BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1220 (Torres) - CalSTRS Annual Legislation 
          
          Amended: April 10, 2014         Policy Vote: PE&R 4-0
          Urgency: No                     Mandate: No
          Hearing Date: May 5, 2014       Consultant: Maureen Ortiz
          
          This bill does not meet the criteria for referral to the  
          Suspense File.
          
          
          Bill Summary:  SB 1220 makes numerous technical, clarifying and  
          non-controversial changes to the Teachers' Retirement Law (TRL).

          Fiscal Impact: 

              One-time costs of approximately $55,000 to $63,000 to  
              CalSTRS (Special Fund).

          CalSTRS indicates one-time costs for implementing changes to the  
          CalSTRS member database system resulting from the following  
          components:  1) break in service provision: $15,000, 2) cash  
          balance termination requirements: $5,000 to $8,000, and 3)  
          option change for same-sex spouse: $35,000 to $40,000.

          Background:  The enactment of the Public Employees' Pension  
          Reform Act (PEPRA) of 2013 resulted in the creation of two  
          distinct groups of employees:  1) those first hired to perform  
          CalSTRS creditable activities prior to January 1, 2013 and who  
          are subject to a 2% at age 60 retirement formula; and 2) those  
          first hired to perform CalSTRS creditable activities on or after  
          January 1, 2013 and who are subject to the new higher formula of  
          2% at age 62. 

          Proposed Law:  SB 1220 makes various technical, conforming, or  
          minor changes to the Teachers' Retirement Law to facilitate  
          efficient administration of the State Teachers' Retirement Plan  
          which includes the Defined Benefit (DB) Program, the Defined  
          Benefit Supplement (DBS) program and the Cash Balance (CB)  
          Benefit Program.

          SB 1220 makes the following specific changes to the Teachers'  
          Retirement Law:








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             a)    Clarifies the definition of creditable service as it  
               relates to state apportionment to apply only to charter  
               schools.
             b)   Clarifies the definitions of "school year" and "academic  
               year" so that it will also apply to members who work in  
               school districts with nontraditional school years which  
               could be construed to have qualified as a break in service  
               under PEPRA.
             c)   Adds a definition for the term "base allowance" and  
               replaces "initial monthly" and "original" with "base  
               allowance" to reduce inconsistent use of terms that refer  
               to a monthly allowance under the DB Program prior to an  
               annual benefit adjustment and after modification for an  
               option.
             d)   Defines "credit service" for 2% at 62 members so that  
               service for which compensation is in excess of the limit  
               and no contributions are paid is deemed to be credit  
               service.
             e)   Clarifies instances where a JPA may be considered  
               employers in the Teachers' Retirement Law.
             f)   Clarifies "compensation earnable" to make the period of  
               time used for the calculation consistent.
             g)   Clarifies the definition of CalSTRS members subject to  
               PEPRA by specifying that this definition excludes  
               individuals who are employed to perform creditable service  
               within six months of performing service in a concurrent  
               retirement system even if they do not become members of the  
               DB Program within those six months.
             h)   Makes numerous other technical and clarifying changes,  
               clarifies several applicable definitions with the TRL,  
               deletes obsolete code references, and makes conforming  
               changes relating to the administration of the state  
               Teachers Retirement Law resulting from enactment of PEPRA.

          Staff Comments:  SB 1220 is sponsored by CalSTRS to make various  
          technical, conforming or minor amendments necessary for  
          continued effective administration of the California State  
          Teachers' Retirement System.












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