Amended in Assembly April 11, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 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,begin delete and 26910 of,end deletebegin insert 26910, and 27004 of,end insert 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 amended, 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 notbegin delete beend deletebegin insert beenend insert 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.begin insert The bill would make conforming and, with respect to the Cash Balance Benefit Program, revise the circumstances under which a participant may change an option beneficiary after retirement changes.end insert

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

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

P2    1

SECTION 1.  

Section 22105.5 of the Education Code is
2amended to read:

3

22105.5.  

“Annuity beneficiary” means the person or trust
4designated by a member pursuant to Section 25011, 25011.1,
P3    125018, or 25018.1 to receive an annuity under the Defined Benefit
2Supplement Program upon the member’s death.

3

SEC. 2.  

Section 22149 of the Education Code is amended to
4read:

5

22149.  

(a) “Option beneficiary” means the person or trust
6designated by a member to receive a retirement allowance under
7the Defined Benefit Program upon the member’s death.

8(b) For purposes of this section, “trust” means an irrevocable
9trust with the following characteristics:

10(1) The trust satisfies the requirements of subparagraph (A) or
11(C) of paragraph (4) of subdivision (d) of Section 1396p of Title
1242 of the United States Code.

13(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
14of Title 26 of the Code of Federal Regulations.

15(3) The trust, or the account in a pooled trust, is for the sole
16benefit of a single beneficiary and other beneficiaries to the trust,
17if any, are successor beneficiaries.

18(4) The beneficiary of the trust who is beneficiary with respect
19to the trust’s interest in the member’s benefit shall be considered
20the designatedbegin insert optionend insert beneficiary for the purpose of determining
21eligibility for, and the amount and duration of, benefits under the
22plan.

23

SEC. 3.  

Section 22450 of the Education Code is amended to
24read:

25

22450.  

(a) Each member and beneficiary shall furnish to the
26board any information affecting his or her status as a member or
27beneficiary of the Defined Benefit Program as the board requires,
28which may include, but shall not be limited to, the following:

29(1) Financial statements, certified copies of state and federal
30income tax records, or evidence of financial status.

31(2) Employment, legal, or medical documentation.

32(b) A member who has not had any creditable service reported
33during the prior school year shall provide the system with his or
34her current mailing address and beneficiary information.

35(c) For a trust that is designated as an option beneficiary, as
36defined in Section 22149, the following documentation is required:

37(1) The member shall provide an acknowledged certification
38that includes each declaration prescribed by clause A-6 of Section
391.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and
40a declaration that the trust meets the requirements and conditions
P4    1as defined in Section 22149. The certification shall be submitted
2to the system at the time of election of the beneficiary and is
3required for the election to be valid. The certification shall be in
4the form of an acknowledged declaration signed by the member
5and by all then-acting trustees of the trust.

6(2) After the member’s death, the then-acting trustee or trustees
7of the trust shall provide an acknowledged certification that
8includes each of the declarations prescribed by clause A-6 of
9Section 1.401(a)(9)-4 of Title 26 of the Code of Federal
10Regulations and a declaration that the trust meets the requirements
11and conditions provided in Section 22149. The certification by the
12trustee or trustees of the trust shall be submitted to the system upon
13the member’s death and shall additionally certify that the trust has
14not been revoked, modified, or amended in any manner which
15would cause the representations contained in the certification to
16be incorrect. The certification shall contain a statement that it is
17being signed by all of the then-acting trustees of the trust and shall
18be in the form of an acknowledged declaration signed by all the
19then-acting trustees.

20(3) At any time, upon demand by the system, the member or
21trustee of the trust shall provide a copy of the trust instrument.

22

SEC. 4.  

Section 22451.5 of the Education Code is amended to
23read:

24

22451.5.  

(a) Upon request by the system, a member shall
25provide proof of his or her date of birth to resolve any discrepancy
26between the member’s date of birth as originally documented on
27the records of the system and the member’s date of birth as
28subsequently submitted.

29(b) A member shall provide proof of the date of birth of a person
30who is, or the beneficiary of a trust that is, designated by the
31member as beneficiary under an option selected pursuant to Chapter
3228 (commencing with Section 24300) if the beneficiary is not also
33a member of the plan.

34(c) Documentation substantiating the date of birth of a member’s
35dependent child shall be provided if an allowance payable under
36this part will include an amount for that dependent child.

37(d) At the time application is made for payment of a family
38allowance or survivor benefit allowance to a surviving spouse or
39dependent parent, a member’s surviving spouse or dependent parent
40shall provide proof of his or her date of birth.

P5    1(e) At the discretion of the board, an original document, a
2certified copy of the original, or a photocopy shall be acceptable
3to establish proof of the date of birth.

4

SEC. 5.  

Section 23301 of the Education Code is amended to
5read:

6

23301.  

A corporation, trust, eleemosynary, parochial institution,
7or public entity may be designated as a beneficiary under this part,
8but they shall not be designated as option beneficiaries, except a
9trust as defined in Section 22149.

10

SEC. 6.  

Section 24300 of the Education Code is amended to
11read:

12

24300.  

(a) A member may, upon application for retirement,
13elect an option pursuant to this part that would provide an
14actuarially modified retirement allowance payable throughout the
15life of the member and the member’s option beneficiary or
16beneficiaries, as follows:

17(1) Option 2. The modified retirement allowance shall be paid
18to the retired member. Upon the retired member’s death, an
19allowance equal to the modified amount that the retired member
20was receiving shall be paid to the option beneficiary.

21(2) Option 3. The modified retirement allowance shall be paid
22to the retired member. Upon the retired member’s death, an
23allowance equal to one-half of the modified amount that the retired
24member was receiving shall be paid to the option beneficiary.

25(3) Option 4. The modified retirement allowance shall be paid
26to the retired member as long as both the retired member and the
27option beneficiary are living. Upon the death of either the retired
28member or the option beneficiary, an allowance equal to two-thirds
29of the modified amount that the retired member was receiving shall
30be paid to the surviving retired member or the surviving option
31beneficiary.

32(4) Option 5. The modified retirement allowance shall be paid
33to the retired member as long as both the retired member and the
34option beneficiary are living. Upon the death of either the retired
35member or the option beneficiary, an allowance equal to one-half
36of the modified amount that the retired member was receiving shall
37be paid to the surviving retired member or surviving option
38beneficiary.

39(5) Option 6. The modified retirement allowance shall be paid
40to the retired member and upon the retired member’s death, an
P6    1allowance equal to the modified amount that the retired member
2was receiving shall be paid to the option beneficiary.

3(6) Option 7. The modified retirement allowance shall be paid
4to the retired member and upon the retired member’s death, an
5allowance equal to one-half of the modified amount the retired
6member was receiving shall be paid to the option beneficiary.

7(7) Option 8. (A) A member may designate multiple option
8beneficiaries. The member who has designated more than one
9option beneficiary shall elect an option that the member is
10authorized to elect subject to subdivision (e) for each beneficiary
11designated that would provide an actuarially modified retirement
12allowance payable throughout the lives of the member and the
13member’s option beneficiaries upon the member’s death.

14(B) The modified retirement allowance shall be paid to the
15retired member as long as the retired member and at least one of
16the option beneficiaries are living. Upon the retired member’s
17death, an allowance shall be paid to each surviving option
18beneficiary in accordance with the option elected respective to that
19beneficiary. The member shall determine the percentage of the
20unmodified allowance that will be modified by the election of
21Option 2, Option 3, Option 4, Option 5, Option 6, or Option 7
22within this option, the aggregate of which shall equal 100 percent
23of the member’s unmodified allowance. The election of this option
24is subject to approval by the board.

25(C) A member who is a party to an action for legal separation
26or dissolution of marriage and who is required by court order to
27designate a spouse or former spouse as an option beneficiary may
28designate his or her spouse or former spouse as a sole option
29beneficiary under subparagraphs (A) and (B). The member shall
30specify the option elected for the spouse or former spouse and the
31percentage of his or her unmodified allowance to be modified by
32the option, consistent with the court order. The percentage of the
33member’s unmodified allowance that is not modified by the option
34shall remain an unmodified allowance payable to the member. The
35aggregate of the percentages specified for the option beneficiary
36and the member’s remaining unmodified allowance, if any, shall
37equal 100 percent.

38(b) For purposes of this section, the member shall designate an
39option beneficiary on a properly executed retirement application.
P7    1Except as otherwise provided by this chapter, the option shall
2become effective on the member’s benefit effective date.

3(c) A member may revoke or change an election of an option
4at any time prior to the effective date of the member’s retirement
5under this part. A revocation or change of an option may not be
6made in derogation of a spouse’s or former spouse’s community
7property rights as specified in a court order.

8(d) (1) A member may change the beneficiary designated
9pursuant to this section without penalty by designating a trust as
10beneficiary if all of the following requirements are met:

11(A) The trust conforms to the definition of trust in Section
1222149.

13(B) The beneficiary of the trust is the same person as the
14previously namedbegin insert optionend insert beneficiary.

15(C) The member files an application and any required documents
16in a form prescribed by the system.

17(2) If a trust is determined to be invalid or terminates after the
18system commences payment to the trust, beginning on the effective
19date of termination of the trust, the benefit shall be paid to, and all
20associated rights and responsibilities shall accrue to, the beneficiary
21of the trust so long as that beneficiary is eligible to receive a
22
begin delete benefit.end deletebegin insert benefit pursuant to this section.end insert

23(e) On or before July 1, 2004, the board shall evaluate the
24existing options and annuities provided pursuant to this section,
25Chapter 38 (commencing with Section 25000) of this part, and
26Part 14 (commencing with Section 26000) and adopt, as a plan
27amendment, any appropriate changes to the options and annuities
28based on the needs of members, participants, and their
29beneficiaries, including, but not limited to, providing economic
30security for beneficiaries and reducing complexity in the election
31of options and annuities by members and participants. The changes
32to the options and annuities may have no net actuarial impact on
33the retirement fund, and the board may establish any eligibility
34criteria it deems necessary to prevent an adverse actuarial impact
35to the fund. The board shall designate the effective date of the plan
36amendment, which shall be at least 18 months after the amendment
37is adopted by the board, and notwithstanding any other provision
38of this section, the options and annuities available to members and
39participants eligible to retire pursuant to this part and Part 14
40(commencing with Section 26000), after the effective date of the
P8    1plan amendment made pursuant to this subdivision, shall reflect
2the changes adopted as a plan amendment pursuant to this
3subdivision.

4(f) Any member or participant who retired and elected an option
5or a joint and survivor annuity, or who filed a preretirement election
6of an option prior to the effective date of the plan amendment made
7pursuant to subdivision (d), may elect to change to a different
8option or joint and survivor annuity, as modified by the board as
9a plan amendment pursuant to subdivision (d), if the member or
10participant meets all the criteria established by the board to prevent
11a change in an option or joint and survivor annuity from having
12an adverse actuarial impact on the retirement fund, including, but
13not limited to, the effective date of a new designation or limitations
14on any changes if a member or participant, as the case may be, or
15 beneficiary, or both, is currently not living or afflicted with a
16known terminal illness. The member or participant shall designate
17the change during the six-month period that begins with the
18effective date of the plan amendment, on a form prescribed by the
19system. Any member changing an option election pursuant to this
20subdivision is not subject to the allowance reduction prescribed
21in Section 24309 or 24310 as a result of the election. If a member
22or participant elects to change his or her option or joint and survivor
23annuity under this subdivision, the member or participant shall
24retain the same option beneficiary or beneficiaries as named in the
25prior designation.

26(g) The Legislature reserves the right to modify this section
27prior to the effective date of the plan amendment made pursuant
28to subdivision (d) to prevent any actuarial impact to the fund.

29(h) Except as described in subdivision (e) of Section 24300.1,
30on or after January 1, 2007, a member may not make a new election
31for an option or joint and survivor annuity described in subdivision
32(a).

33(i) Any member with a retirement effective on or after January
341, 2007, shall elect an option from the options described in Section
3524300.1. Any member making a new option election under the
36provisions of Section 24320, 24321, 24322, or 24323 shall elect
37an option from the options described in Section 24300.1 if the
38effective date of the new option election is on or after January 1,
392007.

P9    1

SEC. 7.  

Section 24300.1 of the Education Code is amended to
2read:

3

24300.1.  

(a) A member may, upon application for retirement,
4elect an option pursuant to this part that would provide an
5actuarially modified retirement allowance payable throughout the
6life of the member and the member’s option beneficiary or
7beneficiaries, as follows:

8(1) One hundred percent beneficiary option. The modified
9retirement allowance shall be paid to the retired member and upon
10the member’s death, 100 percent of the modified allowance shall
11continue to be paid to the option beneficiary.

12(2) Seventy-five percent beneficiary option. The modified
13retirement allowance shall be paid to the retired member and upon
14the member’s death, 75 percent of the modified allowance shall
15continue to be paid to the option beneficiary. Pursuant to Section
16401(a)(9) of the Internal Revenue Code, unless the option
17beneficiary is the member’s spouse or former spouse who has been
18awarded a community property interest in the benefits of the
19member under this part, the member may not designate an option
20beneficiary under this option who is more than exactly 19 years
21younger than the member.

22(3) Fifty percent beneficiary option. The modified retirement
23allowance shall be paid to the retired member and upon the
24member’s death, 50 percent of the modified allowance shall
25continue to be paid to the option beneficiary.

26(4) Compound option. The member may designate multiple
27option beneficiaries or one or multiple option beneficiaries with
28a designated percentage to remain unmodified. The member shall
29elect an option as described in paragraph (1), (2), or (3) for each
30designated option beneficiary that would provide an actuarially
31modified retirement allowance payable throughout the lives of the
32retired member and the member’s option beneficiary or
33beneficiaries upon the member’s death.

34(A) The modified retirement allowance shall be paid to the
35member as long as the member and at least one option beneficiary
36is living. Upon the member’s death, an allowance shall be paid to
37each surviving option beneficiary in accordance with the option
38elected respective to that option beneficiary.

39(B) The member shall specify the percent of the unmodified
40allowance that will be modified by the election of each option
P10   1described in paragraph (1), (2), or (3) of this subdivision. The
2percent of the unmodified allowance that is not modified by an
3option, if any, shall be payable to the member. The sum of the
4percentages specified for the option beneficiary or beneficiaries
5and the member’s remaining unmodified allowance, if any, shall
6equal 100 percent.

7(C) The member’s election of the compound option is subject
8to all of the following:

9(i) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
10unless the option beneficiary is the member’s spouse or former
11spouse who has been awarded a community property interest in
12the member’s benefits under this part, the member may not
13designate an option beneficiary under the 100 percent beneficiary
14option within this compound option who is more than exactly 10
15years younger than the member.

16(ii) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
17unless the option beneficiary is the member’s spouse or former
18spouse who has been awarded a community property interest in
19the member’s benefits under this part, the member may not
20designate an option beneficiary under the 75 percent beneficiary
21option within this compound option who is more than exactly 19
22years younger than the member.

23(b) For purposes of this section, the member shall designate an
24option beneficiary on a properly executed retirement application.
25Except as otherwise provided by this chapter, the option shall
26become effective on the member’s benefit effective date.

27(c) Except as provided in subdivision (d), a member may revoke
28or change an election of an option no later than 30 days from the
29date the member’s initial benefit payment for the member’s most
30recent retirement under the Defined Benefit Program is paid by
31the system. A revocation of an option may not be made in
32derogation of a spouse’s or a former spouse’s community property
33rights as specified in a court order.

34(d) (1) A member may change the beneficiary designated
35pursuant to this section without penalty by designating a trust as
36beneficiary if all of the following requirements are met:

37(A) The trust conforms to the definition of trust in Section
3822149.

39(B) The beneficiary of the trust is the same person as the
40previously namedbegin insert optionend insert beneficiary.

P11   1(C) The member files an application and any required documents
2in a form prescribed by the system.

3(2) If a trust is determined to be invalid or terminates after the
4system commences payment to the trust, beginning on the effective
5date of termination of the trust, the benefit shall be paid to, and all
6associated rights and responsibilities shall accrue to, the beneficiary
7of the trust so long as that beneficiary is eligible to receive a
8
begin delete benefit.end deletebegin insert benefit pursuant to this section.end insert

9(e) Notwithstanding Section 297 or 299.2 of the Family Code,
10a spouse described in paragraphs (2) and (4) of subdivision (a)
11does not include the domestic partner of the member, pursuant to
12Section 7 of Title 1 of the United States Code.

13(f) If there is a determination of community property rights as
14described in Chapter 12 (commencing with Section 22650) of this
15part on or before December 31, 2006, the member may elect the
16option that is required by the judgment or court order. Nothing in
17this part shall permit the member to change the option to the
18detriment of the community property interest of the nonmember
19spouse.

20(g) The board may evaluate the existing options and annuities
21provided pursuant to this section, Chapter 38 (commencing with
22Section 25000) of this part, and Part 14 (commencing with Section
2326000) and adopt, as a plan amendment, any appropriate changes
24to the options and annuities based on the needs of the members,
25participants, and their beneficiaries, including, but not limited to,
26providing economic security for beneficiaries and reducing the
27complexity of the options and annuities. The changes to the options
28and annuities may have no net actuarial impact on the retirement
29fund and the board may establish any eligibility criteria the board
30deems necessary to prevent an adverse actuarial impact to the fund.
31The board shall designate the effective date of the plan amendment,
32which shall be at least 18 months after the amendment is adopted
33by the board, and notwithstanding any other provision of this
34section, the options and annuities available to members and
35participants eligible to retire pursuant to this part and Part 14
36(commencing with Section 26000), after the effective date of the
37plan amendment made pursuant to this subdivision, shall reflect
38the changes adopted as a plan amendment to this subdivision.

39

SEC. 8.  

Section 24307 of the Education Code is amended to
40read:

P12   1

24307.  

(a) A member who qualifies to apply for retirement
2under Section 24201 or 24203 may make a preretirement election
3of an option, as provided in Section 24300.1 without right of
4revocation or change after the benefit effective date, except as
5provided in this part. The preretirement election of an option shall
6become effective as of the date of the member’s signature on a
7properly executed form prescribed by the system, subject to the
8following requirements:

9(1) The form includes the signature of the member’s spouse or
10registered domestic partner, if applicable, and the signature is
11dated.

12(2) The date the form is received at the system’s headquarters
13office is within 30 days after the date of the member’s signature
14and, if applicable, the spouse’s or registered domestic partner’s
15signature.

16(b) A member who makes a preretirement election of an Option
172, Option 3, Option 4, Option 5, Option 6, or Option 7 pursuant
18to Section 24300, or an election as described in paragraph (1), (2),
19or (3) of Section 24300.1 may subsequently make a preretirement
20election of the compound option described in paragraph (4) of
21subdivision (a) of Section 24300.1. The member may retain the
22same option and the same option beneficiary as named in the prior
23preretirement election for a designated percentage within the
24compound option.

25(c) Upon the member’s death prior to the benefit effective date,
26the beneficiary who was designated under the option elected and
27who survives shall receive an allowance calculated under the
28option, under the assumption that the member retired for service
29pursuant to Chapter 27 (commencing with Section 24201) on the
30date of death. The payment of the allowance to the option
31beneficiary shall be in lieu of the family allowance provided in
32Section 23804, the payment provided in paragraph (1) of
33subdivision (a) of Section 23802, the survivor benefit allowance
34provided in Section 23854, and the payment provided in
35subdivisions (a) and (b) of Section 23852, except that if the
36beneficiary dies before all of the member’s accumulated retirement
37contributions are paid, the balance, if any, shall be paid to the estate
38of the person last receiving or entitled to receive the allowance.
39The accumulated annuity deposit contributions and the death
P13   1payment provided in Sections 23801 and 23851 shall be paid to
2the beneficiary in a lump sum.

3(d) If the member subsequently retires for service, and the
4elected option has not been canceled pursuant to Section 24309,
5a modified service retirement allowance computed under Section
6 24300 or 24300.1 and the option elected shall be paid.

7(e) The amount of the service retirement allowance prior to
8applying the option factor shall be calculated as of the earlier of
9the member’s age at death before retirement or age on the last day
10of the month in which the member requested service retirement
11be effective. The modification of the service retirement allowance
12by the option elected shall be based on the ages of the member
13and the beneficiary designated under the option, as of the date the
14election was signed.

15(f) A member who terminates the service retirement allowance
16pursuant to Section 24208 shall not be eligible to file a
17preretirement election of an option until one calendar year elapses
18from the date the allowance is terminated. If the member retires
19again within one calendar year of the termination of their benefit
20pursuant to Section 24208, the retired member shall keep, upon
21subsequent retirement, the option and beneficiary or the unmodified
22election in place upon the date the termination of the benefits
23became effective.

24(1) If the member’s option beneficiary or beneficiaries
25predecease the member within one calendar year of the termination
26of benefits and before the member has retired again, upon
27notification to the system, the system shall cancel the option and
28beneficiary from that portion of the benefit with reduction pursuant
29to Section 24309. The member shall not elect a new option or
30beneficiary pursuant to Section 24310 until one calendar year from
31the termination effective date has elapsed.

32(2) If a final decree of dissolution of marriage or a judgment of
33nullity has been entered or an order of separate maintenance has
34been made within one calendar year of the termination of benefits
35and the member has not retired again, upon notification to the
36system, the system shall cancel or change the option election in
37accordance with the court order with reduction pursuant to Section
3824309. Any additional changes shall not be made until one calendar
39year from the termination effective date has elapsed.

P14   1(g) (1) A member may change the beneficiary designated
2pursuant to this section without penalty by designating a trust as
3beneficiary if all of the following requirements are met:

4(A) The trust conforms to the definition of trust in Section
522149.

6(B) The beneficiary of the trust is the same person as the
7previously namedbegin insert optionend insert beneficiary.

8(C) The member files an application and any required documents
9in a form prescribed by the system.

10(2) If a trust is determined to be invalid or terminates after the
11system commences payment to the trust, beginning on the effective
12date of termination of the trust, the benefit shall be paid to, and all
13associated rights and responsibilities shall accrue to, the beneficiary
14of the trust so long as that beneficiary is eligible to receive a
15
begin delete benefit.end deletebegin insert benefit pursuant to this section.end insert

16(h) The system shall inform members who are qualified to make
17a preretirement election of an option, through the annual statements
18of account, that the election of an option can be made.

19

SEC. 9.  

Section 24309 of the Education Code is amended to
20read:

21

24309.  

(a) A member may change or cancel the election of an
22option made pursuant to Section 24307. The change or cancellation
23shall be on a properly executed form provided by the system and
24received at the system’s headquarters office within 30 days after
25the date of the member’s signature and, if applicable, the spouse’s
26signature, and no later than 30 days from the date the member’s
27initial benefit payment for the member’s most recent retirement
28under the Defined Benefit Program is paid by the system. The
29change or cancellation shall become effective as of the date of the
30member’s signature or the day prior to the member’s benefit
31effective date, whichever is earlier. Except as provided in
32subdivision (g) of Section 24307, both of the following shall apply:

33(1) Any change to an election of an option shall be made
34according to Section 24307 and shall be considered a new
35preretirement election of an option.

36(2) Regardless of how the member elects to receive his or her
37retirement allowance, a change made to an election of an option
38or a cancellation of an option shall result in the reduction of that
39allowance by an amount determined by the board to be the actuarial
40equivalent of the coverage the member received as a result of the
P15   1preretirement election and that does not result in any adverse
2funding to the plan.

3(b) If the option beneficiary designated in the preretirement
4election of an option pursuant to Section 24307 dies prior to the
5member’s retirement, the preretirement election shall be canceled
6as of the day following the date of death and the member’s
7subsequent retirement allowance under this part shall be subject
8to the allowance reduction prescribed in this section.

9(c) If the option elected pursuant to Section 24307 is “Option
108” as described in paragraph (7) of subdivision (a) of Section 24300
11or the compound option as described in paragraph (4) of
12subdivision (a) of Section 24300.1, a member may cancel the
13designation of an option beneficiary. If the member cancels the
14designation of the option beneficiary or the option beneficiary
15predeceases the member prior to the member’s retirement, the
16member may elect to receive that portion of the retirement
17allowance without modification for the option or elect one or
18multiple new or existing option beneficiaries as described in
19Section 24307. Any change or cancellation of the designation of
20the option beneficiary under this subdivision shall result in the
21allowance reduction prescribed in this section.

22

SEC. 10.  

Section 24331 of the Education Code is amended to
23read:

24

24331.  

(a) An option beneficiary or a trusteebegin insert or beneficiaryend insert
25 of a trust that is an option beneficiary who is receiving an
26allowance pursuant to the option elected by the member may
27designate a beneficiary to receive any allowance that has accrued
28and is unpaid, and any remaining balance of the retired member’s
29accumulated retirement contributions payable pursuant to Section
3023881, upon the death of the option beneficiary.

31(b) Unless otherwise specified in the trust instrument, the trustee
32of the trust that is an option beneficiary is entitled to name a
33subsequent beneficiary if the trust is valid. If the trust is determined
34to be invalid or terminates, any election by the trustee pursuant to
35this division shall be void and the beneficiary shall be entitled to
36exercise all rights provided to option beneficiaries under this part.

37

SEC. 11.  

Section 24613.5 is added to the Education Code, to
38read:

39

24613.5.  

The board shall not be required to determine the
40powers of a trustee or the validity of a trust or of any of the terms
P16   1of a trust that is elected as a beneficiary, option beneficiary, or
2other payee under the plan. Such a determination by the board
3shall not be inferred from the fact that a member or trustee has
4provided a copy of all or part of the trust instrument. The
5acknowledged certification pursuant to Section 22450 by the
6member or trustee that the trustee has the powers declared therein
7and that the trust meets the requirements described in this part and
8Part 14 shall be conclusive. Payment of benefits to a trust pursuant
9to the board’s determination in good faith of the existence, identity,
10or other facts relating to entitlement of the trust to receive a benefit
11under this part constitutes a complete discharge and release of the
12board, system, and plan from liability for the benefit.

13

SEC. 12.  

Section 25015 of the Education Code is amended to
14read:

15

25015.  

(a) If a member elects to receive a benefit payable
16under the Defined Benefit Supplement Program as a joint and
17survivor annuity, the designation of the beneficiary made pursuant
18to Section 24300 or 24300.1 shall apply to the benefit payable
19under this chapter. The annuity beneficiary designation shall not
20be changed after the date the benefit becomes payable to the
21member, except as provided in Section 24300, 24300.1, 24324,
2225011, 25011.1, 25018, or 25018.1, or Chapter 12 (commencing
23with Section 22650).

24(b) If the member designates one or multiple option beneficiaries
25within Option 8 pursuant to Section 24300 or the compound option
26pursuant to Section 24300.1, the percentage of the unmodified
27allowance attributable to each option beneficiary specified in that
28designation shall apply to the joint and survivor annuity payable
29under this chapter. The member shall elect one joint and survivor
30annuity type and this annuity type shall be applied the same for
31each beneficiary and each designated percentage of the member
32only annuity. If any percentage of the allowance was designated
33to remain unmodified, the member only annuity shall apply for
34the corresponding percentage of the annuity provided under this
35chapter. The annuity amount payable to the member during his or
36her lifetime shall be modified to be payable over the combined
37lives of the member and the annuity beneficiary or beneficiaries.

38(1) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
39the member shall not designate the 100 percent beneficiary annuity
40type under this subdivision if any annuity beneficiary is more than
P17   1exactly 10 years younger than the member, unless that annuity
2beneficiary is the member’s spouse or former spouse who has been
3awarded a community property interest in the member’s benefits
4under this part.

5(2) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
6the member shall not designate the 75 percent beneficiary annuity
7type under this subdivision if any annuity beneficiary is more than
8exactly 19 years younger than the member, unless that annuity
9beneficiary is the member’s spouse or former spouse who has been
10awarded a community property interest in the member’s benefits
11under this part.

12(c) (1) If the member predeceases an annuity beneficiary, the
13annuity beneficiary may designate, on a properly executed form
14provided by the system, a payee to receive an amount that may be
15payable in a lump sum pursuant to Section 25023 upon the death
16of the annuity beneficiary.

17(2) Unless otherwise specified in the trust instrument, the trustee
18begin insert or beneficiaryend insert of the trust that is an annuity beneficiary is entitled
19to name a subsequent beneficiary if the trust is valid. If the trust
20is determined to be invalid or terminates, any election by the trustee
21pursuant to this paragraph shall be void and the beneficiary shall
22be entitled to exercise all rights provided to annuity beneficiaries
23under this part.

24

SEC. 13.  

Section 26106.5 is added to the Education Code, to
25read:

26

26106.5.  

(a) For purposes of this part, “annuity beneficiary”
27means the person or trust designated by a participant pursuant to
28Section 26807, 26807.5, 26906, or 26906.5 to receive an annuity
29upon the participant’s death.

30(b) For purposes of this section, “trust” means an irrevocable
31trust with the following characteristics:

32(1) The trust satisfies the requirements of subparagraph (A) or
33(C) of paragraph (4) of subdivision (d) of Section 1396p of Title
3442 of the United States Code.

35(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
36of Title 26 of the Code of Federal Regulations.

37(3) The trust, or the account in a pooled trust, is for the sole
38benefit of a single beneficiary and other beneficiaries to the trust,
39if any, are successor beneficiaries.

P18   1(4) The beneficiary of the trust who is beneficiary with respect
2to the trust’s interest in thebegin delete member’send deletebegin insert participant’send insert benefit shall
3be considered the designated beneficiary for the purpose of
4determining eligibility for, and the amount and duration of, benefits
5under the program.

6

SEC. 14.  

Section 26306 of the Education Code is amended to
7read:

8

26306.  

(a) Upon request by the system, a participant or
9beneficiary with respect to the Cash Balance Benefit Program shall
10provide to the system any information affecting his or her status
11as a participant or beneficiary.

12(b) Upon request by the system, the participant shall provide
13proof of his or her date of birth.

14(c) A participant who has not contributed to the Cash Balance
15Benefit Program during the immediately preceding plan year shall
16provide the system with his or her current mailing address and
17beneficiary information.

18(d) For a trust as defined in subdivision (b) of Section 26106.5
19that is designated as a joint and survivor annuity beneficiary, the
20following documentation is required:

21(1) The participant shall provide an acknowledged certification
22that includes each declaration prescribed by clause A-6 of Section
231.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and
24a declaration that the trust meets the requirements and conditions
25as defined in subdivision (b) of Section 26106.5. The certification
26shall be submitted to the system at the time of election of the
27beneficiary and is required for the election to be valid. The
28certification shall be in the form of an acknowledged declaration
29signed by the participant and by all then-acting trustees of the trust.

30(2) After the participant’s death, the then-acting trustee or
31trustees of the trust shall provide an acknowledged certification
32that includes each of the declarations prescribed by clause A-6 of
33Section 1.401(a)(9)-4 of Title 26 of the Code of Federal
34Regulations and a declaration that the trust meets the requirements
35and conditions as defined in subdivision (b) of Section 26106.5.
36The certification by the trustee or trustees of the trust shall be
37submitted to the system upon the participant’s death and shall
38additionally certify that the trust has not been revoked, modified,
39or amended in any manner which would cause the representations
40contained in the certification to be incorrect. The certification shall
P19   1contain a statement that it is being signed by all of the then-acting
2trustees of the trust and shall be in the form of an acknowledged
3declaration signed by all the then-acting trustees.

4(3) At any time, upon demand by the system, thebegin delete memberend delete
5begin insert participantend insert or trustee of the trust shall provide a copy of the trust
6instrument.

7

SEC. 15.  

Section 26811 of the Education Code is amended to
8read:

9

26811.  

(a) Except as provided in subdivision (b), the annuity
10beneficiary under the joint and survivor annuity elected pursuant
11to paragraph (3) or (4) of subdivision (b) of Section 26807 or
12begin delete paragraphs (2) to (5), inclusive,end deletebegin insert paragraph (2), (3), or (4)end insert of
13subdivision (a) of Section 26807.5 shall be the person designated
14by the participant on the application for a retirement benefit under
15this part, and shall not be changed after the original retirement date
16unless the beneficiary has predeceased the participant.

17(b) (1) A participant may change the annuity beneficiary
18designated pursuant to this section without penalty by designating
19a trust as beneficiary if all of the following requirements are met:

20(A) The trust conforms to the definition of trust in Section
2126105.5.

22(B) The beneficiary of the trust is the same person as the
23previously namedbegin insert annuityend insert beneficiary.

24(C) The member files an application and any required documents
25in a form prescribed by the system.

26(2) If a trust is determined to be invalid or terminates after the
27system commences payment to the trust, beginning on the effective
28date of termination of the trust, the benefit shall be paid to, and all
29associated rights and responsibilities shall accrue to, the beneficiary
30of the trust so long as that beneficiary is eligible to receive a
31
begin delete benefit.end deletebegin insert benefit pursuant to this section.end insert

32

SEC. 16.  

Section 26910 of the Education Code is amended to
33read:

34

26910.  

(a) Except as provided in subdivision (b), the
35beneficiary under the joint and survivor option elected pursuant
36to paragraph (3) or (4) of subdivision (b) of Section 26906 or
37begin delete paragraphs (1) to (4), inclusive,end deletebegin insert paragraph (2), (3), or (4)end insert of
38subdivision (a) of Section 26906.5 shall be the person or trust
39 designated by the participant on the application for a disability
40benefit under this part, and shall not be changed after the original
P20   1disability date unless the beneficiary has predeceased the
2participant.

3(b) (1) A participant may change the annuity beneficiary
4designated pursuant to this section without penalty by designating
5a trust as beneficiary if all of the following requirements are met:

6(A) The trust conforms to the definition of trust in Section
7 26105.5.

8(B) The beneficiary of the trust is the same person as the
9previously namedbegin insert annuityend insert beneficiary.

10(C) The member files an application and any required documents
11in a form prescribed by the system.

12(2) If a trust is determined to be invalid or terminates after the
13system commences payment to the trust, beginning on the effective
14date of termination of the trust, the benefit shall be paid to, and all
15associated rights and responsibilities shall accrue to, the beneficiary
16of the trust so long as that beneficiary is eligible to receive a
17
begin delete benefit.end deletebegin insert benefit pursuant to this section.end insert

18begin insert

begin insertSEC. 17.end insert  

end insert

begin insertSection 27004 of the end insertbegin insertEducation Codeend insertbegin insert is amended to
19read:end insert

20

27004.  

(a) A beneficiary, other than anbegin delete entity,end deletebegin insert entity except a
21trust as defined in Section 26106.5,end insert
may elect to receive the final
22benefit payable under the Cash Balance Benefit Program as an
23annuity payable in monthly installments provided that the sum of
24the employee account and the employer account that is payable to
25the beneficiary equals at least three thousand five hundred dollars
26($3,500).

27(b) A beneficiary who elects to receive an annuity pursuant to
28this section shall elect a period certain annuity. This form of
29payment is an annuity equal to the actuarial equivalent of the sum
30of the balance of the employee account and the employer account
31on the date of the participant’s death. The annuity shall be payable
32in whole year increments over a period of years specified by the
33beneficiary, from a minimum of three years to a maximum of 10
34years. However, the annuity period shall not exceed the life
35expectancy of thebegin delete beneficiary. Theend deletebegin insert beneficiary of the trust that is
36beneficiary with respect to the trust’s interest in the plan.end insert

37begin insert (c)end insertbegin insertend insertbegin insertTheend insert beneficiary may designate a payee to receive the
38remaining balance of payments if the beneficiary dies prior to the
39end of the period certain.begin insert Unless otherwise specified in the trust
40instrument, the trustee or beneficiary of the trust that is an annuity
P21   1beneficiary is entitled to name a subsequent beneficiary if the trust
2is valid. If the trust is determined to be invalid or terminated, any
3election by the trustee pursuant to this subdivision shall be void
4and the beneficiary shall be entitled to exercise all rights provided
5to annuity beneficiaries under this part.end insert



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