BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 963| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 963 Author: Bonilla (D) Amended: 8/31/15 in Senate Vote: 21 SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 7/13/15 AYES: Pan, Morrell, Beall, Fuller, Hall SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/17/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen ASSEMBLY FLOOR: 77-0, 5/7/15 (Consent) - See last page for vote SUBJECT: Teachers Retirement LawTeachers Retirement Law. SOURCE: California State Teachers Retirement System DIGEST: This bill clarifies the definition of service that can be reported to the California State Teachers' Retirement System (CalSTRS) and provides CalSTRS membership and creditable service for those in partial certificated positions. This bill also remedies membership issues for individuals in classified positions who were erroneously reported to CalSTRS by their employers. Senate Floor Amendments of 8/31/15 eliminates an earlier amendment specifying the manner in which compensation earnable for the purpose of determining a retirement benefit is calculated for outgrowth activities performed by a member of CalSTRS, thus returning the statute to existing law. AB 963 Page 2 ANALYSIS: Existing law: 1) Establishes CalSTRS, which is the state retirement system for certificated educators of students from prekindergarten through community college level and specifies that employees reported to CalSTRS must adhere to certification or credentialing requirements, such as those adopted by the Commission on Teacher Credentialing, the minimum standards adopted by the California Community Colleges Board of Governors, or provisions required under an approved charter for the operation of charter schools, as specified. 2) Establishes, in CalSTRS, both a traditional defined benefit plan (DB) and a cash balance plan, known as the Defined Benefit Supplement Plan (DBS), which pays an annuity or a lump sum at retirement or separation based on the cash balance in the DBS at that time. In general, employer and member contributions for regular credited service are deposited in the DB and contributions on non-regular service (e.g., service beyond a full year for teaching overload classes) are deposited in the DBS. 3) Requires that school employers report "creditable service" to CalSTRS and defines which types of employment, or creditable service, may be attributable to the DB for purposes of determining a retirement allowance and which types may be attributable to the DBS. In addition to teachers, school counselors, health professionals, those who design curriculum and train teachers, superintendents, and other educational professionals may have their service credited in CalSTRS. The State is also a CalSTRS school employer because it administers teaching programs in the Department of Corrections and Rehabilitation and state schools for the deaf and blind. 4) Gives the CalSTRS board the final authority on how educational service not specifically identified in statute may or may not be credited in CalSTRS. AB 963 Page 3 5) Defines which types of "creditable compensation" may be credited under the DB plan and which types of compensation may be credited under the DBS plan and gives CalSTRS final authority on whether to credit compensation to the DB or the DBS. 6) Requires that the service of non-certificated employees, such as clerical, maintenance, and law-enforcement staff, be reported and credited in the California Public Employees' Retirement System (CalPERS), as specified. 7) Allows an individual whose service has been credited under CalSTRS, who then changes positions to perform service that would be credited under CalPERS, to elect to remain in CalSTRS, and vice versa, as specified. This bill: 1) Reorganizes the definition of "creditable service" and creditable service "activities" in the DB and DBS Programs to clarify the certification qualifications, minimum standards and other requirements that need to be met in order to perform creditable service for prekindergarten through grade 12, community colleges, and charter school employers. Sections 22119.5, 26113 2) Specifies that activities connected with the enforcement of laws relating to compulsory education and child welfare activities, and mentoring, including program support advisors and coaches working in teacher and administrator preparation programs, as specified, are creditable in CalSTRS. Sections 22119.5, 26113 3) Clarifies that a prekindergarten through grade 12 employer may include the State. Sections 22119.5, 26113 4) Specifies that the work of community college presidents and chancellors is creditable service along with the work of superintendents currently in statute if the work is listed as a creditable activity. Sections 22119.5, 26113 AB 963 Page 4 5) Ensures that the work of consulting teachers participating in the Peer Assistance and Review Program for Teachers is considered creditable service if that work is listed as a creditable activity. Sections 22119.5, 26113 6) Clarifies that specified work that does not meet the Commission on Teacher Credentialing certification qualifications or the California Community Colleges Board of Governors minimum standards must be any of the creditable service activities listed in order to be creditable. Sections 22119.5, 26113 7) Clarifies that outgrowth activities do not require a credential and are only creditable when they are performed in addition to other creditable service. Sections 22119.5, 26113 8) Allows individuals performing service in a partial certificated full-time position (e.g., a superintendent who also acts as a budget director) on a part-time basis to have their service entirely creditable in CalSTRS. Sections 22119.5, 26113 9) Provides that the service of individuals whose employers have erroneously reported their service to CalSTRS is creditable to the DB Program if the service was performed on or before December 31, 2015, and reported to CalSTRS as creditable service. Section 22119.6 10)Requires employers, upon request from CalSTRS, to provide information regarding the requirements that need to be met in order to perform creditable service. Section 22458.5 11)Allows individuals whose employers have erroneously reported their service to CalSTRS, whose service is deemed creditable, including those who retired on or before December 31, 2015, to elect to have that service covered by a different public retirement system, as specified. Section 22508.7 12)Specifies that if a CalSTRS member elects to have service moved to a different public retirement system, any member contributions, credited interest and employer contributions, less amounts already paid to the individual, shall be returned to the employer. Any amounts due to CalSTRS shall AB 963 Page 5 be collected from the individual before he or she can be covered by another public retirement system. Section 22508.7 13)Allows individuals who had service removed from CalSTRS and reported to a different public retirement system, at the direction of CalSTRS, including those receiving a benefit on or before December 31, 2015, to elect to have that service covered by the DB Program, as specified. Individuals making this election become CalSTRS members and have all rights of a member, including electing to stay in CalSTRS if he or she is hired into a position that requires membership in a different public retirement system as specified in current statute. Section 22508.7 14)Provides that all individuals who make such an election as outlined above, maintain their current status pursuant to the California Public Employees' Pension Reform Act of 2013 (PEPRA). Section 22508.7 15)Specifies that the election made by an individual who performs service deemed creditable, as specified, is irrevocable and must be made in writing on a form prescribed by CalSTRS on or before June 30, 2016, as specified. Section 22508.7 16)Specifies that CalSTRS is under no obligation to identify, locate, or notify individuals who may have had service erroneously reported by their employers to CalSTRS. Section 22508.7 17)Makes other technical and conforming changes and mirrors amendments also included in AB 991(Assembly Public Employees, Retirement and Social Security Committee, Chapter 123, Statutes of 2015), CalSTRS annual housekeeping bill. Sections 22119.2, 22119.322146, 22164.5, 26135.7 Comments According to CalSTRS, among the activities listed as creditable service are school activities related to, and an outgrowth of, the instructional and guidance program of the school when they are performed in addition to other creditable service. AB 963 Page 6 Employees reported to CalSTRS must adhere to credentialing requirements adopted by the Commission on Teacher Credentialing, minimum standards adopted by the California Community Colleges Board of Governors or provisions required under an approved charter for the operation of a charter school. The work of superintendents is excluded from these requirements. In addition, if a CalSTRS member is hired in a position to perform activities not creditable to CalSTRS, he or she can elect in writing within 60 days from the date of hire to stay in CalSTRS, as specified. If CalSTRS discovers that an individual has not performed creditable service, the system requires employers to re-report that service to the appropriate retirement system, and contributions received would be returned to the employer. Employers and constituent groups claim that service is being misreported because the credential requirements are confusing, and some of the activities listed in the law are vague. Those groups recommend CalSTRS should, consequently, broaden the definition of "creditable service" to allow certain positions, which they believe are generally performing activities included in the definition of "creditable service," to be reported to and accepted by the system. Prior Legislation SB 1220 (Torres, Chapter 755, Statutes of 2014) made various technical, conforming or minor changes to the Teachers' Retirement Law to facilitate efficient administration of the State Teachers' Retirement Plan, including specifying how to determine compensation earnable for outgrowth activities. AB 1381 (Assembly Public Employees, Retirement and Social Security Committee, Chapter 559, Statutes of 2013) made various technical corrections and conforming changes that align the Teachers' Retirement Law with the provisions of PEPRA, as enacted in AB 340 (Furutani). AB 340 (Furutani, Chapter 296, Statutes of 2012) made various changes to the CalSTRS benefit structure that affect all CalSTRS members, including adding the definition of "retired member activities" for the DB Program. AB 2700 (Lempert, Chapter 1021, Statutes of 2000) made all AB 963 Page 7 compensation for creditable service creditable to CalSTRS and credited member and employer contributions for service in excess of 1.000 years of service per school year to the DBS Program. AB 948 (Gallegos, Chapter 394, Statutes of 1995) established definitions of various employment activities that are considered creditable service and provided that the earnings limitation on postretirement service is applied only to compensation earned from creditable service. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee, CalSTRS anticipates one-time technology costs estimated at below $100,000 (non General Fund). Other administration costs will be minor and absorbable. SUPPORT: (Verified9/1/15) California State Teachers' Retirement System (source) Alliance of Schools for Cooperative Insurance Programs Association of California Community College Administrators Association of California School Administrators Association of Chief Human Resources Officers/Equal Employment Officers California Association of School Business Officials California Retired Teachers Association California School Boards Association California Teachers Association Community College League of California Foothill-De Anza Community College District Los Angeles Community College District Los Rios Community College District North Orange County Community College District Rancho Santiago Community College District Riverside Community College District Riverside County Superintendent of Schools Santa Clarita Community College District School Employers Association of California Schools Excess Liability Fund Shasta-Tehama-Trinity Joint Community College District AB 963 Page 8 Siskiyou Joint Community College District South Orange County Community College District Statewide Association of Community Colleges West Kern Community College District Two individuals OPPOSITION: (Verified9/1/15) None received ARGUMENTS IN SUPPORT: CalSTRS states that some employers have erroneously reported service to CalSTRS due to confusion surrounding the definition of "creditable service" in the Teachers' Retirement Law. Due to this perceived vagueness, individuals have been removed from CalSTRS or have had service incorrectly reported to a different public retirement system. CalSTRS is sponsoring AB 963 to ensure more effective and efficient administration of the retirement plan and to help alleviate confusion among employers on how to determine what service is creditable to CalSTRS. ASSEMBLY FLOOR: 77-0, 5/7/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Campos, Roger Hernández, Steinorth Prepared by:Pamela Schneider / P.E. & R. / (916) 651-1519 9/1/15 21:30:43 AB 963 Page 9 **** END ****