BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 996

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          Date of Hearing:  April 22, 2015 


                                  Rob Bonta, Chair

          AB 996  
          (Medina) - As Introduced February 26, 2015

          SUBJECT:  State Teachers' Retirement System:  investment  

          SUMMARY:  Requires the California State Teachers' Retirement  
          System (CalSTRS) to include in its 403(b) investment information  
          bank side-by-side comparison information on registered vendors  
          and requires all school districts, community college districts,  
          and county offices of education to adopt a policy regarding  
          campus access by 403(b) vendors.  

          EXISTING LAW:  

          1)Permits, as a matter of federal law, employees to make pre-tax  
            contributions to tax-deferred retirement savings programs  
            commonly known by their section numbers in the Internal  
            Revenue Code (e.g., 401(k), 403(b), 457).  These plans are  
            commonly referred to as "defined contribution plans."

          2)Permits, as a matter of federal law, public school employees,  
            employees of 501(c)(3) entities, and ministers to participate  
            in a 403(b) defined contribution plan.


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          3)Requires CalSTRS to establish a registration process for  
            vendors that wish to offer 403(b) retirement plan investment  
            products to employees of school districts, community college  
            districts and county offices of education.

          4)Requires CalSTRS to establish and maintain an impartial  
            investment information bank, via an Internet Web site,  
            containing information about the retirement investment  
            products offered by the registered vendors that contains  
            objective comparisons of participant cost and education,  
            vendor experience and services. 

          5)Authorizes CalSTRS to organize the date in the information  
            bank but prohibits them from ranking or giving preference to a  
            vendor or product.

          6)Allows school employers to select and provide retirement  
            investment product options to its employees from among the  
            registered vendors, as specified.

          FISCAL EFFECT:  Unknown.

          COMMENTS:  According to the author, "Educators need access to  
          financial products, such as 403(b) plans, to ensure a  
          financially secure retirement.  These plans should be  
          transparent and financially beneficial so that educators are  
          able to make both educated and responsible choices.  Too often,  


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          educators have been lured into less than secure products by free  
          pizza and a sales pitch in the lunch room by a vendor who is  
          more concerned about commission than the retirement security of  
          those they are pitching products to.

          "Campus policies regarding 403(b) vendor access often varies  
          from district to district and ranges from prohibited to open  
          with permission from local educators.  By requiring a campus  
          policy on vendors' access, both educators and school district  
          officials will be able to control the access of

          403(b) vendors on school campuses."

          According to the sponsor of the bill, "?AB 996 requires more  
          comprehensive information to be added to the existing 403(b)  
          Compare Website that is managed by the California State  
          Teachers' Retirement System.  It is imperative for educators to  
          have additional educational resources that help them to  
          understand what a 403(b) product is so that they can make  
          educated decisions.  By providing easier accessibility and more  
          apples to apples comparisons, educators will have additional  
          tools to help them to select products that will work for their  
          own retirement needs." 

          Opponents are requesting that the provision requiring the  
          side-by-side comparison be amended so that the comparison of  
          each registered vendor is segregated by the types of products  
          offered by each vendor, i.e. mutual funds, variable annuities  


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          and fixed annuities.  They believe this change would make for a  
          more useful comparison and allow those interested in specific  
          investment options a simpler way to do their research.

          Additionally, opponents are suggesting that the provision  
          requiring districts to adopt a policy regarding campus access by  
          403(b) vendors should be amended to clearly state that this  
          provision is not intended to change or alter any rules or  
          procedures that these entities currently have in place but only  
          to require these entities to officially maintain such a policy  
          and that the policy must fully comply with the requirements of  
          the Internal Revenue Service (IRS), conform to provisions of the  
          California Insurance Code, and that the local school boards,  
          community college districts and county offices of education  
          consult with their applicable insurance committees or collective  
          bargaining representative committees on the appropriate policy  
          to be maintained.

          AB 1949 (Cedillo) of 2012, would have permitted a school  
          district to restrict the investment products offered in its  
          403(b) plan based on a competitive review process.  This bill  
          failed passage in the Assembly Committee on Insurance.

          AB 2099 (Cedillo) of 2012, would have authorizes a pilot project  
          to allow the Los Angeles Unified School District and the Los  
          Angeles Community College District to select specific 403(b)  
          products offered by 4 or more vendors of 403(b) products or  


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          establish a list of preferred vendors as recommended by a joint  
          committee made up exclusively of bargaining unit members and  
          management as defined.  This bill was amended to include these  
          provisions late in the legislative session and was never  
          referred to a committee for a hearing.          



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          California Teachers Association (Sponsor)

          Association of California School Administrators

          California Federation of Teachers

          California Retired Teachers Association

          Faculty Association of California Community Colleges


          American Fidelity Assurance Company (Oppose unless Amended) 

          AXA Equitable life Insurance Company (Oppose unless Amended)

          Variable Annuity Life Insurance Company (Oppose unless Amended)


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          Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)