BILL NUMBER: AB 1320	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Allen

                        FEBRUARY 18, 2011

   An act to amend Sections 20814 and 20816 of, and to add Sections
20814.5 and 31453.7 to, the Government Code, relating to public
employees' retirement.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1320, as introduced, Allen. Public employees' retirement:
employer contribution rates.
   (1) The Public Employees' Retirement Law prescribes employer
contribution rates to the retirement fund for the Public Employees'
Retirement System. Existing law requires that the state's
contribution rate be adjusted in the Budget Act based on rates
established by the system's actuary. Existing law provides that the
employer contribution rate for an employer other than the state shall
be determined on an annual basis by the actuary, as specified.
Existing law requires that the rate at which a public employer
contributes to the system shall be based upon its experience, and not
the experience of public agency employers generally. Existing law
requires that all assets of an employer in the system be used to
determine the employer's contribution rate.
   This bill would establish in the retirement fund for each employer
a Taxpayer Adverse Risk Prevention Account. The account would be an
employer asset, but would not be counted as an asset for the purpose
of determining the employer's contribution rate. Deposits into the
account would be made with all or a portion of employer contributions
when the actuarial value of assets exceeds the present value of
benefits, as specified. The bill would provide that the assets of the
account would be drawn upon to pay a portion of the employer
contribution when the employer contribution rate is greater than the
normal cost of benefits, as specified. The bill would provide that
the employer contribution rate may be reduced, pursuant to a
specified formula, when the employer's Taxpayer Adverse Risk
Prevention Account exceeds an amount equal to 50% of the employer's
assets, exclusive of the assets in the Taxpayer Adverse Risk
Prevention Account. The bill would permit assets in an account to be
used for specified transfers and contributions authorized under
existing law. The bill would provide that assets in an account would
be invested with other system assets.
   (2) The County Employees Retirement Law of 1937 authorizes the
board of retirement to determine county or district contributions on
the basis of a normal contribution rate, which is computed as a level
percentage of compensation which, when applied to future
compensation of the average new member entering the system, together
with member contributions, is sufficient to provide for the payment
of all prospective benefits of a member.
   This bill would establish in each county or district's retirement
fund a Taxpayer Adverse Risk Prevention Account. The account would be
an employer asset, for that county or district, but would not be
counted as an asset for the purpose of determining the employer's
contribution rate. Deposits into the account would be made with all
or a portion of employer contributions when the actuarial value of
assets exceeds the present value of benefits, as specified. The bill
would provide that the assets of the account would be drawn upon to
pay a portion of the employer contribution when the employer
contribution rate is greater than the normal cost of benefits, as
specified. The bill would provide that the employer contribution rate
may be reduced, pursuant to a specified formula, when the employer's
Taxpayer Adverse Risk Prevention Account exceeds an amount equal to
50% of the employer's assets, exclusive of the assets in a Taxpayer
Adverse Risk Prevention Account. The bill would permit assets in an
account to be used for other specified contributions. The bill would
provide that assets in an account would be invested with other system'
s assets.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 20814 of the Government Code is amended to
read:
   20814.  (a) Notwithstanding any other provision of law, the state'
s contribution under this chapter shall be adjusted from time to time
in the annual Budget Act according to the following method. As part
of the proposed budget submitted pursuant to Section 12 of Article IV
of the California Constitution, the Governor shall include the
contribution rates submitted by the actuary of the liability for
benefits on account of employees of the  state. 
 state, as adjusted pursuant to Section 20814.5.  The
Legislature shall adopt the actuary's contribution rates and
authorize the appropriation in the Budget Act.
   (b) The employer contribution rates for all other public employers
under this system shall be determined on an annual basis by the
 actuary   actuary, adjusted pursuant to Section
20814.5,  and shall be effective on the July 1 following notice
of a change in rate.
  SEC. 2.  Section 20814.5 is added to the Government Code, to read:
   20814.5.  (a) For the purposes of this section, the following
definitions apply:
   (1) "Actual employer contribution rate" means the actual rate to
be paid by the employer as a result of adjustments made pursuant to
subdivision (b) to the employer contribution rate by the actuary.
   (2) "Employer contribution rate" means a rate for payment of the
total employer contribution, as determined by the actuary according
to the most recently completed valuation of the total liability for
the benefits on the account of the employees of the employer.
   (3) "Normal cost of benefits" means a rate for payment of normal
cost, as determined by the actuary according to the most recently
completed valuation.
   (b) Notwithstanding any other provision of law, the employer
contribution rate shall be adjusted according to the following:
   (1) If the employer contribution rate is greater than the normal
cost of benefits, then the actual employer contribution rate shall be
a rate, not less than the normal cost of benefits, and sufficient,
when combined with assets transferred from the Taxpayer Adverse Risk
Prevention Account established pursuant to subdivision (c), to equal
the employer contribution rate.
   (2) Except as provided in subdivision (d), if the employer
contribution rate is less than the normal cost of benefits, the
actual employer contribution rate shall be equal to the normal cost
of benefits.
   (c) For the purposes of subdivision (b), a separate account shall
be established for each employer in the retirement fund to be known
as a Taxpayer Adverse Risk Prevention Account.
   (1) A Taxpayer Adverse Risk Prevention Account is an employer
asset, but shall not be counted as part of employer assets for
purposes of determining the employer contribution rate.
   (2) Deposits to a Taxpayer Adverse Risk Prevention Account shall
be made with all or a portion of the actual employer contribution
rate in excess of the employer contribution rate when the actuarial
value of assets exceed the present value of benefits as determined by
the chief actuary, according to the most recently completed annual
valuation.
   (3) A Taxpayer Adverse Risk Prevention Account shall be drawn from
to pay for that portion of the employer contribution rate that
exceeds the actual employer contribution rate, pursuant to paragraph
(1) of subdivision (b).
   (4) The funds in a Taxpayer Adverse Risk Prevention Account may be
used to pay for employee contributions picked up by an employer
pursuant to Section 414(h)(2) of the Internal Revenue Code (26 U.S.C.
Sec. 414).
   (5) The funds in a Taxpayer Adverse Risk Prevention Account may be
used to make asset transfers pursuant to Section 20816.
   (6) The funds in a Taxpayer Adverse Risk Prevention Account may be
used to reduce any contributions authorized under Section 20820.
   (7) The funds in Taxpayer Adverse Risk Prevention Accounts shall
be invested with other assets of the system.
   (d) Notwithstanding paragraph (2) of subdivision (b), an actual
employer contribution rate may be reduced below a rate equal to 100
percent of the normal cost of benefits, as specified in paragraph (2)
of subdivision (b), pursuant to a formula determined by the actuary
when that employer's Taxpayer Adverse Risk Prevention Account exceeds
an amount equal to 50 percent of the employer assets, other than the
assets in the Taxpayer Adverse Risk Prevention Account. That
reduction in the actual employer contribution rate shall be
reevaluated annually by the actuary. The actual employer contribution
rate may be increased when the excess of funds in the employer's
Taxpayer Adverse Risk Prevention Account no longer exceeds an amount
equal to 50 percent of the employer assets, other than the assets in
the Taxpayer Adverse Risk Prevention Account.
  SEC. 3.  Section 20816 of the Government Code is amended to read:
   20816.  (a) Notwithstanding any other provision of this part, all
assets of an  employer   employer, other than
the assets in a Taxpayer Adverse Risk Prevention Account established
pursuant to Section 20814.5,  shall be used in the determination
of the employer contribution rate for the membership comprising the
basis of the computation. Assets held shall be recognized over the
same funding period used to amortize unfunded accrued actuarial
obligations, whether in excess of the accrued actuarial obligation or
not, using the entry age normal funding method.
   (b) On and after January 1, 1999, contracting agencies for which
the actuarial value of assets exceeds the present value of benefits
as of the most recently completed valuation, as determined by the
chief actuary, may request that the board transfer employer assets to
member-accumulated contribution accounts to satisfy all or a portion
of the member contributions required by this part. That transfer
shall be over a 12-month period provided the actuarial value of
assets exceeds the present value of benefits. In determining the
present value of benefits and the actuarial value of assets for
purposes of this part, liabilities and assets attributed to the 1959
survivor allowance may not be included. On and after January 1, 2003,
a transfer of assets may not be made pursuant to this subdivision
unless all or the same portion of the member contributions of each
member in a membership classification are satisfied through the
transfer. An employer electing a transfer of assets pursuant to this
subdivision shall satisfy the members' contributions for a period of
not less than one month and not more than one year.
   (c) On and after January 1, 2002, any contracting agency for which
the actuarial value of assets exceeds the present value of benefits
as of the most recently completed valuation, as determined by the
chief actuary, may request that the board transfer from the
contracting agency's employer account excess assets, as determined by
the board subject to the requirements and limitations of Section 420
of the Internal Revenue Code (26 U.S.C. Sec. 420), to a retiree
health account established by the board, in its discretion, in the
contracting agency's employer account pursuant to Section 401(h) of
the Internal Revenue Code (26 U.S.C. 401(h)) for the purpose of
providing health benefits to the contracting agency's retirees and
their covered dependents. The board may, in its discretion, transfer
excess assets from the contracting agency's employer account to that
contracting agency's retiree health account within that agency's
employer account, if the transfer meets the conditions of a qualified
transfer pursuant to Section 420 of the Internal Revenue Code (26
U.S.C. Sec. 420). The transferred assets shall be used solely for the
payment of current retiree health liabilities. That qualified
transfer shall be made only once each year. The board may adopt
regulations necessary to implement this subdivision. Notwithstanding
any other provision of law, the regulations may provide for the
nonforfeiture of accrued pension benefits of participants and
beneficiaries of a plan from which excess assets are transferred to
the extent necessary for the transfer to meet the conditions of a
qualified transfer pursuant to Section 420 of the Internal Revenue
Code (26 U.S.C. Sec. 420), and may include any other provision
necessary under Section 420 of the Internal Revenue Code (26 U.S.C.
Sec. 420) or Section 401(h) of the Internal Revenue Code (26 U.S.C.
Sec. 401(h)) to accomplish the purposes of this subdivision. 
   (d) On and after January 1, 2006, a transfer of assets may be made
pursuant to this section and Section 20814.5.  
    (d)
    (e)  For the purpose of this section, "employer" means
any contracting agency, the state, or a school employer. 
    (e) 
    (f)  The actuarial report in the annual financial report
shall also express the effect upon employer contribution rates of
this section and of the recognition of net unrealized gains and
losses.
  SEC. 4.  Section 31453.7 is added to the Government Code , to read:

   31453.7.  (a) For the purposes of this section, the following
definitions apply:
   (1) "Actual employer contribution rate" means the actual rate to
be paid by the employer as a result of adjustments made to the
employer contribution rate by the actuary as provided in this
section.
   (2) "Employer" means the applicable county or district.
   (3) "Employer contribution rate" means a rate for payment of the
total employer contribution, as determined by the system's actuary
according to the most recently completed valuation of the total
liability for the benefits on the account of the employees of the
employer.
   (4) "Normal cost of benefits" means a rate for payment of normal
cost, as determined by the system's actuary according to the most
recently completed valuation.
   (b) Notwithstanding any other provision of law, the employer
contribution rate of the county or district shall be adjusted
according to the following:
   (1) If the employer contribution rate is greater than the normal
cost of benefits, then the actual employer contribution rate shall be
a rate, not less than the normal cost of benefits, and sufficient,
when combined with assets transferred from the Taxpayer Adverse Risk
Prevention Account established pursuant to subdivision (c), to equal
the employer contribution rate.
   (2) Except as provided in subdivision (d), if the employer
contribution rate is less than the normal cost of benefits, the
actual employer contribution rate shall be equal to the normal cost
of benefits.
   (c) For the purposes of subdivision (b), a separate account shall
be established for each employer in the retirement system to be known
as an Taxpayer Adverse Risk Prevention Account.
   (1) A Taxpayer Adverse Risk Prevention Account is an employer
asset, but shall not be counted as part of employer assets for
purposes of determining the employer contribution rate.
   (2) Deposits to a Taxpayer Adverse Risk Prevention Account shall
be made with all or a portion of the actual employer contribution
rate in excess of the employer contribution rate when the actuarial
value of assets exceed the present value of benefits as determined by
the system's actuary, according to the most recently completed
annual valuation.
   (3) A Taxpayer Adverse Risk Prevention Account shall be drawn from
to pay for that portion of the employer contribution rate that
exceeds the actual employer contribution rate, pursuant to paragraph
(1) of subdivision (b).
   (4) The funds in a Taxpayer Adverse Risk Prevention Account may be
used to pay for employee contributions picked up by an employer
pursuant to Section 414(h)(2) of the Internal Revenue Code (26 U.S.C.
Sec. 414).
   (5) The funds in Taxpayer Adverse Risk Prevention Accounts shall
be invested with other assets of the system.
   (d) Notwithstanding paragraph (2) of subdivision (b), an actual
employer contribution rate may be reduced below a rate equal to 100
percent of the normal cost of benefits, as specified in paragraph (2)
of subdivision (b), pursuant to a formula determined by the system's
actuary when that employer's Taxpayer Adverse Risk Prevention
Account exceeds an amount equal to 50 percent of the employer assets,
other than the assets in the Taxpayer Adverse Risk Prevention
Account. That reduction in the actual employer contribution rate
shall be reevaluated annually by the system's actuary. The actual
employer contribution rate may be increased when the excess of funds
in the employer's Taxpayer Adverse Risk Prevention Account no longer
exceeds an amount equal to 50 percent of the employer assets, other
than the assets in the Taxpayer Adverse Risk Prevention Account.