BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1379|
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THIRD READING
Bill No: AB 1379
Author: Assembly Public Employees, Retirement and Social
Security Committee
Amended: 8/22/13 in Senate
Vote: 21
SENATE PUBLIC EMPLOY. & RETIRE. COMM. : 5-0, 6/24/13
AYES: Beall, Walters, Block, Gaines, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 4/25/13 (Consent) - See last page for
vote
SUBJECT : Teachers' Retirement Law
SOURCE : California State Teachers' Retirement System
DIGEST : This bill is the California State Teachers'
Retirement System's (CalSTRS) annual housekeeping bill intended
to make technical and non-controversial changes to the Teachers'
Retirement Law (TRL).
Senate Floor Amendments of 8/22/13 remove a superfluous comma
and clarify that a particular paragraph in Education Code
Section 24410 shall not apply to any action filed in Superior
Court prior to January 1, 2014.
ANALYSIS :
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Existing law:
1.Registered Domestic Partner
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.
2.2+2 Retirement Incentive Program
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authorizing this program was repealed on January 1, 2005, and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.
3.Nonmember Spouse: Final Compensation
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.
4.Working after Retirement
A. Sets employment and earnings limitations on working for
a CalSTRS employer following retirement and 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.
B. Defines "retired member activities" and incorporates the
third-party exclusion in the definition, but does not
clearly define "limited term."
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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."
1.CalSTRS Headquarters
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."
2.Two-Year Retirement Incentive Program
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.
1.Unused Sick Leave
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 certify the
number of unused sick leave days to CalSTRS within 30 days
following the effective date of the member's service
retirement.
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B. Allows a member to backdate his/her service retirement
benefit effective date to as early as the day following the
date the member terminated his/her employment regardless of
when the service retirement application is received after
the employment termination date.
1.Disability Benefits
A. Makes a member eligible for disability or disability
retirement benefits (depending on whether the member has
Coverage A or Coverage B) after he/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.
B. 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.
C. Requires CalSTRS to calculate a member's final
compensation for service retirement after he/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
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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.
D. 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; however, this is inconsistent
with the service retirement option election revocation or
change process.
E. 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 DB 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.
1.Reinstatement from Retirement
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/her
ability to terminate his/her retirement benefit and
reinstate to active membership after he/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.
1.Retirement Following Reinstatement
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
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benefit amounts and, consequently, current benefit amounts if
a change in a previous benefit impacts a current benefit
calculation.
2.Beneficiary Designation
A. Allows a member to choose the type of benefit he/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 DBS account upon his/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.
1.Supplemental Base Allowance for Disability Allowance to
Service Retirement
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.
1.Benefit Payment Information
Requires CalSTRS to provide electronic copies of a benefit
recipient's payment information which are made available on a
secure Internet Web site. A benefit recipient is mailed a
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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
Internal Revenue Service (IRS) or the Franchise Tax Board
(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.
2.Deferred Compensation Contract Term
A. 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.
B. Employers interpret this to require all new contracts
for a 457(b) program with CalSTRS to be for a five-year
period.
1.403(b) Vendor Registry
Allows CalSTRS to operate a 403(b) vendor registry, and
information bank to enable eligible participants to compare
vendors' 403(b) products. However, the statute that
authorizes CalSTRS to operate the registry references a
regulatory organization that no longer exists because the
National Association of Securities Dealers merged with the
enforcement arm of the New York Stock Exchange to form a
successor organization known as the Financial Industry
Regulatory Authority.
2.Medicare Premium Payment Program (Education Code Sec. 25940)
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
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the MPPP.
This bill:
1.Registered Domestic Partner
Revises and updates the references to sections of the TRL that
conflict with federal law in their treatment of registered
domestic partners.
2.2+2 Retirement Incentive Program
Removes statutory references to the "2+2" program (i.e.,
Education Code Section 22714.5).
3.Nonmember Spouse: Final Compensation
Corrects a reference to the provision of law relating to final
compensation for a nonmember spouse.
4.Working after Retirement
A. 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. Ensures consistent interpretation of the length of the
zero-dollar limit period by consistently using "180
calendar days" as the timeframe.
1.CalSTRS Headquarters
Defines the term "system's headquarters office" to mean the
office building established as the permanent headquarters
facility for CalSTRS in 2009, and removes various redundant
references to Education Code Section 22375, which defined
CalSTRS authority prior to completion of the system
headquarters office.
2.Two-Year Retirement Incentive Program
Clarifies that employers must notify retirees of the
restriction on returning to work within five years imposed by
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the terms of the CalSTRS Retirement Incentive Program.
3.Unused Sick Leave
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.
4.Disability Benefits
A. 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/her
disability benefit application.
B. 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. 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.
(1) 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.
(2) 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. Ensures equal treatment for CB Benefit program
participants receiving a disability annuity who return to
work, regardless of age.
1.Reinstatement from Retirement
A. Clarifies that a member cannot have a reinstatement date
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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/she receives, within 45 days, if the
member cancels his/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/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/she has previously reinstated includes
the amount that he/she was eligible to receive immediately
preceding reinstatement.
1.Retirement Following Reinstatement
Clarifies that a member's retirement allowance calculation
after he/she has previously reinstated, includes the amount
that he/she was eligible to receive immediately preceding
reinstatement.
2.Beneficiary Designation
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.
3.Supplemental Base Allowance for Disability Allowance to
Service Retirement
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. Does
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not apply to any action filed in Superior Court before January
1, 2014.
4.Benefit Payment Information
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 in the benefit amount
due to an annual enhancement or an adjustment to income tax
withholding tables by the IRS or FTB.
5.Deferred Compensation Contract Term
Clarifies that employers are able to negotiate the contract
terms, including the length of the contract, without requiring
a specified initial contract period.
6.403(b) Vendor Registry
Corrects the name of the regulatory organization to the
Financial Industry Regulatory Authority.
7.Medicare Premium Payment Program (EC 25940)
Clarifies that CalSTRS will use the most recent retirement
date if it uses a retirement date to determine eligibility for
the MPPP.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/23/13)
California State Teachers' Retirement System (source)
ARGUMENTS IN SUPPORT : According to CalSTRS, "AB 1379 makes
various technical and conforming changes to the TRL to
facilitate efficient administration of the State Teachers'
Retirement Plan, which includes the DB Program, the DBS Program
and the CB Benefit Program."
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ARGUMENTS IN OPPOSITION : >
ASSEMBLY FLOOR : 76-0, 4/25/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez,
Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,
Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Cooley, Lowenthal, Nazarian, Vacancy
JL:ej 8/29/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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