BILL ANALYSIS Ó
AB 1875
Page 1
Date of Hearing: April 27, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
1875 (Chávez) - As Amended April 11, 2016
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|Policy | Public Employees, Retirement, |Vote:| 7 - 0 |
|Committee: |and Social Security | | |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill 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:
AB 1875
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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
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been revoked, modified or amended in a manner that would cause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.
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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.
FISCAL EFFECT:
Minor and absorbable costs for the development of forms,
publications, web content, new processes and staff training.
COMMENTS:
1)Background. Under existing law, CalSTRS DB Program members
and CB Benefit Program participants can elect to receive an
actuarially reduced lifetime benefit and, in exchange, can
name an option beneficiary or annuity beneficiary who will
receive a lifetime allowance upon the member's or
participant's death. However, the beneficiary must be a
person, and election of a trust as an option beneficiary is
prohibited
Special needs trusts shield the assets and income of disabled
individuals from disqualifying them from eligibility for
public benefits and services. Since trusts currently are
prohibited from being named as an option or annuity
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beneficiary, a member or participant who wishes to provide a
lifetime benefit to a disabled person cannot do so without
jeopardizing that individual's eligibility for other public
benefits.
2)Purpose. According to the author, AB 1875 will permit
irrevocable trusts that are established for individuals who
are disabled to be an option beneficiary or annuity
beneficiary for the defined benefit program and the Cash
Balance Benefit Program.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081