BILL ANALYSIS Ó
SB 1220
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Date of Hearing: June 25, 2014
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Rob Bonta, Chair
SB 1220 (Torres) - As Amended: June 12, 2014
SENATE VOTE : 33-0
SUBJECT : State teachers' retirement.
SUMMARY : Makes various technical, conforming, or
non-controversial changes to the Teachers Retirement Law (TRL)
to facilitate efficient administration of the California State
Teachers Retirement (CalSTRS) Plan, which includes the Defined
Benefit (DB) Program, the Defined Benefit Supplement (DBS)
Program, and the Cash Balance Benefit (CB) Program (CB).
Specifically, this bill :
1)Defines the term "base allowance" and corrects various
references to a member's base allowance.
2)Clarifies that months not included in the normal school year
will not be considered a break in service and ensures that
members are treated consistently when calculating final
compensation.
3)Makes minor punctuation corrections and removes unnecessary
references.
4)Clarifies that the definition of CalSTRS members subject to
Public Employees' Pension Reform Act of 2013 (PEPRA) 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.
5)Specifies that when a member is performing outgrowth
activities, the compensation earnable for those activities is
determined as if the creditable compensation if earned at the
lowest pay rate for other creditable service activities that
the member performs for the same employer during the same
year.
6)Repeals an obsolete section and clarifies the definition of
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creditable service and that the clause related to state
apportionment is only meant to be applicable to charter
schools.
7)Defines "credited service" for 2% at 62 members so that even
though no contributions are made on compensation earned above
the limit (and therefore not eligible for a resulting benefit)
the member still earns appropriate service credit for the
amount of time worked.
8)Specifies that joint powers authorities (JPAs) are among the
entities considered to be employers so long as the JPA meets
specified criteria.
9)Clarifies that the time periods used to calculate final
compensation for the three-year timeframes are equal to 36
months in order to be consistent with the 12-month calculation
and requires employer certification that a member's salary was
reduced because of a reduction in school funds in order to use
36 non-consecutive months to calculate final compensation.
10)Inserts a reference to the principles supporting the
integrity of the Teachers' Retirement Fund with regard to
determining which compensation is not eligible for credit in
the DB Program and instead is credited to the DBS Program.
11)Clarifies that written employment agreements are included in
the provisions that restrict employers from paying the
member's portion of contributions to the DB Program.
12)Provides CalSTRS the authority to issue a refund payment by
direct deposit if requested by the member, in lieu of mailing
a refund payment.
13)Clarifies that a member cannot currently be receiving a
retirement benefit when he/she subsequently applies for a
disability benefit.
14)Removes the unclear term "retiring" and clarifies that the
limit on backdating applies to a member who submits an
application to retire on or after the statutorily applicable
date.
15)Adds references to code sections authorizing retirement that
were previously left out of the provisions of law pertaining
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to the longevity bonus and the career factor.
16)Opens a window period in which a member who was married to a
same-sex spouse and who elected a beneficiary option under the
DB Program, or an annuity under the DBS Program, including
disability annuities, prior to June 26, 2013, can change
his/her option or annuity election if the member was prevented
from selecting the option of his/her choice due to the federal
age restrictions previously in place that applied to same-sex
spouse beneficiaries.
17)Comprehensively reorganizes the sections of Chapter 28 of the
TRL pertaining to option beneficiary elections, repeals
obsolete sections and references, aligns references to the new
section numbers, and clarifies the provisions of law related
to survivor benefit options, as specified.
18)Clarifies resulting changes to the member's benefit and when
and how a member may elect a new option beneficiary with
regard to the option beneficiary pre-deceasing the member.
19)Specifies the requirements for naming a new option
beneficiary upon re-retirement, and the situations in which
anew beneficiary election may become invalid for retired
members who reinstate into active service.
20)Clarifies that with regard to a dissolution of marriage, a
judgment of nullity, or an order of separate maintenance made
within one year of the termination of benefits and
reinstatement, CalSTRS will remove or change the option
election in accordance with the court order, and any
additional changes cannot be made until one year from the
termination effective date.
21)Clarifies that when a member has elected a compound option
under the DB Program, and also elects a DBS annuity, the DBS
annuity is subject to specified age restrictions imposed by
federal law.
22)Simplifies the definition of "vendor" to include any
organization qualified to do business in California that
offers 403(b) products, and deletes two unnecessary
definitions of 403(b) vendor types.
23)Allows a CB Program participant to apply for a retirement or
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termination benefit without requiring employer certification
that employment has been terminated if no contributions are
reported by the employer within the previous 12 months,
consistent with the requirements in the DB Program.
24)Makes various technical, conforming, changes to the TRL.
EXISTING LAW :
1)Establishes CalSTRS, which provides retirement, death, and
disability benefits to over 868,000 members and retirees who
are or were educators in California K-12 schools and community
colleges.
2)Creates three retirement benefit programs in CalSTRS: (a) the
DB Program, which covers all eligible members and provides a
retirement benefit based on age at retirement, years of
service, and the member's final compensation; (b) the CB
Program, which primarily is for part-time educators who do not
participate in, or are not eligible for, the DB Program; and
(c) the DBS Program, which takes contributions from members
and employers for service performed that is not eligible for
coverage in the DB Program (such as teaching classes in excess
of a full-time load, coaching, or other designated
activities).
3)Creates, due to enactment of the PEPRA, two distinct groups of
employees: (a) those first hired to perform CalSTRS creditable
activities prior to January 1, 2013 - the 2% at age 60
members; and (b) those first hired to perform CalSTRS
creditable activities on or after that date - the 2% at age 62
members.
4)Defines creditable service by providing a list of activities
that are considered creditable service, including school
activities related to, and an outgrowth of, the instructional
and guidance program of the school when performed in addition
to other creditable service. These outgrowth activities
include assignments such as coach, club advisor, department
chair and mentor teacher.
5)Provides for periodic increases to a retired members base
allowance to mitigate inflation and ensure adequate purchasing
power; however, the term base allowance is not always
consistently cited.
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6)Defines "creditable service" for the DB Program and CB Program
by providing a list of activities that are considered
creditable service, including employment in a charter school
that is eligible for state apportionment.
7)Allows two or more public agencies to join together and
operate collectively under a JPA; however, JPAs are not
explicitly included in the current definition of employer in
the TRL.
8)Gives CalSTRS the authority to select, purchase, or acquire an
office building for the purposes of establishing a permanent
headquarters facility for the system.
9)Specifies which employer and member contributions on
compensation are to be credited to the DBS Program, including
contributions on compensation not eligible for credit in the
DB Program.
10)Restricts an employer from paying member contributions to the
DB Program, as specified.
11)Authorizes CalSTRS to provide a requested refund of member
contributions, as specified, by placing the payment in the
mail, addressed to the address directed by the member.
However, CalSTRS is not specifically authorized to issue a
member's refund through direct deposit.
12)Allows a retired member to terminate his/her retirement and
reinstate to active, creditable service. After at least one
year of additional active service, the member, if eligible,
may apply for disability benefits. Termination of the
retirement benefit is required prior to applying for a
subsequent disability benefit.
13)Allows a member to submit an application for service
retirement during a period either before or after the chosen
retirement date, within specified parameters, including
limited backdating of the chosen retirement date. In
addition, an individual awaiting a disability determination
may apply for service retirement, as specified and if so
eligible. However, the term "retiring" as used in these
provisions is not clearly defined.
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14)Allows a member receiving a disability retirement benefit to
terminate the disability benefit and later retire for service.
Upon subsequent service retirement, the member may be
eligible for the longevity bonus; however, the law omits
reference to that benefit enhancement from the service
retirement calculation. In addition, existing law
inconsistently applies the longevity bonus and career factor
when a member moves from disability allowance to service
retirement. Moreover, the age factor and the exclusion of the
children's portion of the disability allowance are missing
from the calculation of service retirement when a member moves
directly from disability allowance to service retirement.
15)Establishes that government benefit providers are to treat
same-sex married couples equally in all areas of benefit
administration, including taxes and survivor benefits.
16)Requires CalSTRS to administer an impartial website
information bank for vendors wishing to sell 403(b) products
in the state of California. Vendors must register with the
Internet Web site and provide certain information on their
companies and the products offered. The Internet Web site,
known as 403bCompare, provides CalSTRS members and
participants, classified employees and eligible state
employees the ability to review and compare information about
tax-deferred retirement investment 403(b) products provided by
the registered vendors.
FISCAL EFFECT : According to the Senate Appropriations
Committee, "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."
COMMENTS : According to CalSTRS, "This bill is necessary to
permit continued effective administration of the California
State Teachers' Retirement System. Any administrative costs
associated with this bill are minor and absorbable, and there
are no program costs resulting from this bill."
REGISTERED SUPPORT / OPPOSITION :
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Support
California State Teachers' Retirement System (Sponsor)
California Teachers Association
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957