BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 991 (Committee on Public Employees, Retirement, and Social
Security) - State teachers' retirement
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: June 1, 2015 |Policy Vote: PE&R 4-0 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: June 22, 2015 |Consultant: Maureen Ortiz |
| | |
-----------------------------------------------------------------
This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: AB 991 makes various technical and conforming changes
to the Teachers' Retirement Law.
Fiscal
Impact:
One-time costs of $90,000-$100,000 to CalSTRS (Special Fund)
CalSTRS indicates one-time costs for database changes associated
with broadening the types of payments and collection of
overpayments eligible for dispensation.
Background: The Cash Balance Benefit Program (CB) is a hybrid retirement
plan that has attributes of both a defined benefit (DB) and
defined contribution plan, including employee and employer
AB 991 (Committee on Public Employees, Retirement, and Social
Security) Page 1 of
?
contributions and annuities. It was established to provide an
alternative retirement program for employees who do not mandate
into the DB Program and is optional for employers to offer.
Requirements for mandatory membership into the DB Program depend
on the type of employer (preK-12 or community college district)
and if that employer offers the CB Benefit Program or if they
are a DB-only employer. The CB Benefit Program is for certain
employees of public schools.
Existing law defines "credited service" as service for which the
required contributions have been paid. However, there is a limit
established by Section 401(a)(17) of the Internal Revenue Code
on compensation that counts toward the pension of a public
employee who first becomes a member on or after July 1, 1996,
and no contributions are paid to CalSTRS on compensation in
excess of the limit. The limit is increased based on
cost-of-living increases.
The Teachers' Retirement Board is allowed to establish a
threshold of up to $10 for the processing of a payment or the
collection of an overpayment resulting from an adjustment to a
benefit or other amount paid to a member, participant or
beneficiary. If the amount of the payment or collection is below
the threshold, then CalSTRS is not required to issue the payment
or collect the overpayment until the amount equals or exceeds
the threshold. This allows CalSTRS to avoid the expense of
issuing a payment or collecting an overpayment when the amount
is relatively small. However, there are payments or collections
that are not subject to the threshold, requiring CalSTRS to
process a payment or collection for small amounts.
Proposed Law:
AB 991 makes numerous technical and conforming changes to the
Teachers' Retirement Law including the following provisions:
Clarifications governing membership in the Defined Benefit
Program and eligibility to participate in the Cash Balance
Benefit Program.
AB 991 (Committee on Public Employees, Retirement, and Social
Security) Page 2 of
?
Clarifies the types of compensated leave for which
compensation is creditable for CalSTRS by adding a definition
of "leave of absence" and adding pay for the use of an
employer-approved compensated leave of absence to the
definition of "creditable compensation."
This measure defines "credited service" so that service for
which compensation is in excess of the 401(a)(17) limit, and
no contributions are paid, is deemed to be credited service.
Reduces the number of payments or collections for relatively
small amounts by broadening the types of payments and
overpayments eligible for dispensation when the amounts are
below the threshold.
Clarifies that a person's election of membership into the DB
Program is irrevocable until the member receives a refund of
accumulated retirement contributions, in addition to
terminating employment.
Allows CalSTRS to grant service credit for unused sick leave
reported by employers during the last school year in which the
member earns creditable compensation.
Makes clarifications with respect to retired members,
annuitants and members receiving a disability retirement
benefit, and the amount of the reduction due to compensation
earned in excess of the earnings limit.
Makes various changes to specify and clarify service
retirement calculations for members with multiple retirements.
Clarifies that only the compensation earned for the
performance of retired member or participant activities is
AB 991 (Committee on Public Employees, Retirement, and Social
Security) Page 3 of
?
subject to the applicable postretirement earnings limits (not
employer provided health benefits).
Clarifies the salary cap for members who are subject to PEPRA.
Makes numerous clarifications, typographical corrections,
inadvertent code references, and technical changes.
Staff
Comments: CalSTRS sponsors a bill annually to make technical
and noncontroversial housekeeping changes to the Teachers'
Retirement Law to facilitate efficient administration of the
State Teachers' Retirement Plan, which includes the Defined
Benefit Program, the Defined Benefit Supplement Program, and the
Cash Balance Benefit Program.
-- END --