BILL ANALYSIS Ó
AB 1875
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 1875
(Chávez) - As Amended April 11, 2016
SUBJECT: State teachers' retirement: option beneficiaries:
trusts
SUMMARY: Allows members of the California State Teachers'
Retirement System (CalSTRS) to designate an irrevocable trust
established for a disabled person as an option beneficiary or
annuity beneficiary, as specified. Specifically, this bill:
1)Permits irrevocable trusts, as specified, established for
individuals who are disabled to be an option beneficiary for
members of the CalSTRS Defined Benefit (DB) Program or annuity
beneficiary for participants of the CalSTRS Cash Balance (CB)
Benefit Program.
2)Requires that the beneficiary of the trust be considered the
designated option beneficiary for the purpose of determining
eligibility for, and the amount and determination of,
benefits.
3)Allows a member or participant to change an existing
beneficiary designation without penalty for the purpose of
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designating a trust as a beneficiary.
4)Requires a member or participant to provide specified
documentation if a trust is designated, including a
certification that the trust meets relevant requirements.
Trustees acting at the time of the death of the member or
participant would be required to provide a similar
certification and additionally certify that the trust has not
been revoked, modified or amended in a manner that would cause
the certification to be incorrect.
5)Allows a trustee to name a beneficiary to receive payments
issued for the month of the trust beneficiary's death and any
contributions and interest remaining in the member's account,
unless the terms of the trust specify otherwise.
6)Provides that the Teachers' Retirement Board (Board) is not
required to determine the powers of a trustee or the validity
of a trust and, provided the Board acts in good faith,
immunizes the Board, system and plan from liability.
EXISTING LAW: Allows CalSTRS members to elect an option
beneficiary, and participants can elect an annuity beneficiary,
to receive a lifetime allowance upon the member's death.
However, the beneficiary must be a person, and election of a
trust as an option beneficiary is prohibited.
FISCAL EFFECT: Unknown.
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COMMENTS: According to the author, "The current code correctly
states that entities with no termination date (e.g. corporation,
trust, public entity or parochial institution cannot be option
beneficiaries since they can "live forever". However, when
making estate plans to care for disabled adult children, many
parents use Special Needs Trusts or Supplemental Needs Trusts.
These irrevocable trusts terminate upon the death of the
beneficiary of said trusts (the disabled child). Allowing
Supplemental Needs Trusts or Special Needs Trusts to be the
option beneficiary would have no monetary effect on the State
and would greatly assist those who truly need some help."
Under federal law, a parent, grandparent or court can establish
a special needs trust for a disabled individual to shield the
assets and income of the trust from disqualifying him or her
from eligibility for public benefits, such as Medi-Cal or
Supplemental Security Income, and from barring his or her access
to support services that require eligibility for those benefits.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
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Opposition
None on file
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957