BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1379
Jim Beall, Chair HEARING DATE: June 24, 2013
AB 1379 (Asm. PER&SS Comm) as amended 6/13/13
FISCAL: YES
CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM: ANNUAL
HOUSEKEEPING BILL
HISTORY :
Sponsor: California State Teachers' Retirement System
(CalSTRS)
Other legislation: AB 2663 (Assembly PER&SS Committee),
Chapter 864, Statutes of 2012
SB 349 (Negrete McLeod),
Chapter 703, Statutes of 2011
ASSEMBLY VOTES :
PER & SS 7-0 4/10/13
Appropriations 17-0 4/17/13
Assembly Floor 76-0 4/25/13
SUMMARY :
AB 1379 is CalSTRS' annual housekeeping bill intended to make
technical and non-controversial changes to the Teachers'
Retirement Law (TRL).
BACKGROUND AND ANALYSIS :
1)Registered Domestic Partner
Existing law generally allows a member's registered
domestic partner to receive the same treatment from CalSTRS
as a member's spouse, except as prohibited by federal law.
This bill revises and updates the references to sections of
the TRL that conflict with federal law in their treatment
of registered domestic partners.
Section affected: EC 22007.5
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2)2+2 Retirement Incentive Program
Existing law formerly established the "2+2" retirement
incentive program (i.e., "golden handshake"), operative
from January 1, 2004 through December 31, 2004, which
provided an additional two years of service credit and two
additional years of age, for purposes of the age factor
used to calculate retirement benefits, to retiring members
of the Defined Benefit (DB) Program whose employers elected
to participate. The statute authorizing this program was
repealed on January 1, 2005, and subsequently removed from
statute.
This bill removes statutory references to the "2+2" program
(i.e., Education Code Section 22714.5).
Sections affected: EC 22134.5, 24203.5, 24203.6, 24209,
24209.3, 24211, 24212, 24213
3)Nonmember Spouse: Final Compensation
Existing law generally limits final compensation for the
purpose of calculating a defined benefit to the highest
average annual compensation earnable for any period of
three consecutive schools years. However, final
compensation may be the highest average annual compensation
earnable during any period of 12 consecutive months, if a
2% at 60 member has 25 or more years of service credit or
it is part of a written collective bargaining agreement and
associated costs are paid to CalSTRS.
This bill corrects a reference to the provision of law
relating to final compensation for a nonmember spouse.
Section affected: EC 22135
4)Working after Retirement
a) Existing law :
i) sets employment and earnings limitations on working
for a CalSTRS employer following retirement and
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excludes from these limitations activities performed
by an employee in a limited-term assignment for a
third party employer that does not participate in a
California public pension system, and the activities
performed are not normally performed for an employer,
as specified.
ii) defines "retired member activities" and
incorporates the third-party exclusion in the
definition, but does not clearly define "limited
term."
This bill clarifies the exclusion of third-party
employee activities from the definition of "retired
member activities" by specifying that assignments must
be 24 months or less.
b) Existing law states that retired members are subject
to a zero-dollar earnings limit for the first 180
calendar days after their most recent retirement.
Education Code section 24214.5 inconsistently references
this period of time, referring to it as both "180 days"
and "six consecutive months."
This bill ensures consistent interpretation of the
length of the zero-dollar limit period by consistently
using "180 calendar days" as the timeframe.
Sections affected: EC 22164.5, 24214.5
5)CalSTRS Headquarters
Existing law authorizes CalSTRS to select, purchase, or
acquire in the name of the Teachers' Retirement Plan, an
office building in the greater metropolitan Sacramento area
for the purposes of establishing a permanent headquarters
facility for the system, but does not specifically define
the term "system's headquarters office."
This bill defines the term "system's headquarters office"
to mean the office building established as the permanent
headquarters facility for CalSTRS in 2009, and removes
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various redundant references to Education Code Section
22375, which defined CalSTRS authority prior to completion
of the system headquarters office.
Sections affected: EC 22175, 22303, 22662, 22663, 22664,
22801, 22829, 23001, 23104, 23202, 23300, 24005, 24105,
24201.5, 24204, 24208, 24300.2, 24306.5, 24306.7, 24307,
24309, 24311, 24312, 24312.1, 24613, 25011.5, 25018.2
6)2-Year Retirement Incentive Program
Existing law :
a) allows school districts to offer the CalSTRS
Retirement Incentive Program, in which a member can
receive two additional years of service credit to
encourage retirement (i.e., "golden handshake").
b) requires that members lose the increase in their
benefit provided by the Retirement Incentive Program if
they return to work within five years with the school
district that granted the incentive credit.
c) requires employers to advise reemployed retired
members of earnings limitations, as well as to report
all postretirement earnings, but does not require
employers to inform retired members that postretirement
employment would adversely affect their incentive credit
if they return to work within five years.
This bill clarifies that employers must notify retirees of
the restriction on returning to work within 5 years imposed
by the terms of the CalSTRS Retirement Incentive Program.
Section affected: EC 22461
7)Unused Sick Leave
Existing law :
a) allows a retiring member to receive service credit
for unused sick leave certified by the member's last
employer or employers, and requires the employer to
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certify the number of unused sick leave days to CalSTRS
within 30 days following the effective date of the
member's service retirement.
b) allows a member to backdate his or her service
retirement benefit effective date to as early as the day
following the date the member terminated his or her
employment regardless of when the service retirement
application is received after the employment termination
date.
This bill allows an employer to submit the information
within 30 days following the effective date of the member's
service retirement or within 30 days of when the
application for retirement is received by CalSTRS.
Sections affected: EC 22717, 22717.5
1)Disability Benefits
a) Existing law makes a member eligible for disability or
disability retirement benefits (depending on whether the
member has coverage A or coverage B) after he or she is
vested and meets other requirements; specifies time
periods in which a member may apply for a disability
benefit, including the period while the member is
employed; and requires that the member be continuously
incapacitated from the last day of actual performance of
service.
The TRL specifies a "disability benefit" that converts to
a service retirement benefit at age 60 under coverage A
for members who joined CalSTRS prior to October 16, 1992,
or a "disability retirement benefit" that pays 50% of
final compensation under Coverage B for members who
joined on or after October 16, 1992, or who voluntarily
elected coverage B.
This bill clarifies that in order to qualify for a
disability benefit under Coverage A or B, a member must
not only be employed, but also have performed creditable
service within four months prior to the date CalSTRS
receives his or her disability benefit application.
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b) Existing law allows a member who is eligible to
retire to receive a service retirement benefit while
that member is waiting for a disability benefit
application to be evaluated and allows, in the event
that the disability benefit application is approved,
that the member becomes a disabled member and is paid a
disability retirement benefit in place of the service
retirement benefit.
Different requirements apply to the service retirement
benefit effective date depending on whether an
application for "service retirement" or an application
for "service retirement during evaluation of disability
application" is submitted.
This bill aligns the "service retirement during
evaluation of a disability application" requirements
with the requirements for a "service retirement benefit"
effective date if a member's application for the
disability benefit is denied.
c) Existing law requires CalSTRS to calculate a member's
final compensation for service retirement after he or
she has returned to work following receipt of a
disability
allowance by using compensation earnable, or projected
final compensation, or a combination of the two, and
specifies that for calculations when the member returned
to active service for less than three years following
receipt of a disability allowance, CalSTRS is to use a
combination of the two, not one or the other.
This bill specifies that a member's final compensation
when the member returned to active service for less than
three years following receipt of a disability retirement
allowance is calculated using compensation earnable, or
projected final compensation, or a combination of both.
d) Existing law provides that a member may only revoke
or change a disability option election before the
disability benefit effective date or within 30 days of
the date of mailing of an acknowledgement notice;
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however, this is inconsistent with the service
retirement option election revocation or change process.
This bill :
i) ensures a consistent process for revoking or
changing an option election by setting a deadline of
30 days after the first disability retirement benefit
payment.
i) clarifies that a member who designates an option
beneficiary will do so on a form specified by CalSTRS
and submitted on or before the last day of the month
of a member's disability retirement.
a) Existing law requires the termination of a disability
annuity if a participant who is receiving a disability
annuity under the Cash Balance (CB) benefit program
returns to work prior to age 60 to perform creditable
service subject to coverage by the CB benefit program or
the Defined Benefit program; however, current law does
not address any consequences for a participant over the
age of 60 receiving a disability annuity who returns to
work.
This bill ensures equal treatment for CB benefit program
participants receiving a disability annuity who return
to work, regardless of age.
Sections affected: EC 24002, 24102, 24105, 24201.5, 24204,
24211, 24105, 24301, 26911
1)Reinstatement from Retirement
Existing law :
a) allows a member to submit an application for retirement
with any effective date, including backdating the
application, as long as that date meets specified
conditions.
b) requires that the effective date of retirement can be no
earlier than the date on which a member exercises his or
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her ability to terminate his or her retirement benefit
and reinstate to active membership after he or she
retires.
c) allows a retired member to reinstate to active
membership and re-retire within one year, but requires
that such a member keep the same benefit option election
and beneficiaries that were in effect during the first
retirement and prohibits changes to them for a period of
one year after reinstating.
This bill :
a) clarifies that a member cannot have a reinstatement date
and a re-retirement date on the same date; that the
intent of the law is not to allow members to receive
multiple benefits for the same time period; and that a
member must return payments he or she receives, within
45 days, if the member cancels his or her retirement
application, and be liable for any resulting adverse tax
consequences.
b) eliminates a loophole allowing a member to reinstate for
one year, elect, change or cancel an option, and then
backdate his or her retirement date.
c) clarifies the reinstatement effective date requirements
and adds an omitted reference to a related provision of
law.
d) clarifies that a member's retirement allowance
calculation after he or she has previously reinstated
includes the amount that he or she was eligible to
receive immediately preceding reinstatement.
Sections affected: EC 24204, 24208
1)Retirement Following Reinstatement
Existing law requires CalSTRS to review accounts for
accuracy and on occasion to adjust previous benefit amounts
when a data or calculation error is found. CalSTRS must
adjust previous benefit amounts and, consequently, current
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benefit amounts if a change in a previous benefit impacts a
current benefit calculation.
This bill clarifies that a member's retirement allowance
calculation after he or she has previously reinstated
includes the amount that he or she was eligible to receive
immediately preceding reinstatement.
Sections affected: EC 24209, 24211
2)Beneficiary Designation
Existing law :
a)allows a member to choose the type of benefit he or she
wants upon retirement from the Defined Benefit
Supplement (DBS) plan, including a lump-sum, a lifetime
joint and survivor annuity, or a period certain annuity.
b)allows the member to name a person or entity (such as an
estate, trust, corporation or charitable organization)
as a designated beneficiary to receive the balance of
the member's Defined Benefit Supplement (DBS) account
upon his or her death if the member chose a period
certain annuity; however, the law is silent regarding
the manner in which the beneficiary must receive the
balance of the DBS account, and CalSTRS administers the
payment of the DBS account balance differently,
depending on whether the designated beneficiary is a
person or an entity.
This bill specifies the manner in which a member's
beneficiary would receive the balance of the DBS account
period certain annuity: the remainder of the period
certain annuity payments if the beneficiary is a person,
and the remaining balance of the account if the beneficiary
is an entity.
Section affected: EC 25022
1)Supplemental Base Allowance for Disability Allowance to
Service Retirement
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Existing law :
a) establishes supplemental benefits to provide purchasing
power protection when a member's initial allowance no
longer keeps pace with inflation and specifies that the
inflation rate is the change in the California Consumer
Price Index from the year the benefit began to the year
for which the supplemental benefit is calculated.
b) requires, when a member goes from disability allowance
to service retirement, that the disability allowance
effective date is used for purposes of calculating the
supplemental benefit. However, existing law is silent on
what is used as the initial allowance for purposes of the
calculation.
This bill clarifies that the disability allowance a member
was eligible to receive on the effective date of the
disability allowance is to be used for the purposes of
determining postretirement benefit increases, and makes a
grammatical correction to clarify that the supplemental
base allowance should not include applicable allowance
increases or enhancements.
Sections affected: 24410, 24415
1)Benefit Payment Information
Existing law requires CalSTRS to provide electronic copies
of a benefit recipient's payment information, which are
made available on a secure web site. A benefit recipient
is mailed a copy of the payment information only 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 IRS or FTB. Benefit recipients may choose
to receive the payment information by mail for each monthly
payment or to not receive a mailed copy at all.
This bill clarifies that CalSTRS may designate electronic
delivery as the default method of delivery unless the
benefit recipient submits a written request, as specified
under existing law, to receive a mailed copy of the payment
information either monthly or only when there is a change
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in the benefit amount due to an annual enhancement or an
adjustment to income tax withholding tables by the IRS or
FTB.
Section affected: 24604
2)Deferred Compensation Contract Term
Existing law allows CalSTRS to offer deferred compensation
programs authorized under sections 403(b) or 457(b) of the
federal Internal Revenue Code, which employers may choose
to establish and offer to employees; additionally, statue
that authorizes CalSTRS to offer the 457(b) program
specifies that the initial period of a contract between
CalSTRS and an employer is five years.
Employers interpret this to require all new contracts for a
457(b) program with CalSTRS to be for a five-year period.
This bill clarifies that employers are able to negotiate
the contract terms, including the length of the contract,
without requiring a specified initial contract period.
Section affected: 24975
3)403(b) Vendor Registry
Existing law allows CalSTRS to operate a 403(b) vendor
registry and information bank to enable eligible
participants to compare vendors' 403(b) products. However,
the statue that authorize CalSTRS to operate the registry
references a regulatory organization that no longer exists
because the National Association of Securities Dealers
(NASD) merged with the enforcement arm of the New York
Stock Exchange to form a successor organization known as
the Financial Industry Regulatory Authority (FINRA).
This bill corrects the name of the regulatory organization
to the Financial Industry Regulatory Authority.
Sections affected: 25101, 25103, 25106
4)Medicare Premium Payment Program (EC 25940)
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Existing law establishes the Medicare Premium Payment
Program (MPPP) to provide retired members the benefit of a
CalSTRS paid Medicare Part A premium if they meet certain
eligibility requirements, including the requirement that
the member must retire by a date specified by the Teachers'
Retirement Board (board). The board currently sets that
date to June 30, 2012. Unless the board extends the MPPP
sunset date, members who reinstate and subsequently retire
after June 30, 2012, are ineligible for the MPPP.
This bill clarifies that CalSTRS will use the most recent
retirement date if it uses a retirement date to determine
eligibility for the MPPP.
Section affected: EC 25940
FISCAL :
The Assembly Appropriations Committee found "negligible
fiscal impact on the CalSTRS retirement program and possible
minor administrative cost savings to CalSTRS."
COMMENTS :
1)Argument in Support :
According to CalSTRS, "AB 1379 makes various technical and
conforming changes to the Teachers' Retirement Law to
facilitate efficient administration of the State Teachers'
Retirement Plan (Plan), which includes the Defined Benefit
(DB) Program, the Defined Benefit Supplement (DBS) Program
and the Cash Balance (CB) Benefit Program."
2)SUPPORT :
California State Teachers' Retirement System (CalSTRS),
Sponsor
3)OPPOSITION :
None to date
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#####
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