BILL ANALYSIS Ó SENATE COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT Dr. Richard Pan, Chair 2015 - 2016 Regular Bill No: AB 992 Hearing Date: 6/08/15 ----------------------------------------------------------------- |Author: |Committee on Public Employees, Retirement, and | | |Social Security | |-----------+-----------------------------------------------------| |Version: |2/26/15 As introduced | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Glenn Miles | | | | ----------------------------------------------------------------- Subject: County Employees Retirement Law of 1937: disability retirement: modification of allowance SOURCE: State Association of County Retirement Systems ASSEMBLY VOTES: ----------------------------------------------------------------- |Assembly Floor: |78 - 0 | |--------------------------------+--------------------------------| |Assembly Public Employees, |7 - 0 | |Retirement/Soc Sec Committee: | | ----------------------------------------------------------------- DIGEST: This bill clarifies that a member of a 1937 Act county retirement system ('37 Act) may change his or her optional retirement allowance election if the member retires for service while the member's application for a disability retirement is pending and is later granted a disability retirement benefit. ANALYSIS: Existing law: 1)Authorizes a '37 Act retirement system member to retire for service, if eligible, while awaiting the final determination of the member's application for a disability retirement AB 992 (Committee on Public Employees, Retirement, and Social Security) Page 2 of ? allowance. 2)Provides, when a member retires for service or non-service related disability, a continuing benefit for the retiree's spouse of 60% (or more if the county so elects, as specified) of the member's unmodified benefit if the member predeceases the spouse. 3)Allows a member who retires to elect an optional modified allowance that would provide a lesser service retirement allowance for the member and a continuing lifetime allowance for the member's survivor that would exceed the 60%. 4)Provides, when the member retires for a service-related disability, that the member's unmodified retirement benefit would continue in full to the surviving spouse if the member predeceases the spouse. 5)Allows the surviving spouse, if the member dies while awaiting the final determination on the service disability retirement, to receive the optional or unmodified allowance at the time the disability retirement is granted, whichever is more beneficial, and to have that benefit applied to the entire period of retirement. This bill clarifies that a member who retires for service pending a final determination of an application for a disability retirement benefit may change the election of the optional or unmodified retirement allowance at the time the member is awarded a disability retirement allowance. Background Normally, the member's right to elect the modified retirement option or change the election exists only until the member receives the first payment of any retirement allowance. However, existing law also states that the optional or unmodified type of allowance selected by the member at the time of retirement for service shall not be binding as to the type of allowance the member receives if he or she dies while awaiting the disability determination and is subsequently awarded a disability retirement. Thus, there is some confusion as to whether a member may change AB 992 (Committee on Public Employees, Retirement, and Social Security) Page 2 of ? the election of the optional retirement allowance upon approval of the member's disability application when the member has already received a payment of a service retirement allowance. The benefit for a surviving spouse is higher when the retirement is for service-related disability. A member who is awarded a service disability benefit may be able to receive an unmodified allowance and provide an equivalent or higher continuing benefit to his or her spouse (upon the member's death) than the continuing benefit the member could provide by taking a benefit reduction and choosing one of the optional benefits. This bill is intended to clarify that the member may change the type of option or unmodified benefit he or she chose at service retirement if doing so would result in a better benefit, as if the disability had been already determined at the original time of retirement. FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No SUPPORT: State Association of County Retirement Systems (source) Los Angeles County Employees Retirement Association OPPOSITION: None received ARGUMENTS IN SUPPORT: According to the sponsor: Under existing law, a '37 Act member who files for disability retirement may, if eligible, retire from service while their disability retirement application is pending. If the member is later found to be eligible for disability retirement benefits, appropriate adjustments are made to their retirement allowance retroactive to the effective date of his or her disability retirement. While most '37 Act retirement systems would allow a retiree AB 992 (Committee on Public Employees, Retirement, and Social Security) Page 2 of ? under the above scenario to change their retirement option if the retirement board grants a disability benefit, there appears to be a conflict between two sections of existing law. AB 992 resolves the conflict between these two sections and validates the current practices of most '37 Act systems.