestic partners. Assembly Amendments recast the provisions of the bill with the same intent as it left the Senate, and make the necessary conforming changes to PERS, STRS and the County Employees Retirement Law of 1937 law. ANALYSIS : Existing Law 1.Provides that registered domestic partners of public employees have the same retirement survivor rights as the spouses of married public employees. 2.Provides that 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). 3.Provides 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. 4.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 retire before January 1, 2005. B. Single public employees who retired before January 1, 2005, who subsequently enter into domestic partnerships. Spousal Survivor Benefits . The Public Employees' SB 973 Page 3 Retirement System (PERS) and the County Employees Retirement Act of 1937 ('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 percent of the member's benefit. If, before retirement, the member chooses to provide more than 25 percent 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 percent to 100 percent of the member's actuarially reduced benefit. Non-spousal Survivor Benefits . PERS 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. The State Teachers Retirement System (STRS) is the Exception and Does Not Provide "Automatic" Survivor Benefits . 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 SB 973 Page 4 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. 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 is 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 PERS, 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 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 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 SB 973 Page 5 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. 10. Makes various technical changes to the provisions of the State Teacher's Retirement Law which implemented AB 205 (Goldberg) Chapter 421, Statutes of 2003. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No It is PERS position that this bill is not expected to have an impact on PERS' actuaries' current assumption that 85 percent on non-safety members and 90 percent of safety members are married or in a domestic partnership. PERS' staff states that the "slight increase in domestic partners' entitlement to benefits would be captured at the end of each year's unrealized actuarial loss and will not trigger an increase in employer rates or a revision of the actuarial assumption." SUPPORT : (Verified 8/30/05) Equality California (source) American Civil Liberties Union American Federation of State, County and Municipal Employees California Federation of Teachers California Public Employees Retirement System California School Employees Association California State Employees Association SB 973 Page 6 Los Angeles County Employees Retirement Association National Association of Social Workers Service Employees International Union, Local 1000 OPPOSITION : (Verified 8/30/05) Department of Finance JJA:cm 8/30/05 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****