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
          
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          |Version: June 1, 2015           |Policy Vote: PE&R 4-0           |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date:  June 22, 2015    |Consultant: Maureen Ortiz       |
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          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  
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          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.








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           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  








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            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.





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