BILL ANALYSIS Ó
AB 2663
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2663 (Public Employees, Retirement and Social Security
Committee)
As Amended June 20, 2012
Majority vote
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|ASSEMBLY: |75-0 |(May 17, 2012) |SENATE: |37-0 |(August 23, |
| | | | | |2012) |
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Original Committee Reference: P.E.,R & S. S.
1)SUMMARY : Makes various technical, conforming, and compliance
amendments necessary for continued effective administration of
the California State Teachers' Retirement System (CalSTRS).
Specifically, this bill :
2)Replaces the term "salary or other remuneration" with
"creditable compensation" to clarify existing law.
3)Consolidates the following three separately mandated reports
into a single financial report:
a) The return on investments and actual payroll subject to
the system for the prior fiscal year,
b) The nature, duration, and cost of investment contract
services used,
c) The extent to which inflation has eroded the purchasing
power of defined benefits and the amount of supplementary
increases in retirement allowances required to preserve the
purchasing power of defined benefits.
4)Allows CalSTRS to determine the form, including electronic,
that county superintendents and other employing agencies must
use to furnish any information concerning any member or
beneficiary the board may require.
5)Clarifies that existing authority to subpoena witnesses to
compel attendance at a board hearing is in addition to
authority granted to a state agency under the Government Code
to issue a subpoena to compel the production of documents
relating to an investigation under the jurisdiction of the
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agency.
6)Clarifies that employers must notify retirees of specified
earnings limitations.
7)Allows a retiring member to receive service credit for unused
sick leave from more than one employer, if the member performs
service for those employers in his or her last year.
8)Specifies additional types of employers who would be held
responsible for failure to make assessed penalty payments.
These include: "district superintendent, chancellor of a
community college district, or other employing agency that
reports directly to the system."
9)Removes a reference to the qualifying condition of a member
under Coverage B disability benefit whose death occurs within
four months after termination of a disability allowance
benefit. This qualifying condition could not occur under
Coverage B.
10)Allows for a combination of reductions by the amount of
workers' compensation benefits for permanent disability,
temporary disability, and vocational rehabilitation. This
would conform Coverage B disability benefit to the existing
provisions of the Coverage A disability benefit.
11)Clarifies that the maximum amount that can be collected for
earnings in excess of the Annual Earnings Limit is the
remaining annual allowance payable for the fiscal year after
any reductions due to a violation of the Zero Dollar Limit
(ZDL) in the same year.
12)Changes the maximum benefit reduction when a member exceeds
the ZDL to the amount of the allowance payable during the
first six calendar months after a member retired for service,
if the member is below normal retirement age at the time the
compensation is earned.
13)Clarifies that employment under the Cash Balance (CB) benefit
program is subject to the earnings limits.
14)Clarifies that a CB benefit program annuity for a retired
participant below age 60 may be reduced by up to the amount of
the annuity payable during the first 180 calendar days after a
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participant retired.
15)Allows CalSTRS to only send payment information when there is
a change in the benefit amount due to an annual enhancement or
an adjustment to an income tax withholding tax table by the
Internal Revenue Service (IRS) or the Franchise Tax Board
(FTB), unless a person does not want to receive that payment
information at all.
16)Corrects a reference to an incorrect section.
17)Specifies November 30, 2004, as the implementation date of
the 403bCompare.com Web site.
18)Corrects an incorrect reference to the Teachers' Retirement
Law in the Public Resources Code.
The Senate amendments :
1)Consolidate the information required for various reports into
the annual CalSTRS financial report.
2)Clarify that CalSTRS is authorized to direct the form in which
information is submitted by employers.
AS PASSED BY THE ASSEMBLY , made various technical, conforming,
and compliance amendments necessary for continued effective
administration of CalSTRS.
FISCAL EFFECT : According to the Senate Appropriations
Committee, "One-time costs of $85,000 potentially offset by
future savings (Special). CalSTRS indicates one-time IT costs
to make changes to the member database, and the "myCalSTRS"
Website. Savings will result from consolidation of numerous
reports and from the reduction in the number of mailings to
members."
COMMENTS : According to CalSTRS:
1)Existing law distinguishes between compensation that is
creditable and compensation that is non-creditable.
Compensation must first be determined to be creditable before
the contributions and service credit associated with it can be
assigned to either the Defined Benefit (DB) program or the
Defined Benefit Supplement (DBS) program. Under existing law,
any salary or remuneration determined to have been paid for
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the principal purpose of enhancing a member's benefit would be
credited to the DBS program, rather than the DB program. Any
salary or other remuneration that is determined to be
non-creditable cannot be assigned to either program.
2)Existing law requires CalSTRS to provide the Governor and the
Legislature separate reports mandated by law containing
specified information, including:
a) The return on investments and actual payroll subject to
the system for the prior fiscal year.
b) The nature, duration, and cost of investment contract
services used.
c) The extent to which inflation has eroded the purchasing
power of DB benefits and the amount of supplementary
increases in retirement allowances required to preserve the
purchasing power of DB benefits.
3)Existing law requires employers to submit any information
concerning a member or beneficiary that CalSTRS may require.
In addition, in accordance with existing law, CalSTRS requires
employers to submit monthly reports containing compensation
and contribution information electronically and in an
encrypted format. This bill clarifies that CalSTRS is
authorized to direct the form in which an employer submits
information or reports to CalSTRS, including electronically.
4)Existing law gives CalSTRS the authority to request back-up
documentation from employers, to research the validity of
compensation information in order to ensure that a member's
increased compensation is justified as well as to properly
determine benefit calculations. If the employer does not
supply the requested documents, CalSTRS cannot fully research
nor make a decision regarding the compensation of the member.
Delays in receiving the requested information can lead to
incorrect benefit calculations and could potentially impede
efforts to identify and prevent spiking.
5)Existing law requires employers to advise reemployed retired
members of earnings limitations as well as to report all
post-retirement earnings. Current law, among other
provisions: (1) restricts post-retirement employment for
retirees who are under normal retirement age of 60 for the
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first six months after their benefit effective date and (2)
imposes an earnings limitation on members receiving a
disability retirement. However, the law that requires
employers to advise retired members of earnings limitations
does not contain specific references to these two limitations.
6)Current law allows a retiring member to receive service credit
for unused sick leave certified by the member's last employer.
However, the law specifies that only the unused sick leave
from the member's last employer may be accepted. If a member
works for more than one employer during his or her last day of
paid employment, CalSTRS will only accept the unused sick
leave certified by the employer for which the member worked
last. The member is unable to receive credit for all hours of
unused sick leave that he or she has earned with other
employers.
7)Under existing law, CalSTRS can hold county superintendents
responsible for failure to make assessed penalty payments.
However, existing law does not authorize CalSTRS to hold
school districts, community colleges and any other employing
agencies that report directly to CalSTRS accountable for
failing to make assessment payments to CalSTRS.
8)CalSTRS provides a monthly benefit to survivors of an active
member, or of a member receiving a Coverage A disability
benefit, who dies before retiring. Under Coverage A, for
members who joined CalSTRS on or before October 15, 1992,
disability benefits are paid as long as the member remains
disabled or until he or she reaches age 60. While under
Coverage B, for members who joined CalSTRS after October 15,
1992, disability benefits are paid for as long as a member
remains disabled, without respect to age, or until he or she
returns to full-time employment.
9)Current law provides that disability retirement benefits be
reduced by workers' compensation benefits. Under existing
law, the amount of that reduction is determined by the amount
of benefits for temporary or permanent disability or
vocational rehabilitation. In cases where a member is
receiving a combination of these benefit payments, CalSTRS
would only be able to reduce the disability benefit by an
amount equal to one of these benefits, allowing a member to
receive payments from both CalSTRS and workers' compensation
for the same impairment.
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10)Federal law prohibits pension plans from distributing
benefits before either normal retirement age or a separation
from service. To comply with federal law, state law requires
retired members under the age of 60 to be subject to a ZDL for
the first six months after retirement or until age 60,
whichever occurs sooner. CalSTRS reduces a member's
retirement benefit by the amount earned for performing
CalSTRS-covered employment during this ZDL period.
In addition, retired members are subject to a fiscal year
limitation on earnings from public school employment in
California (Annual Earnings Limit). The benefit of a retired
member is reduced by the amount of any earnings that exceed
the limitation, up to a member's annual benefit amount. The
earnings limitation is currently $31,020.
The Annual Earnings Limit and the ZDL currently act
independently. When a retired member exceeds the ZDL, CalSTRS
collects the amount exceeded from the member's benefit. If
the retired member were to continue working, the member could
also exceed the Annual Earnings Limit. Under current law,
earnings subject to the ZDL are also subject to the Annual
Earnings Limit, and CalSTRS collects for both, with each
collection being up to the annual allowance payable. This
could result in more than the annual allowance payable for the
one fiscal year in which the excess compensation was earned
being collected.
11)AB 232 (Hill), Chapter 90, Statutes of 2009, allowed CalSTRS
to mail a copy of the benefit payment information when benefit
payments are made by electronic funds transfer, only when
there is a change in the net amount paid or the recipient
requests to receive a copy. Under the provisions of that law,
CalSTRS must mail the payment information when there is an
adjustment to the allowance, even to those members who have
requested that the information never be mailed. Therefore,
CalSTRS could potentially mail more payment information
documents to members who, prior to the implementation of AB
232, indicated they did not want to receive it.
12)The 403bCompare.com Web site was established by CalSTRS in
response to AB 2506 (Steinberg), Chapter 1095, Statutes of
2002, that required the Teachers' Retirement Board to
establish a vendor registration process through which
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information about tax-deferred retirement investment products
falling under Section 403(b) of the Internal Revenue Code
would be made available to eligible public employees. Current
law requires prospective venders of 403(b) products to
register those products on the 403bCompare.com Web site and
prohibits employees from participating in unregistered
products, unless employees purchased or entered into products
"prior to the date of implementation of the 403bCompare.com
website." The lack of an actual date for implementation
within the law is causes confusion for stakeholders regarding
participation in products not registered on the site.
13)Revenue generated from the use of State School Lands (land
granted to California by the federal government to support
schools) and Lieu Lands (properties purchased with the
proceeds from the sale of school lands) during the prior year
is transferred to CalSTRS each year for the purpose of
providing annual supplemental payments in quarterly
installments.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004636