BILL NUMBER: AB 1320 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 30, 2011
AMENDED IN SENATE JUNE 23, 2011
AMENDED IN ASSEMBLY MAY 27, 2011
INTRODUCED BY Assembly Member Allen
(Coauthors: Assembly Members Furutani and Ma)
FEBRUARY 18, 2011
An act to amend Section 20816 of, and to add
Sections 20814.5 and 31453.7 to , the Government
Code, relating to public employees' retirement , and making an
appropriation therefor .
LEGISLATIVE COUNSEL'S DIGEST
AB 1320, as amended, Allen. Public employees' retirement: employer
contribution rates.
(1) The Public Employees' Retirement Law prescribes employer
rates for contribution rates to the
retirement fund for the Public Employees' Retirement System (PERS).
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, on and after January July
1, 2013, would establish in the retirement fund
for each employer a Taxpayer Adverse Risk Prevention
Rate Stabilization Account in the Employer
Rate Stabilization Fund, which this bill would create and which would
be continuously appropriated to the Board of Administration of PERS
for the purpose of stabilizing employer retirement contributions. By
creating a continuously appropriated fund and authorizing the
expenditure of employer payments, this bill would make an
appropriation. The bill would provide that the board has sole and
exclusive control over the administration of the fund and would
require that the investment of fund assets be according to
strategies established by the board . The account
would be bill would provide that the Rate
Stabilization Account is an employer asset, but it
would not be counted as an asset for the purpose of determining the
employer's contribution rate. Deposits into the account
would be made The bill would require employers
to make payments to the account when the actuarial value
of assets exceeds the accrued liability, as specified ,
which would be calculated based on the employer normal cost of
benefits and which would be credited to each employer's Rate
Stabilization Account. Payments by the state would be made in the
annual Budget Act . 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 employer normal cost of benefits, as specified.
The bill would require the employer to make an additional
contribution when the employer's contribution rate is less than the
employer normal cost of benefits, as defined, and that additional
contribution would be credited to the employer's Taxpayer Adverse
Risk Prevention Account. The bill would provide that the
employer would not be is not required
to make that additional contribution when the employer's
Taxpayer Adverse Risk Prevention Rate Stabilization
Account exceeds an amount equal to 50% of the employer's
assets, exclusive of the assets in the Taxpayer Adverse Risk
Prevention Rate Stabilization 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
according to investment strategies established by the Board of
Administration of PERS.
(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, on and after January July
1, 2013, would establish in each county or district's retirement
fund a Taxpayer Adverse Risk Prevention Rate
Stabilization Account. The bill would provide that the
account would be is an employer
asset, for that county or district, but it would not be
counted as an asset for the purpose of determining the employer's
contribution rate. Deposits into the account would be made
The bill would require employers to make payments
when the actuarial value of assets exceeds the accrued
liability, as specified , which would be calculated based on the
employer normal cost of benefits and which would be credited to each
employer's Rate Stabilization Account . 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 require the employer to make an
additional contribution when the employer's contribution rate is less
than the employer normal cost of benefits, as defined, and that
additional contribution would be credited to the employer's Taxpayer
Adverse Risk Prevention Account. The bill would provide
that the employer would not be is not
required to make that additional contribution when the employer's
Taxpayer Adverse Risk Prevention Rate
Stabilization Account exceeds an amount equal to 50% of the
employer's assets, exclusive of the assets in a Taxpayer
Adverse Risk Prevention Rate Stabilization
Account. The bill would permit assets in an account to be
used for other specified contributions. The bill would
provide require that assets in an
account would be invested according to investment
strategies established by the board of retirement.
Vote: majority. Appropriation: no yes
. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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) "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.
(2) "Employer normal cost of benefits" means a rate for payment of
normal cost of benefits, as determined by the actuary according to
the most recently completed valuation less the employee contribution
rate.
(b) Notwithstanding any other provision of law, the employer
contribution rate shall be adjusted according to the following:
(1) If the employer contribution rate, as determined by the
actuary, is greater than the employer normal cost of benefits, then
the employer shall remit an amount, not less than the employer normal
cost of benefits that is, and sufficient is
sufficient, as determined by the actuary, when combined with
assets transferred from the Taxpayer Adverse Risk Prevention
Rate Stabilization 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 employer normal cost of benefits,
the employer shall remit the employer contribution rate amount and
make an additional contribution equal to the difference between the
employer contribution rate and the employer normal cost of benefits.
That additional contribution amount shall be credited to the employer'
s Taxpayer Adverse Risk Prevention Rate
Stabilization Account.
(c) For the purposes of subdivision (b), a
There is hereby created in the State Treasury the
Employer Rate Stabilization Fund for the purpose of receiving
employer payments made pursuant to paragraph (2) of subdivision (b)
and stabilizing state and contracting agency employer retirement
contributions pursuant to this section. Notwithstanding Section
13340, all moneys in the fund are continuously appropriated without
regard to fiscal years to the board for expenditure pursuant to this
section. The board has sole and exclusive control over the
administration of the fund and the investment of its assets shall be
according to strategies established by the board. Payments by the
state pursuant to paragraph (2) of subdivision (b) shall be made in
the annual Budget Act. A separate account shall be established
for each employer in the retirement fund to be
known as a Taxpayer Adverse Risk Prevention
Rate Stabilization Account.
(1) A Taxpayer Adverse Risk Prevention
Rate Stabilization 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
Rate Stabilization Account shall be made when
the actuarial value of assets exceeds the accrued liability as
determined by the chief actuary, according to the most recently
completed annual valuation.
(3) A Taxpayer Adverse Risk Prevention
Rate Stabilization Account shall be drawn from to pay for that
portion of the employer contribution rate that exceeds the employer
normal cost of benefits, pursuant to paragraph (1) of subdivision
(b).
(4) The funds in a Taxpayer Adverse Risk Prevention Account may be
used to make asset transfers pursuant to Section 20816.
(5) The funds in Taxpayer Adverse Risk Prevention Accounts shall
be invested according to investment strategies established by the
board.
(d) Notwithstanding paragraph (2) of subdivision (b), when an
employer's Taxpayer Adverse Risk Prevention
Rate Stabilization Account exceeds an amount equal to 50
percent of the employer assets, other than the assets in the
Taxpayer Adverse Risk Prevention Rate Stabilization
Account, that employer is not required to make an additional
contribution as specified in paragraph (2) of subdivision (b).
(e) Nothing in this section shall be construed to interfere with a
public retirement board's authority and fiduciary responsibility as
set forth in Section 17 of Article XVI of the California
Constitution. If, and to the extent that, the board of a public
retirement system determines that the receipt of any additional
contributions required under this section would conflict with its
fiduciary responsibility set forth in Section 17 of Article XVI of
the California Constitution, the board may refuse to receive those
contributions.
SEC. 2. Section 20816 of the Government Code is
amended to read:
20816. (a) Notwithstanding any other provision of this part, all
assets of an 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 on and after January 1, 2013, a
transfer of assets may be made pursuant to Section 20814.5.
(e) For the purpose of this section, "employer" means any
contracting agency, the state, or a school employer.
(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. 3. SEC. 2. 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) "Employer" means the applicable county or district.
(2) "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.
(3) "Employer normal cost of benefits" means a rate for payment of
normal cost of benefits, as determined by the system's actuary
according to the most recently completed valuation, less the employee
contribution.
(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, as determined by the
actuary, is greater than the employer normal cost of benefits, then
the employer shall remit an amount, not less than the employer normal
cost of benefits that is sufficient as determined by the actuary,
when combined with assets transferred from the Taxpayer
Adverse Risk Prevention Rate Stabilization
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
employer shall remit the employer contribution rate amount and make
an additional contribution equal to the difference between the
employer contribution rate and the employer normal cost of benefits.
That additional contribution amount shall be credited to the employer'
s Taxpayer Adverse Risk Prevention Rate
Stabilization Account.
(c) For the purposes of subdivision (b), a separate account shall
be established for each employer in the retirement system to be known
as a Taxpayer Adverse Risk Prevention Rate
Stabilization Account.
(1) A Taxpayer Adverse Risk Prevention Rate
Stabilization 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
Rate Stabilization Account shall be made when
the actuarial value of assets exceeds the accrued liability as
determined by the system's actuary, according to the most recently
completed annual valuation.
(3) A Taxpayer Adverse Risk Prevention
Rate Stabilization Account shall be drawn from to pay for that
portion of the employer contribution rate that exceeds the employer
normal cost of benefits, pursuant to paragraph (1) of subdivision
(b).
(4) The funds in Taxpayer Adverse Risk Prevention
Rate Stabilization Accounts shall be invested
according to investment strategies established by the board.
(d) Notwithstanding paragraph (2) of subdivision (b), when an
employer's Taxpayer Adverse Risk Prevention
Rate Stabilization Account exceeds an amount equal to 50
percent of the employer assets, other than the assets in the
Taxpayer Adverse Risk Prevention Rate Stabilization
Account , that employer is not required to make an
additional contribution as specified in paragraph (2) of subdivision
(b).
(e) Nothing in this section shall be construed to interfere with a
public retirement board's authority and fiduciary responsibility as
set forth in Section 17 of Article XVI of the California
Constitution. If, and to the extent that, the board of a public
retirement system determines that the receipt of any additional
contributions required under this section would conflict with its
fiduciary responsibility set forth in Section 17 of Article XVI of
the California Constitution, the board may refuse to receive those
contributions.
SEC. 4. SEC. 3. This act shall become
operative January July 1, 2013.