BILL ANALYSIS Ó
AB 1379
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1379 (Public Employees, Retirement and Social Security
Committee)
As Amended August 22, 2013
Majority vote
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|ASSEMBLY: |76-0 |(April 25, |SENATE: |37-0 |(September 3, |
| | |2013) | | |2013) |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : Makes various technical and conforming changes to the
Teachers' Retirement Law (TRL) necessary for continued effective
administration of the California State Teachers' Retirement
System (CalSTRS). Specifically, this bill :
1)Revises and updates the references to sections of the TRL that
conflict with federal law in their treatment of registered
domestic partners.
2)Removes statutory references to the "2+2" program, which was
repealed on January 2005, from several sections of law because
this program no longer exists.
3)Corrects a reference to the provision of law relating to final
compensation for a nonmember spouse.
4)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.
5)Defines the term "system's headquarters office" to mean the
office building established as the permanent headquarters
facility for CalSTRS. It also removes various references to
Education Code Section 22375.
6)Clarifies that employers must notify retirees of the
restriction imposed by the terms of the CalSTRS Retirement
Incentive Program.
7)Extends the deadline for reporting unused sick leave to
accommodate the ability of a member to backdate his or her
retirement effective date by allowing an employer to submit
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the information within 30 days of when the application for
retirement is received by CalSTRS.
8)Clarifies that in order to qualify for a disability benefit, 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 application and
corrects the term "disability allowance" to read "disability
retirement allowance," in order to avoid confusion with the
use of the term.
9)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 disability is denied.
10)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 he or she cancels his
or her retirement application.
11)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. The measure also clarifies the
reinstatement effective date requirements and adds an omitted
reference to a related provision of law.
12)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.
13)Clarifies that a member's final compensation is calculated
using compensation earnable, projected final compensation, or
a combination of both.
14)Ensures consistent interpretation of the length of the
zero-dollar limit period by consistently using "180 calendar
days" as the timeframe.
15)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. The measure also
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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.
16)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. This provision does not apply to any
action filed in Superior Court before January 1, 2014.
17)Makes a grammatical correction to clarify that the
supplemental base allowance, used to calculate supplemental
benefits, should not include applicable allowance increases or
enhancements.
18)Clarifies that CalSTRS may designate electronic delivery as
the default method of delivery for benefit payment information
unless a member makes a different selection.
19)Clarifies that employers are able to negotiate the contract
terms to participate in the 457(b) program offered by CalSTRS,
including the length of the contract, without requiring a
specified initial contract period.
20)Specifies the manner in which a member's beneficiary would
receive the balance of a Defined Benefit Supplement (DBS)
account period certain annuity and adds omitted references to
a related provision of law.
21)Corrects the name of the regulatory organization in the
sections of law authorizing CalSTRS to operate a 403(b) vendor
registry and information bank.
22)Clarifies that CalSTRS will use the most recent retirement
date if it uses a retirement date to determine eligibility for
the Medicare Premium Payment Program (MPPP).
23)Ensures equal treatment for Cash Balance (CB) Benefit Program
participants receiving a disability annuity who return to
work, regardless of age.
The Senate amendments :
1)Clarify that the disability allowance a member was eligible to
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receive on the effective date of the disability allowance is
to be used for the purposes of determining postretirement
benefit increases. This provision does not apply to any
action filed in Superior Court before January 1, 2014.
2)Make a grammatical correction to clarify that the supplemental
base allowance, used to calculate supplemental benefits,
should not include applicable allowance increases or
enhancements.
3)Clarify that CalSTRS may designate electronic delivery as the
default method of delivery for benefit payment information
unless a member makes a different selection.
4)Clarify that employers are able to negotiate the contract
terms to participate in the 457(b) program offered by CalSTRS,
including the length of the contract, without requiring a
specified initial contract period.
5)Correct the name of the regulatory organization in the
sections of law authorizing CalSTRS to operate a 403(b) vendor
registry and information bank.
6)Remove additional references to Education Code Section 22375.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
.
COMMENTS : According to CalSTRS:
1)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.
Therefore, the law also includes specific provisions where
registered domestic partners are not treated the same as
spouses due to federal restrictions. Education Code (EC)
Section 22007.5 makes several references to provisions in
state law that conform to the restrictions of federal law,
including one that does not allow a member to designate a
registered domestic partner as the option beneficiary for the
75% option and the Compound option. However, some of the
references in EC Section 22007.5 to these restrictions are
cited incorrectly.
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2)The "2+2" retirement incentive program, which was operative
from January 1, 2004, through December 31, 2004, 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 section of law (EC Section 22714.5) that authorized this
program was repealed on January 1, 2005, and subsequently
removed from statute.
3)Final compensation is generally 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)Postretirement employment restrictions and earnings limits are
specified in EC Sections 24214 and 24214.5. AB 178 (Gorell),
Chapter 135, Statutes of 2012, excluded from these
restrictions and limits 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. In addition, a new section of law
enacted by AB 340 (Furutani), Chapter 296, Statutes of 2012,
defined "retired member activities" and incorporated the
third-party exclusion in the definition. However,
"limited-term" remains undefined.
5)CalSTRS has the authority to select, purchase, or acquire in
the name of the Teachers' Retirement Plan, an office building
in the greater metropolitan Sacramento area, including the
City of Sacramento, the County of Sacramento, and the eastern
part of Yolo County, for the purposes of establishing a
permanent headquarters facility for the system. In 2009, when
construction of the current headquarters building was
completed, CalSTRS staff moved into the new headquarters.
Many sections of law continue to refer to EC Section 22375
that authorizes the headquarters office, and there is no
specifically defined meaning of "system's headquarters
office."
6)Current law allows school districts to offer the CalSTRS
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Retirement Incentive Program, in which a member can receive
two additional years of service credit to encourage
retirement. Members lose the ongoing increase in their
benefit if they return to work within five years with the
school district that granted the incentive credit. Existing
law requires employers to advise reemployed retired members of
earnings limitations, as well as to report all postretirement
earnings. However, existing law 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.
7)Current law allows a retiring member to receive service credit
for unused sick leave certified 0by the member's last employer
or employers. The employer is required to certify the number
of unused sick leave days to CalSTRS within 30 days following
the effective date of the member's service retirement.
However, the provisions of SB 349 (Negrete McLeod), Chapter
703, Statutes of 2011, allowed 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.
If a member backdated his or her retirement benefit effective
date, the employer would be unable to comply with the law in a
timely manner.
8)CalSTRS members are eligible for disability benefits after
they are vested and meet other requirements. Current law
specifies time periods in which a member can apply for a
disability benefit, including the period while the member is
employed. A broad interpretation of "employed" could allow an
on-call substitute teacher who has a contract with a school
district, but who has not worked in over four months, to be
considered employed, which would circumvent the requirement to
be continuously incapacitated from the last day of actual
performance of service.
9)A member who is eligible to retire may receive a service
retirement benefit if that member is waiting for a disability
benefit application to be evaluated. In the event that the
member receives approval of his or her disability benefit
application, the member becomes a disabled member and is paid
a disability benefit in place of a service retirement benefit.
Under existing law, different requirements apply to the
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service retirement benefit effective date depending on whether
a service retirement application or an application for service
retirement during evaluation of disability is submitted.
10)CalSTRS members may submit an application for retirement with
any effective date, including backdating to as early as
January 1, 2012, as long as that date meets specified
conditions. AB 178 (Gorell), Chapter 135, Statutes of 2012,
added the condition that the effective date can be no earlier
than the date on which a member exercises his or her ability
to terminate his or her retirement benefit and reinstate to
active membership after he or she retires.
11)Existing law allows a retired member to reinstate to active
membership and re-retire within one year. Such a member is
required to keep the same 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.
12)CalSTRS continually reviews accounts for accuracy and on
occasion has to adjust previous benefit amounts when a data or
calculation error is found. CalSTRS has a fiduciary
responsibility to adjust previous benefit amounts and,
consequently, current benefit amounts if a change in a
previous benefit impacts a current benefit calculation.
13)Under current practice, CalSTRS calculates 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, projected final compensation,
or a combination of the two. The law currently specifies that
for calculations where the member returned to active service
for less than three years, CalSTRS is to use a combination of
the two, not one or the other.
14)Retired members are subject to a zero-dollar earnings limit
for the first 180 calendar days after their most recent
retirement. As adopted by AB 340 (Furutani), Chapter 296,
Statutes of 2012, EC Section 24214.5 inconsistently references
this period of time, referring to it as both "180 days" and
"six consecutive months."
15)Existing law provides that a member may only revoke or change
a disability option election before the disability retirement
benefit effective date or within 30 days of the date of
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mailing of an acknowledgement notice. This is inconsistent
with the service retirement option election revocation or
change process.
16)Current law allows a 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 or her death. The law is silent
regarding the manner in which the beneficiary must receive the
balance of the DBS account. The CalSTRS corporate database
was programmed to administer the payment of the DBS account
balance differently, depending on whether the designated
beneficiary is a person or an entity. However, paying
different designated beneficiaries differently is not
specifically permitted by law.
17)The MPPP was established to provide retired members the
benefit of CalSTRS paying their Medicare Part A premium if
they meet certain eligibility requirements. One of those
requirements is 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.
18)Existing law requires the termination of a disability annuity
if a participant who is receiving a disability annuity under
the 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. Current law does not
address any consequences for a participant over the age of 60
receiving a disability annuity who returns to work.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0001906