BILL ANALYSIS Ó
AB 996
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 996
(Medina) - As Introduced February 26, 2015
SUBJECT: State Teachers' Retirement System: investment
products
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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REGISTERED SUPPORT / OPPOSITION:
Support
California Teachers Association (Sponsor)
Association of California School Administrators
California Federation of Teachers
California Retired Teachers Association
Faculty Association of California Community Colleges
Opposition
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)
319-3957