California Legislature—2015–16 Regular Session

Assembly Bill No. 1875

Introduced by Assembly Member Chávez

February 10, 2016

An act to amend Sections 22105.5, 22149, 22450, 22451.5, 23301, 24300, 24300.1, 24307, 24309, 24331, 25015, 26306, 26811, and 26910 of, and to add Sections 24613.5 and 26106.5 to, the Education Code, relating to state teachers’ retirement.

LEGISLATIVE COUNSEL’S DIGEST

AB 1875, as introduced, Chávez. State teachers’ retirement: option beneficiaries: trusts.

Existing law, the Teachers’ Retirement Law, establishes the State Teachers’ Retirement System (STRS) and creates the Defined Benefit Program of the State Teachers’ Retirement Plan, which provides a defined benefit to members of the program, based on final compensation, credited service, and age at retirement, subject to certain variations. STRS is governed by the Teachers’ Retirement Board. Existing law establishes the Cash Balance Benefit Program, administered by the Teachers’ Retirement Board, as a separate benefit program within the State Teachers’ Retirement Plan in order to provide a retirement plan for persons employed to perform creditable service for less than 50% of full-time service. Existing law permits members of STRS to select option beneficiaries and participants in the Cash Balance Benefit Program to select annuity beneficiaries for the purpose of receiving a retirement allowance or an annuity, respectively, upon the member’s or the participant’s death. Existing law specifically prohibits a trust from being an option beneficiary under STRS.

This bill would permit irrevocable trusts, with specified characteristics, that are established for individuals who are disabled to be an option beneficiary or annuity beneficiary, as described above, for the defined benefit program and the Cash Balance Benefit Program. The bill would require the trust to be for the sole benefit of a single beneficiary and that any other beneficiaries be limited to successor beneficiaries. The bill would require, with respect to the trust’s interest in the member’s or in the participant’s benefits, that the beneficiary of the trust be considered the designated beneficiary for the purpose of determining eligibility for, and the amount and determination of, benefits.

The bill would require a member or participant to provide specified documentation if a trust is to be designated an option beneficiary, including a certification that the trust meets relevant requirements, to be signed by the member or participant and acting trustees. The bill would require trustees acting at the time of the death of the member or participant to provide a similar, signed certification and additionally certify that the trust has not be revoked, modified, or amended, in a manner that would cause the certification to be incorrect. The bill would allow a member or participant to change a beneficiary designation without penalty for the purpose of designating a trust as a beneficiary if certain requirements are met. The bill would require, if the trust becomes invalid or terminates, that the benefit or annuity be paid to the beneficiary, if eligible, with associated rights and responsibilities also accruing to that person. The bill would provide that the board is not required to determine the powers of a trustee or the validity of a trust in the context, that such a determination shall not be inferred and, provided the board acts in good faith, as specified, would immunize the board, system, and plan from liability.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 22105.5 of the Education Code is
amended to read:

22105.5.  

“Annuity beneficiary” means the person or begin delete persons end delete
begin insert trust end insert designated by a member pursuant to Section 25011, 25011.1,
25018, or 25018.1 to receive an annuity under the Defined Benefit
Supplement Program upon the member’s death.

SEC. 2.  

Section 22149 of the Education Code is amended to
read:

22149.  

begin insert (a) end insert begin insert   end insert “Option beneficiary” means the person begin insert or trust end insert
designated by a member to receive a retirement allowance under
the Defined Benefit Program upon the member’s death.

begin insert

(b) For purposes of this section, “trust” means an irrevocable
trust with the following characteristics:

end insert begin insert

(1) The trust satisfies the requirements of subparagraph (A) or
(C) of paragraph (4) of subdivision (d) of Section 1396p of Title
42 of the United States Code.

end insert begin insert

(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
of Title 26 of the Code of Federal Regulations.

end insert begin insert

(3) The trust, or the account in a pooled trust, is for the sole
benefit of a single beneficiary and other beneficiaries to the trust,
if any, are successor beneficiaries.

end insert begin insert

(4) The beneficiary of the trust who is beneficiary with respect
to the trust’s interest in the member’s benefit shall be considered
the designated beneficiary for the purpose of determining eligibility
for, and the amount and duration of, benefits under the plan.

end insert

SEC. 3.  

Section 22450 of the Education Code is amended to
read:

22450.  

(a) Each member and beneficiary shall furnish to the
board any information affecting his or her status as a member or
beneficiary of the Defined Benefit Program as the board requires,
which may include, but shall not be limited to, the following:

(1) Financial statements, certified copies of state and federal
income tax records, or evidence of financial status.

(2) Employment, legal, or medical documentation.

(b) A member who has not had any creditable service reported
during the prior school year shall provide the system with his or
her current mailing address and beneficiary information.

begin insert

(c) For a trust that is designated as an option beneficiary, as
defined in Section 22149, the following documentation is required:

end insert begin insert

(1) The member shall provide an acknowledged certification
that includes each declaration prescribed by clause A-6 of Section
1.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and
a declaration that the trust meets the requirements and conditions
as defined in Section 22149. The certification shall be submitted
to the system at the time of election of the beneficiary and is
required for the election to be valid. The certification shall be in
the form of an acknowledged declaration signed by the member
and by all then-acting trustees of the trust.

end insert begin insert

(2) After the member’s death, the then-acting trustee or trustees
of the trust shall provide an acknowledged certification that
includes each of the declarations prescribed by clause A-6 of
Section 1.401(a)(9)-4 of Title 26 of the Code of Federal
Regulations and a declaration that the trust meets the requirements
and conditions provided in Section 22149. The certification by the
trustee or trustees of the trust shall be submitted to the system
upon the member’s death and shall additionally certify that the
trust has not been revoked, modified, or amended in any manner
which would cause the representations contained in the
certification to be incorrect. The certification shall contain a
statement that it is being signed by all of the then-acting trustees
of the trust and shall be in the form of an acknowledged declaration
signed by all the then-acting trustees.

end insert begin insert

(3) At any time, upon demand by the system, the member or
trustee of the trust shall provide a copy of the trust instrument.

end insert

SEC. 4.  

Section 22451.5 of the Education Code is amended to
read:

22451.5.  

(a) Upon request by the system, a member shall
provide proof of his or her date of birth to resolve any discrepancy
between the member’s date of birth as originally documented on
the records of the system and the member’s date of birth as
subsequently submitted.

(b) A member shall provide proof of the date of birth of a person
begin insert who is, or the beneficiary of a trust that is, end insert designated by the
member as beneficiary under an option selected pursuant to Chapter
28 (commencing with Section 24300) if the beneficiary is not also
a member of the plan.

(c) Documentation substantiating the date of birth of a member’s
dependent child shall be provided if an allowance payable under
this part will include an amount for that dependent child.

(d) At the time application is made for payment of a family
allowance or survivor benefit allowance to a surviving spouse or
dependent parent, a member’s surviving spouse or dependent parent
shall provide proof of his or her date of birth.

(e) At the discretion of the board, an original document, a
certified copy of the original, or a photocopy shall be acceptable
to establish proof of the date of birth.

SEC. 5.  

Section 23301 of the Education Code is amended to
read:

23301.  

A corporation, trust, eleemosynary, parochial institution,
or public entity may be designated as a beneficiary under this begin delete part.
However, they may end delete begin insert part, but they shall end insert not be designated as option
begin delete beneficiaries. end delete begin insert beneficiaries, except a trust as defined in Section
22149. end insert

SEC. 6.  

Section 24300 of the Education Code is amended to
read:

24300.  

(a) A member may, upon application for retirement,
elect an option pursuant to this part that would provide an
actuarially modified retirement allowance payable throughout the
life of the member and the member’s option beneficiary or
beneficiaries, as follows:

(1) Option 2. The modified retirement allowance shall be paid
to the retired member. Upon the retired member’s death, an
allowance equal to the modified amount that the retired member
was receiving shall be paid to the option beneficiary.

(2) Option 3. The modified retirement allowance shall be paid
to the retired member. Upon the retired member’s death, an
allowance equal to one-half of the modified amount that the retired
member was receiving shall be paid to the option beneficiary.

(3) Option 4. The modified retirement allowance shall be paid
to the retired member as long as both the retired member and the
option beneficiary are living. Upon the death of either the retired
member or the option beneficiary, an allowance equal to two-thirds
of the modified amount that the retired member was receiving shall
be paid to the surviving retired member or the surviving option
beneficiary.

(4) Option 5. The modified retirement allowance shall be paid
to the retired member as long as both the retired member and the
option beneficiary are living. Upon the death of either the retired
member or the option beneficiary, an allowance equal to one-half
of the modified amount that the retired member was receiving shall
be paid to the surviving retired member or surviving option
beneficiary.

(5) Option 6. The modified retirement allowance shall be paid
to the retired member and upon the retired member’s death, an
allowance equal to the modified amount that the retired member
was receiving shall be paid to the option beneficiary.

(6) Option 7. The modified retirement allowance shall be paid
to the retired member and upon the retired member’s death, an
allowance equal to one-half of the modified amount the retired
member was receiving shall be paid to the option beneficiary.

(7) Option 8. (A) A member may designate multiple option
beneficiaries. The member who has designated more than one
option beneficiary shall elect an option that the member is
authorized to elect subject to subdivision (e) for each beneficiary
designated that would provide an actuarially modified retirement
allowance payable throughout the lives of the member and the
member’s option beneficiaries upon the member’s death.

(B) The modified retirement allowance shall be paid to the
retired member as long as the retired member and at least one of
the option beneficiaries are living. Upon the retired member’s
death, an allowance shall be paid to each surviving option
beneficiary in accordance with the option elected respective to that
beneficiary. The member shall determine the percentage of the
unmodified allowance that will be modified by the election of
Option 2, Option 3, Option 4, Option 5, Option 6, or Option 7
within this option, the aggregate of which shall equal 100 percent
of the member’s unmodified allowance. The election of this option
is subject to approval by the board.

(C) A member who is a party to an action for legal separation
or dissolution of marriage and who is required by court order to
designate a spouse or former spouse as an option beneficiary may
designate his or her spouse or former spouse as a sole option
beneficiary under subparagraphs (A) and (B). The member shall
specify the option elected for the spouse or former spouse and the
percentage of his or her unmodified allowance to be modified by
the option, consistent with the court order. The percentage of the
member’s unmodified allowance that is not modified by the option
shall remain an unmodified allowance payable to the member. The
aggregate of the percentages specified for the option beneficiary
and the member’s remaining unmodified allowance, if any, shall
equal 100 percent.

(b) For purposes of this section, the member shall designate an
option beneficiary on a properly executed retirement application.
Except as otherwise provided by this chapter, the option shall
become effective on the member’s benefit effective date.

(c) A member may revoke or change an election of an option
at any time prior to the effective date of the member’s retirement
under this part. A revocation or change of an option may not be
made in derogation of a spouse’s or former spouse’s community
property rights as specified in a court order.

begin insert

(d) (1) A member may change the beneficiary designated
pursuant to this section without penalty by designating a trust as
beneficiary if all of the following requirements are met:

end insert begin insert

(A) The trust conforms to the definition of trust in Section 22149.

end insert begin insert

(B) The beneficiary of the trust is the same person as the
previously named beneficiary.

end insert begin insert

(C) The member files an application and any required
documents in a form prescribed by the system.

end insert begin insert

(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit.

end insert begin delete

(d)

end delete

begin insert (e) end insert  On or before July 1, 2004, the board shall evaluate the
existing options and annuities provided pursuant to this section,
Chapter 38 (commencing with Section 25000) of this part, and
Part 14 (commencing with Section 26000) and adopt, as a plan
amendment, any appropriate changes to the options and annuities
based on the needs of members, participants, and their
beneficiaries, including, but not limited to, providing economic
security for beneficiaries and reducing complexity in the election
of options and annuities by members and participants. The changes
to the options and annuities may have no net actuarial impact on
the retirement fund, and the board may establish any eligibility
criteria it deems necessary to prevent an adverse actuarial impact
to the fund. The board shall designate the effective date of the plan
amendment, which shall be at least 18 months after the amendment
is adopted by the board, and notwithstanding any other provision
of this section, the options and annuities available to members and
participants eligible to retire pursuant to this part and Part 14
(commencing with Section 26000), after the effective date of the
plan amendment made pursuant to this subdivision, shall reflect
the changes adopted as a plan amendment pursuant to this
subdivision.

begin delete

(e)

end delete

begin insert (f end insert begin insert ) end insert  Any member or participant who retired and elected an option
or a joint and survivor annuity, or who filed a preretirement election
of an option prior to the effective date of the plan amendment made
pursuant to subdivision (d), may elect to change to a different
option or joint and survivor annuity, as modified by the board as
a plan amendment pursuant to subdivision (d), if the member or
participant meets all the criteria established by the board to prevent
a change in an option or joint and survivor annuity from having
an adverse actuarial impact on the retirement fund, including, but
not limited to, the effective date of a new designation or limitations
on any changes if a member or participant, as the case may be, or
beneficiary, or both, is currently not living or afflicted with a
known terminal illness. The member or participant shall designate
the change during the six-month period that begins with the
effective date of the plan amendment, on a form prescribed by the
system. Any member changing an option election pursuant to this
subdivision is not subject to the allowance reduction prescribed
in Section 24309 or 24310 as a result of the election. If a member
or participant elects to change his or her option or joint and survivor
annuity under this subdivision, the member or participant shall
retain the same option beneficiary or beneficiaries as named in the
prior designation.

begin delete

(f)

end delete

begin insert (g) end insert  The Legislature reserves the right to modify this section
prior to the effective date of the plan amendment made pursuant
to subdivision (d) to prevent any actuarial impact to the fund.

begin delete

(g)

end delete

begin insert (h) end insert  Except as described in subdivision (e) of Section 24300.1,
on or after January 1, 2007, a member may not make a new election
for an option or joint and survivor annuity described in subdivision
(a).

begin delete

(h)

end delete

begin insert (i) end insert  Any member with a retirement effective on or after January
1, 2007, shall elect an option from the options described in Section
24300.1. Any member making a new option election under the
provisions of Section 24320, 24321, 24322, or 24323 shall elect
an option from the options described in Section 24300.1 if the
effective date of the new option election is on or after January 1,
2007.

SEC. 7.  

Section 24300.1 of the Education Code is amended to
read:

24300.1.  

(a) A member may, upon application for retirement,
elect an option pursuant to this part that would provide an
actuarially modified retirement allowance payable throughout the
life of the member and the member’s option beneficiary or
beneficiaries, as follows:

(1) One hundred percent beneficiary option. The modified
retirement allowance shall be paid to the retired member and upon
the member’s death, 100 percent of the modified allowance shall
continue to be paid to the option beneficiary.

(2) Seventy-five percent beneficiary option. The modified
retirement allowance shall be paid to the retired member and upon
the member’s death, 75 percent of the modified allowance shall
continue to be paid to the option beneficiary. Pursuant to Section
401(a)(9) of the Internal Revenue Code, unless the option
beneficiary is the member’s spouse or former spouse who has been
awarded a community property interest in the benefits of the
member under this part, the member may not designate an option
beneficiary under this option who is more than exactly 19 years
younger than the member.

(3) Fifty percent beneficiary option. The modified retirement
allowance shall be paid to the retired member and upon the
member’s death, 50 percent of the modified allowance shall
continue to be paid to the option beneficiary.

(4) Compound option. The member may designate multiple
option beneficiaries or one or multiple option beneficiaries with
a designated percentage to remain unmodified. The member shall
elect an option as described in paragraph (1), (2), or (3) for each
designated option beneficiary that would provide an actuarially
modified retirement allowance payable throughout the lives of the
retired member and the member’s option beneficiary or
beneficiaries upon the member’s death.

(A) The modified retirement allowance shall be paid to the
member as long as the member and at least one option beneficiary
is living. Upon the member’s death, an allowance shall be paid to
each surviving option beneficiary in accordance with the option
elected respective to that option beneficiary.

(B) The member shall specify the percent of the unmodified
allowance that will be modified by the election of each option
described in paragraph (1), (2), or (3) of this subdivision. The
percent of the unmodified allowance that is not modified by an
option, if any, shall be payable to the member. The sum of the
percentages specified for the option beneficiary or beneficiaries
and the member’s remaining unmodified allowance, if any, shall
equal 100 percent.

(C) The member’s election of the compound option is subject
to all of the following:

(i) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
unless the option beneficiary is the member’s spouse or former
spouse who has been awarded a community property interest in
the member’s benefits under this part, the member may not
designate an option beneficiary under the 100 percent beneficiary
option within this compound option who is more than exactly 10
years younger than the member.

(ii) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
unless the option beneficiary is the member’s spouse or former
spouse who has been awarded a community property interest in
the member’s benefits under this part, the member may not
designate an option beneficiary under the 75 percent beneficiary
option within this compound option who is more than exactly 19
years younger than the member.

(b) For purposes of this section, the member shall designate an
option beneficiary on a properly executed retirement application.
Except as otherwise provided by this chapter, the option shall
become effective on the member’s benefit effective date.

(c)  begin delete A end delete begin insert Except as provided in subdivision (d), a end insert member may
revoke or change an election of an option no later than 30 days
from the date the member’s initial benefit payment for the
member’s most recent retirement under the Defined Benefit
Program is paid by the system. A revocation of an option may not
be made in derogation of a spouse’s or a former spouse’s
community property rights as specified in a court order.

begin insert

(d) (1) A member may change the beneficiary designated
pursuant to this section without penalty by designating a trust as
beneficiary if all of the following requirements are met:

end insert begin insert

(A) The trust conforms to the definition of trust in Section 22149.

end insert begin insert

(B) The beneficiary of the trust is the same person as the
previously named beneficiary.

end insert begin insert

(C) The member files an application and any required
documents in a form prescribed by the system.

end insert begin insert

(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit.

end insert begin delete

(d)

end delete

begin insert (e) end insert  Notwithstanding Section 297 or 299.2 of the Family Code,
a spouse described in paragraphs (2) and (4) of subdivision (a)
does not include the domestic partner of the member, pursuant to
Section 7 of Title 1 of the United States Code.

begin delete

(e)

end delete

begin insert (f) end insert  If there is a determination of community property rights as
described in Chapter 12 (commencing with Section 22650) of this
part on or before December 31, 2006, the member may elect the
option that is required by the judgment or court order. Nothing in
this part shall permit the member to change the option to the
detriment of the community property interest of the nonmember
spouse.

begin delete

(f)

end delete

begin insert (g) end insert  The board may evaluate the existing options and annuities
provided pursuant to this section, Chapter 38 (commencing with
Section 25000) of this part, and Part 14 (commencing with Section
26000) and adopt, as a plan amendment, any appropriate changes
to the options and annuities based on the needs of the members,
participants, and their beneficiaries, including, but not limited to,
providing economic security for beneficiaries and reducing the
complexity of the options and annuities. The changes to the options
and annuities may have no net actuarial impact on the retirement
fund and the board may establish any eligibility criteria the board
deems necessary to prevent an adverse actuarial impact to the fund.
The board shall designate the effective date of the plan amendment,
which shall be at least 18 months after the amendment is adopted
by the board, and notwithstanding any other provision of this
section, the options and annuities available to members and
participants eligible to retire pursuant to this part and Part 14
(commencing with Section 26000), after the effective date of the
plan amendment made pursuant to this subdivision, shall reflect
the changes adopted as a plan amendment to this subdivision.

SEC. 8.  

Section 24307 of the Education Code is amended to
read:

24307.  

(a) A member who qualifies to apply for retirement
under Section 24201 or 24203 may make a preretirement election
of an option, as provided in Section 24300.1 without right of
revocation or change after the benefit effective date, except as
provided in this part. The preretirement election of an option shall
become effective as of the date of the member’s signature on a
properly executed form prescribed by the system, subject to the
following requirements:

(1) The form includes the signature of the member’s spouse or
registered domestic partner, if applicable, and the signature is
dated.

(2) The date the form is received at the system’s headquarters
office is within 30 days after the date of the member’s signature
and, if applicable, the spouse’s or registered domestic partner’s
signature.

(b) A member who makes a preretirement election of an Option
2, Option 3, Option 4, Option 5, Option 6, or Option 7 pursuant
to Section 24300, or an election as described in paragraph (1), (2),
or (3) of Section 24300.1 may subsequently make a preretirement
election of the compound option described in paragraph (4) of
subdivision (a) of Section 24300.1. The member may retain the
same option and the same option beneficiary as named in the prior
preretirement election for a designated percentage within the
compound option.

(c) Upon the member’s death prior to the benefit effective date,
the beneficiary who was designated under the option elected and
who survives shall receive an allowance calculated under the
option, under the assumption that the member retired for service
pursuant to Chapter 27 (commencing with Section 24201) on the
date of death. The payment of the allowance to the option
beneficiary shall be in lieu of the family allowance provided in
Section 23804, the payment provided in paragraph (1) of
subdivision (a) of Section 23802, the survivor benefit allowance
provided in Section 23854, and the payment provided in
subdivisions (a) and (b) of Section 23852, except that if the
beneficiary dies before all of the member’s accumulated retirement
contributions are paid, the balance, if any, shall be paid to the estate
of the person last receiving or entitled to receive the allowance.
The accumulated annuity deposit contributions and the death
payment provided in Sections 23801 and 23851 shall be paid to
the beneficiary in a lump sum.

(d) If the member subsequently retires for service, and the
elected option has not been canceled pursuant to Section 24309,
a modified service retirement allowance computed under Section
24300 or 24300.1 and the option elected shall be paid.

(e) The amount of the service retirement allowance prior to
applying the option factor shall be calculated as of the earlier of
the member’s age at death before retirement or age on the last day
of the month in which the member requested service retirement
be effective. The modification of the service retirement allowance
by the option elected shall be based on the ages of the member
and the beneficiary designated under the option, as of the date the
election was signed.

(f) A member who terminates the service retirement allowance
pursuant to Section 24208 shall not be eligible to file a
preretirement election of an option until one calendar year elapses
from the date the allowance is terminated. If the member retires
again within one calendar year of the termination of their benefit
pursuant to Section 24208, the retired member shall keep, upon
subsequent retirement, the option and beneficiary or the unmodified
election in place upon the date the termination of the benefits
became effective.

(1) If the member’s option beneficiary or beneficiaries
predecease the member within one calendar year of the termination
of benefits and before the member has retired again, upon
notification to the system, the system shall cancel the option and
beneficiary from that portion of the benefit with reduction pursuant
to Section 24309. The member shall not elect a new option or
beneficiary pursuant to Section 24310 until one calendar year from
the termination effective date has elapsed.

(2) If a final decree of dissolution of marriage or a judgment of
nullity has been entered or an order of separate maintenance has
been made within one calendar year of the termination of benefits
and the member has not retired again, upon notification to the
system, the system shall cancel or change the option election in
accordance with the court order with reduction pursuant to Section
24309. Any additional changes shall not be made until one calendar
year from the termination effective date has elapsed.

begin insert

(g) (1) A member may change the beneficiary designated
pursuant to this section without penalty by designating a trust as
beneficiary if all of the following requirements are met:

end insert begin insert

(A) The trust conforms to the definition of trust in Section 22149.

end insert begin insert

(B) The beneficiary of the trust is the same person as the
previously named beneficiary.

end insert begin insert

(C) The member files an application and any required
documents in a form prescribed by the system.

end insert begin insert

(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit.

end insert begin delete

(g)

end delete

begin insert (h) end insert  The system shall inform members who are qualified to make
a preretirement election of an option, through the annual statements
of account, that the election of an option can be made.

SEC. 9.  

Section 24309 of the Education Code is amended to
read:

24309.  

(a) A member may change or cancel the election of an
option made pursuant to Section 24307. The change or cancellation
shall be on a properly executed form provided by the system and
received at the system’s headquarters office within 30 days after
the date of the member’s signature and, if applicable, the spouse’s
signature, and no later than 30 days from the date the member’s
initial benefit payment for the member’s most recent retirement
under the Defined Benefit Program is paid by the system. The
change or cancellation shall become effective as of the date of the
member’s signature or the day prior to the member’s benefit
effective date, whichever is earlier. begin insert Except as provided in
subdivision (g) of Section 24307, both of the following shall apply: end insert

(1) Any change to an election of an option shall be made
according to Section 24307 and shall be considered a new
preretirement election of an option.

(2) Regardless of how the member elects to receive his or her
retirement allowance, a change made to an election of an option
or a cancellation of an option shall result in the reduction of that
allowance by an amount determined by the board to be the actuarial
equivalent of the coverage the member received as a result of the
preretirement election and that does not result in any adverse
funding to the plan.

(b) If the option beneficiary designated in the preretirement
election of an option pursuant to Section 24307 dies prior to the
member’s retirement, the preretirement election shall be canceled
as of the day following the date of death and the member’s
subsequent retirement allowance under this part shall be subject
to the allowance reduction prescribed in this section.

(c) If the option elected pursuant to Section 24307 is “Option
8” as described in paragraph (7) of subdivision (a) of Section 24300
or the compound option as described in paragraph (4) of
subdivision (a) of Section 24300.1, a member may cancel the
designation of an option beneficiary. If the member cancels the
designation of the option beneficiary or the option beneficiary
predeceases the member prior to the member’s retirement, the
member may elect to receive that portion of the retirement
allowance without modification for the option or elect one or
multiple new or existing option beneficiaries as described in
Section 24307. Any change or cancellation of the designation of
the option beneficiary under this subdivision shall result in the
allowance reduction prescribed in this section.

SEC. 10.  

Section 24331 of the Education Code is amended to
read:

24331.  

begin insert (a) end insert begin insert   end insert An option beneficiary begin insert or a trustee of a trust that
is an option beneficiary end insert who is receiving an allowance pursuant
to the option elected by the member may designate a beneficiary
to receive any allowance that has accrued and is unpaid, and any
remaining balance of the retired member’s accumulated retirement
contributions payable pursuant to Section 23881, upon the death
of the option beneficiary.

begin insert

(b) Unless otherwise specified in the trust instrument, the trustee
of the trust that is an option beneficiary is entitled to name a
subsequent beneficiary if the trust is valid. If the trust is determined
to be invalid or terminates, any election by the trustee pursuant
to this division shall be void and the beneficiary shall be entitled
to exercise all rights provided to option beneficiaries under this
part.

end insert

SEC. 11.  

Section 24613.5 is added to the Education Code, to
read:

24613.5.  

The board shall not be required to determine the
powers of a trustee or the validity of a trust or of any of the terms
of a trust that is elected as a beneficiary, option beneficiary, or
other payee under the plan. Such a determination by the board
shall not be inferred from the fact that a member or trustee has
provided a copy of all or part of the trust instrument. The
acknowledged certification pursuant to Section 22450 by the
member or trustee that the trustee has the powers declared therein
and that the trust meets the requirements described in this part and
Part 14 shall be conclusive. Payment of benefits to a trust pursuant
to the board’s determination in good faith of the existence, identity,
or other facts relating to entitlement of the trust to receive a benefit
under this part constitutes a complete discharge and release of the
board, system, and plan from liability for the benefit.

SEC. 12.  

Section 25015 of the Education Code is amended to
read:

25015.  

(a) If a member elects to receive a benefit payable
under the Defined Benefit Supplement Program as a joint and
survivor annuity, the designation of the beneficiary made pursuant
to Section 24300 or 24300.1 shall apply to the benefit payable
under this chapter. The annuity beneficiary designation shall not
be changed after the date the benefit becomes payable to the
member, except as provided in Section begin insert 24300, 24300.1, end insert 24324,
25011, 25011.1, 25018, or 25018.1, or Chapter 12 (commencing
with Section 22650).

(b) If the member designates one or multiple option beneficiaries
within Option 8 pursuant to Section 24300 or the compound option
pursuant to Section 24300.1, the percentage of the unmodified
allowance attributable to each option beneficiary specified in that
designation shall apply to the joint and survivor annuity payable
under this chapter. The member shall elect one joint and survivor
annuity type and this annuity type shall be applied the same for
each beneficiary and each designated percentage of the member
only annuity. If any percentage of the allowance was designated
to remain unmodified, the member only annuity shall apply for
the corresponding percentage of the annuity provided under this
chapter. The annuity amount payable to the member during his or
her lifetime shall be modified to be payable over the combined
lives of the member and the annuity beneficiary or beneficiaries.

(1) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
the member shall not designate the 100 percent beneficiary annuity
type under this subdivision if any annuity beneficiary is more than
exactly 10 years younger than the member, unless that annuity
beneficiary is the member’s spouse or former spouse who has been
awarded a community property interest in the member’s benefits
under this part.

(2) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
the member shall not designate the 75 percent beneficiary annuity
type under this subdivision if any annuity beneficiary is more than
exactly 19 years younger than the member, unless that annuity
beneficiary is the member’s spouse or former spouse who has been
awarded a community property interest in the member’s benefits
under this part.

(c)  begin insert (1) end insert begin insert   end insert If the member predeceases an annuity beneficiary, the
annuity beneficiary may designate, on a properly executed form
provided by the system, a payee to receive an amount that may be
payable in a lump sum pursuant to Section 25023 upon the death
of the annuity beneficiary.

begin insert

(2) Unless otherwise specified in the trust instrument, the trustee
of the trust that is an annuity beneficiary is entitled to name a
subsequent beneficiary if the trust is valid. If the trust is determined
to be invalid or terminates, any election by the trustee pursuant
to this paragraph shall be void and the beneficiary shall be entitled
to exercise all rights provided to annuity beneficiaries under this
part.

end insert

SEC. 13.  

Section 26106.5 is added to the Education Code, to
read:

26106.5.  

(a) For purposes of this part, “annuity beneficiary”
means the person or trust designated by a participant pursuant to
Section 26807, 26807.5, 26906, or 26906.5 to receive an annuity
upon the participant’s death.

(b) For purposes of this section, “trust” means an irrevocable
trust with the following characteristics:

(1) The trust satisfies the requirements of subparagraph (A) or
(C) of paragraph (4) of subdivision (d) of Section 1396p of Title
42 of the United States Code.

(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
of Title 26 of the Code of Federal Regulations.

(3) The trust, or the account in a pooled trust, is for the sole
benefit of a single beneficiary and other beneficiaries to the trust,
if any, are successor beneficiaries.

(4) The beneficiary of the trust who is beneficiary with respect
to the trust’s interest in the member’s benefit shall be considered
the designated beneficiary for the purpose of determining eligibility
for, and the amount and duration of, benefits under the program.

SEC. 14.  

Section 26306 of the Education Code is amended to
read:

26306.  

(a) Upon request by the system, a participant or
beneficiary with respect to the Cash Balance Benefit Program shall
provide to the system any information affecting his or her status
as a participant or beneficiary.

(b) Upon request by the system, the participant shall provide
proof of his or her date of birth.

(c) A participant who has not contributed to the Cash Balance
Benefit Program during the immediately preceding plan year shall
provide the system with his or her current mailing address and
beneficiary information.

begin insert

(d) For a trust as defined in subdivision (b) of Section 26106.5
that is designated as a joint and survivor annuity beneficiary, the
following documentation is required:

end insert begin insert

(1) The participant shall provide an acknowledged certification
that includes each declaration prescribed by clause A-6 of Section
1.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and
a declaration that the trust meets the requirements and conditions
as defined in subdivision (b) of Section 26106.5. The certification
shall be submitted to the system at the time of election of the
beneficiary and is required for the election to be valid. The
certification shall be in the form of an acknowledged declaration
signed by the participant and by all then-acting trustees of the
trust.

end insert begin insert

(2) After the participant’s death, the then-acting trustee or
trustees of the trust shall provide an acknowledged certification
that includes each of the declarations prescribed by clause A-6 of
Section 1.401(a)(9)-4 of Title 26 of the Code of Federal
Regulations and a declaration that the trust meets the requirements
and conditions as defined in subdivision (b) of Section 26106.5.
The certification by the trustee or trustees of the trust shall be
submitted to the system upon the participant’s death and shall
additionally certify that the trust has not been revoked, modified,
or amended in any manner which would cause the representations
contained in the certification to be incorrect. The certification
shall contain a statement that it is being signed by all of the
then-acting trustees of the trust and shall be in the form of an
acknowledged declaration signed by all the then-acting trustees.

end insert begin insert

(3) At any time, upon demand by the system, the member or
trustee of the trust shall provide a copy of the trust instrument.

end insert

SEC. 15.  

Section 26811 of the Education Code is amended to
read:

26811.  

begin delete The end delete begin insert (a) end insert begin insert   end insert begin insert Except as provided in subdivision (b), the
annuity end insert beneficiary under the joint and survivor annuity elected
pursuant to paragraph (3) or (4) of subdivision (b) of Section 26807
or paragraphs (2) to (5), inclusive, of subdivision (a) of Section
26807.5 shall be the person designated by the participant on the
application for a retirement benefit under this part, and shall not
be changed after the original retirement date unless the beneficiary
has predeceased the participant.

begin insert

(b) (1) A participant may change the annuity beneficiary
designated pursuant to this section without penalty by designating
a trust as beneficiary if all of the following requirements are met:

end insert begin insert

(A) The trust conforms to the definition of trust in Section
26105.5.

end insert begin insert

(B) The beneficiary of the trust is the same person as the
previously named beneficiary.

end insert begin insert

(C) The member files an application and any required
documents in a form prescribed by the system.

end insert begin insert

(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit.

end insert

SEC. 16.  

Section 26910 of the Education Code is amended to
read:

26910.  

begin delete The end delete begin insert (a) end insert begin insert   end insert begin insert Except as provided in subdivision (b), the end insert
beneficiary under the joint and survivor option elected pursuant
to paragraph (3) or begin delete paragraph end delete (4) of subdivision (b) of Section
26906 or begin delete paragraph (2) or (4) end delete begin insert paragraphs (1) to (4), inclusive, end insert of
subdivision (a) of Section 26906.5 shall be the person begin insert or trust end insert
designated by the participant on the application for a disability
benefit begin insert under this part, end insert and shall not be changed after the original
disability date unless the beneficiary begin delete predeceases end delete begin insert has predeceased end insert
the participant.

begin insert

(b) (1) A participant may change the annuity beneficiary
designated pursuant to this section without penalty by designating
a trust as beneficiary if all of the following requirements are met:

end insert begin insert

(A) The trust conforms to the definition of trust in Section
26105.5.

end insert begin insert

(B) The beneficiary of the trust is the same person as the
previously named beneficiary.

end insert begin insert

(C) The member files an application and any required
documents in a form prescribed by the system.

end insert begin insert

(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit.

end insert