BILL NUMBER: AB 1320	AMENDED
	BILL TEXT

	AMENDED IN SENATE  SEPTEMBER 2, 2011
	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 add  Sections 20814.5 and 31453.7 to 
 Section 31453.7 to, and to add Chapter 10 (commencing with
Section 20860) to Part 3 of Division 5 of Title 2 of,  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 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 July 1, 2013, would establish for each
employer a 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 bill would authorize the board,
in its discretion, to establish administrative terms and conditions
governing the Rate Stabilization Fund.  The 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. 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 be drawn upon 
, subject to procedures adopted by the board,  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 provide that the employer is not required to make that
additional contribution when the employer's Rate Stabilization
Account exceeds an amount equal to 50% of the employer's assets,
exclusive of the assets in the Rate Stabilization Account. 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 July 1, 2013, would establish in each
county or district's retirement fund a Rate Stabilization Account.
The bill would provide that the account 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. 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 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 is not required
to make that additional contribution when the employer's Rate
Stabilization Account exceeds an amount equal to 50% of the employer'
s assets, exclusive of the assets in a Rate Stabilization Account.
The bill would require that assets in an account be invested
according to investment strategies established by the board of
retirement.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.


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

   SECTION 1.    Chapter 10 (commencing with Section
20860) is added to Part 3 of Division 5 of Title 2 of the  
Government Code   , to read:  
      CHAPTER 10.  EMPLOYER RATE STABILIZATION


   20860.  For the purposes of this chapter, the following
definitions apply:
   (a) "Employer contribution rate" means a rate for payment of the
total employer contribution, as determined by the actuary pursuant to
Chapter 9 (commencing with Section 20790).
   (b) "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.
   20861.  (a) There is hereby created in the State Treasury the
Employer Rate Stabilization Fund for the purpose of receiving
employer payments made pursuant to subdivision (b) of Section 20862
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 subdivision (b) of Section 20862 shall be made in
the annual Budget Act. A separate account shall be established for
each employer in the fund to be known as a Rate Stabilization
Account.
   (1) A 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 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 and pursuant to subdivision (b) of Section
20862.
   (3) A Rate Stabilization Account shall be drawn from, subject to
procedures adopted by the board, to pay for that portion of the
employer contribution rate that exceeds the employer normal cost of
benefits, pursuant to subdivision (a) of Section 20862.
   (4) The board may, in its discretion, establish administrative
terms and conditions governing the Rate Stabilization Fund, including
the method of payments to the employer's Rate Stabilization Account,
the method of disbursements from the employer's Rate Stabilization
Account, the frequency and content of the reports from or to
employers, the allocation of investment income, and the allocation of
assets upon termination of participation of an employer.
   (b) Notwithstanding subdivision (b) of Section 20862, when an
employer's Rate Stabilization Account exceeds an amount equal to 50
percent of the employer assets, other than the assets in the Rate
Stabilization Account, that employer is not required to make an
additional contribution as specified in subdivision (b) of Section
20862.
   20862.  (a) 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 Rate
Stabilization Account established pursuant to subdivision (c), to
equal the employer contribution rate.
   (b) Except as provided in subdivision (b) of Section 20861, 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 Rate Stabilization Account.
   20863.  Nothing in this chapter 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.  
  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 sufficient, as determined by the actuary,
when combined with assets transferred from the 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 Rate Stabilization Account.
   (c) 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 fund to be known as a Rate Stabilization
Account.
   (1) A 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 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 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).
   (d) Notwithstanding paragraph (2) of subdivision (b), when an
employer's Rate Stabilization Account exceeds an amount equal to 50
percent of the employer assets, other than the assets in the 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 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 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 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 Rate Stabilization Account.
   (1) A 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 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 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 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 Rate Stabilization Account exceeds an amount equal to 50
percent of the employer assets, other than the assets in the 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. 3.  This act shall become operative July 1, 2013.