California Legislature—2015–16 Regular Session

Assembly Bill No. 2375

Introduced by Committee on Public Employees, Retirement, and Social Security (Assembly Members Cooper (Chair), Bonta, Cooley, Gonzalez, and O'Donnell)

February 18, 2016

An act to amend Sections 20034, 20035, 20035.5, 20037, 20037.6, 20037.7, 20037.8, 20037.9, 20037.10, 20037.11, 20037.12, 20037.13, 20037.15, 20537, 20572, 20577.5, 20578, 20638, 20963, 20963.1, 20965, 21499, and 21626.5 of, and to repeal and amend Sections 20037.5 and 20037.14 of, the Government Code, relating to the Public Employees’ Retirement System.

LEGISLATIVE COUNSEL’S DIGEST

AB 2375, as introduced, Committee on Public Employees, Retirement, and Social Security. Public Employees’ Retirement System: omnibus bill.

Existing law, the Public Employees’ Retirement Law, creates the Public Employees’ Retirement System (PERS) for the purpose of providing pension benefits to state employees and employees of contracting agencies and prescribes the rights and duties of members of the system and their beneficiaries. Existing law vests management and control of PERS in its board of administration. PERS provides a defined benefit to members of the program, based on final compensation, credited service, and age at retirement, subject to certain variations.

(1) Existing law prescribes various definitions of final compensation based on employment classification, bargaining unit, date of hire, and date of retirement, among other things.

This bill would revise these definitions to remove redundant language and make technical and style changes.

(2) Existing law authorizes the board to charge interest, at the actuarial interest rate, on the amount of any payment due and unpaid by a contracting agency until payment is received.

This bill would instead permit the board to change interest on payments due and unpaid at the greater of the annual return on the system’s investments for the year prior to the year in which payments are not timely made or a simple annual rate of 10%.

(3) In addition to the above, existing law authorizes the board to assess a contracting agency that fails to make contributions when due interest at an annual rate of 10% and the costs of collection, including reasonable legal fees. In the case of repeated delinquencies, the board may assess the contracting agency a penalty of 10% of the delinquent amount.

This bill would recast these provision to authorize the board, if a contracting agency fails to fully pay any installment of contributions when due, to assess a penalty of 10% of the total amount due and unpaid, including accrued and unpaid interest. The bill would permit the penalty to be assessed once during each 30-day period that the outstanding amount remains unpaid. The bill would also specify that the contracting agency may be assessed the costs of collection, including reasonable legal fees and litigation costs, including, without limitation, legal fees and legal costs incurred in bankruptcy, when necessary to collect any amounts due.

(4) Existing law authorizes the board to terminate a local agency contract if the contracting agency fails for 30 days after demand by the board to pay any installment of required contributions or fails for three months after demand to file any information required for administration of the agency’s employees. Existing law permits the board to reduce benefits in certain instances when contributions are inadequate to fund them. Existing law authorizes the board to merge a plan that has been terminated into the terminated agency pool without benefit reduction or with a lesser reduction if certain conditions are met.

This bill would delete references to merging a plan and instead specify that the board may elect to not impose a reduction on a plan, or to impose a lesser reduction on a plan, that has been terminated if those acts will not impact the actuarial soundness of the terminated agency pool. The bill would make related changes by deleting administrative provisions relating to the sequence for transferring assets in relation to the reduction of benefits.

(5) Existing law grants members in specified member classifications whose retirements are within 4 months of separation from employment specified percentages of service credit for each unused day of sick leave or educational leave.

This bill would specify that a day of unused sick leave or unused educational leave is the equivalent of an 8-hour day.

(6) Existing law requires payment of interest on a preretirement or postretirement death allowance or a preretirement or postretirement lump-sum benefit if not paid within a specified time after the date of death of an annuitant. Existing law prescribes the method of calculating interest for this purpose.

This bill would instead require that interest by calculated at 7%, pursuant to the California Constitution.

(7) Existing law requires a surviving domestic partner be treated in the same manner as a surviving spouse for purposes of postretirement survivor’s allowances if certain conditions are met.

This bill would require that an individual who is the same gender as a member be treated in the same manner as a surviving spouse for purposes of postretirement survivor’s allowances if certain conditions are met.

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 20034 of the Government Code is
amended to read:

20034.  

The begin delete average monthly salary end delete begin insert highest annual average
compensation end insert during any begin insert consecutive 12- or 36-month end insert period of
begin delete service end delete begin insert employment end insert as a member of any retirement system
maintained by the university shall be considered compensation
earnable by a member of this system for purposes of computing
final compensation for the member providing he or she retires
concurrently under both systems.

SEC. 2.  

Section 20035 of the Government Code is amended
to read:

20035.  

(a) Notwithstanding Section 20037, “final
compensation” for the purposes of determining any pension or
benefit with respect to a state member who retires or dies on or
after July 1, 1991, and with respect to benefits based on service
with the state, means the highest annual compensation which was
earnable by the state member during begin delete the end delete begin insert any end insert consecutive 12-month
period of employment begin delete immediately end delete preceding the effective date
of his or her retirement or the date of his or her last separation
from state service if begin delete earlier or during any other period of 12
consecutive months during his or her membership in this system
that the member designates on the application for retirement. end delete
begin insert earlier. end insert

(b) With respect to a state member who retires or dies on or
after July 1, 1991, and who was a managerial employee, as defined
by subdivision (e) of Section 3513, or a supervisory employee, as
defined by subdivision (g) of Section 3513, whose monthly salary
range was administratively reduced by 5 percent because of the
salary range reductions administratively imposed upon managers
and supervisors during the 1991-92 fiscal year, “final
compensation” means the highest annual compensation the state
member would have earned had his or her salary range not been
reduced by the 5-percent reduction. This subdivision shall only
apply if the period during which the state member’s salary was
reduced would have otherwise been included in determining his
or her final compensation. The costs, if any, that may result from
the use of the higher final compensation shall be paid for by the
employer in the same manner as other retirement benefits are
funded.

SEC. 3.  

Section 20035.5 of the Government Code is amended
to read:

20035.5.  

Notwithstanding Section 20037, “final compensation”
for the purposes of determining any pension or benefit with respect
to a school member who retires or dies on or after January 1, 2000,
and with respect to benefits based on service with a school
employer, means the highest annual compensation that was
earnable by the school member during begin delete the end delete begin insert any end insert consecutive
12-month period of employment begin delete immediately end delete preceding the
effective date of his or her retirement or the date of his or her last
separation from service if begin delete earlier or during any other period of 12
consecutive months during his or her membership in this system
that the member designates on the application for retirement. end delete
begin insert earlier. end insert

SEC. 4.  

Section 20037 of the Government Code is amended
to read:

20037.  

For a state member, or for a local member who is an
employee of a contracting agency that is subject to this section,
“final compensation” means the highest begin delete average end delete annual begin insert average end insert
compensation earnable by a member during begin delete the three consecutive
years end delete begin insert any consecutive 36-month period end insert of employment begin delete immediately end delete
preceding the effective date of his or her retirement or the date of
his or her last separation from state service if begin delete earlier or during any
other period of three consecutive years during his or her
membership in this system which he or she designates in his or
her application for retirement, end delete begin insert earlier, end insert including any or all of the
period or periods of (a) service required for qualification for
membership, or (b) prior service which qualifies for credit under
this system, if any, immediately preceding membership, or (c) time
prior to entering state service at the compensation earnable by him
or her in the position first held by him or her in that service, as
may be necessary to complete three consecutive years. For the
purposes of this section, periods of service separated by a period
of retirement or breaks in service may be aggregated to constitute
a period of three consecutive years, if the periods of service are
consecutive except for such a period of retirement or breaks. If a
break in service did not exceed six months in duration, time
included in the break and compensation earnable during that time
shall be included in computation of final compensation. If a break
in service exceeded six months in duration, the first six months
thereof and the compensation earnable during those six months
shall be included in computation of final compensation, but time
included in the break which is in excess of six months and the
compensation earnable during that excess time shall be excluded
in computation of final compensation. On and after November 13,
1968, this section shall apply to all contracting agencies and to the
employees of those agencies whether or not those agencies have
previously elected to be subject to this section, except that this
section shall not apply to an employee of a contracting agency
which has not elected to be subject to this section whose death
occurred or whose retirement was effective prior to November 13,
1968.

SEC. 5.  

Section 20037.5 of the Government Code, as added
by Section 56 of Chapter 88 of the Statutes of 1998, is repealed.

begin delete

20037.5.  

Notwithstanding Section 20035, “final compensation”
for a state member who has elected to be subject to Section
21353.5, for the purposes of determining any pension or benefit
based on service credited under that section, means the highest
average annual compensation earnable by the member during the
consecutive 36-month period immediately preceding the effective
date of his or her retirement, or the date of his or her last separation
from state service if earlier, or during any other period of 36
consecutive months during his or her state membership that the
member designates on the application for retirement.

end delete

SEC. 6.  

Section 20037.5 of the Government Code, as added
by Section 56 of Chapter 91 of the Statutes of 1998, is amended
to read:

20037.5.  

Notwithstanding Section 20035, “final compensation”
for a state member who has elected to be subject to Section
21353.5, for the purposes of determining any pension or benefit
based on service credited under that section, means the highest
average annual compensation earnable by the member during begin delete the end delete
begin insert any end insert consecutive 36-month period begin delete immediately end delete preceding the
effective date of his or her begin delete retirement, end delete begin insert retirement end insert or the date of his
or her last separation from state service if begin delete earlier, or during any
other period of 36 consecutive months during his or her state
membership that the member designates on the application for
retirement. end delete begin insert earlier. end insert

SEC. 7.  

Section 20037.6 of the Government Code is amended
to read:

20037.6.  

(a) Notwithstanding Sections 20035 and 20037, final
compensation for a person who is employed by the state for the
first time and becomes a state member of the system on or after
July 1, 2006, and is represented by State Bargaining Unit 2, means
the highest average annual compensation earnable by the member
during begin delete the end delete begin insert any end insert consecutive 36-month period begin delete immediately end delete preceding
the effective date of his or her begin delete retirement, end delete begin insert retirement end insert or the date
of his or her last separation from state service if begin delete earlier, or during
any other period of 36 consecutive months during his or her state
membership that the member designates on the application for
retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 2.

(c) This section does not apply to:

(1)  Former state employees who return to state employment
on or after July 1, 2006.

(2) State employees hired prior to July 1, 2006, who were subject
to Section 20281.5 during the first 24 months of state employment.

(3) State employees hired prior to July 1, 2006, who become
subject to representation by State Bargaining Unit 2 on or after
July 1, 2006.

(4)  State employees on an approved leave of absence who return
to active employment on or after July 1, 2006.

SEC. 8.  

Section 20037.7 of the Government Code is amended
to read:

20037.7.  

(a) Notwithstanding Sections 20035 and 20037, final
compensation for a person who is employed by the state for the
first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 1, 3,
4, 11, 14, 15, 17, 20, or 21, means the highest average annual
compensation earnable by the member during begin delete the end delete begin insert any end insert consecutive
36-month period begin delete immediately end delete preceding the effective date of his
or her begin delete retirement, end delete begin insert retirement end insert or the date of his or her last separation
from state service if begin delete earlier, or during any other period of 36
consecutive months during his or her state membership that the
member designates on the application for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, or 21.

(c) This section does not apply to:

(1) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(2) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 1, 3, 4, 11, 14,
15, 17, 20, or 21 on or after January 1, 2007.

(4) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 9.  

Section 20037.8 of the Government Code is amended
to read:

20037.8.  

(a) Notwithstanding Sections 20035 and 20037, final
compensation for a person who is employed by the state for the
first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 12
or 13, means the highest average annual compensation earnable
by the member during begin delete the end delete begin insert any end insert consecutive 36-month period
begin delete immediately end delete preceding the effective date of his or her begin delete retirement, end delete
begin insert retirement end insert or the date of his or her last separation from state service
if begin delete earlier, or during any other period of 36 consecutive months
during his or her state membership that the member designates on
the application for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 12 or 13.

(c) This section does not apply to:

(1) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(2) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 12 or 13 on or
after January 1, 2007.

(4) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 10.  

Section 20037.9 of the Government Code is amended
to read:

20037.9.  

(a) Notwithstanding Sections 20035 and 20037, final
compensation for a person who is employed by the state for the
first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 16
or 19, means the highest average annual compensation earnable
by the member during begin delete the end delete begin insert any end insert consecutive 36-month period
begin delete immediately end delete preceding the effective date of his or her begin delete retirement, end delete
begin insert retirement end insert or the date of his or her last separation from state service
if begin delete earlier, or during any other period of 36 consecutive months
during his or her state membership that the member designates on
the application for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 16 or 19.

(c) This section does not apply to:

(1) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(2) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 16 or 19 on or
after January 1, 2007.

(4) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 11.  

Section 20037.10 of the Government Code is amended
to read:

20037.10.  

(a) Notwithstanding Sections 20035 and 20037,
final compensation for a person who is employed by the state for
the first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 7,
means the highest average annual compensation earnable by the
member during begin delete the end delete begin insert any end insert consecutive 36-month period immediately
preceding the effective date of his or her begin delete retirement, end delete begin insert retirement end insert or
the date of his or her last separation from state service if begin delete earlier,
or during any other period of 36 consecutive months during his or
her state membership that the member designates on the application
for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 7.

(c) This section does not apply to:

(1) Service credit accrued while classified as a state peace
officer/firefighter while a member of Bargaining Unit 7.

(2) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(3) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(4) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 7 on or after
January 1, 2007.

(5) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 12.  

Section 20037.11 of the Government Code is amended
to read:

20037.11.  

(a) Notwithstanding Sections 20035 and 20037,
final compensation for a person who is employed by the state for
the first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 10,
means the highest average annual compensation earnable by the
member during begin delete the end delete begin insert any end insert consecutive 36-month period begin delete immediately end delete
preceding the effective date of his or her begin delete retirement, end delete begin insert retirement end insert or
the date of his or her last separation from state service if begin delete earlier,
or during any other period of 36 consecutive months during his or
her state membership that the member designates on the application
for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 10.

(c) This section does not apply to:

(1) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(2) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 10 on or after
January 1, 2007.

(4) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 13.  

Section 20037.12 of the Government Code is amended
to read:

20037.12.  

(a) Notwithstanding Sections 20035 and 20037,
final compensation for a person who is employed by the state for
the first time and becomes a state member of the system on or after
January 1, 2007, and is represented by State Bargaining Unit 18,
means the highest average annual compensation earnable by the
member during begin delete the end delete begin insert any end insert consecutive 36-month period begin delete immediately end delete
preceding the effective date of his or her begin delete retirement, end delete begin insert retirement end insert or
the date of his or her last separation from state service if begin delete earlier,
or during any other period of 36 consecutive months during his or
her state membership that the member designates on the application
for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 18.

(c) This section does not apply to:

(1) Former state employees previously employed before January
1, 2007, who return to state employment on or after January 1,
2007.

(2) State employees hired prior to January 1, 2007, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to January 1, 2007, who become
subject to representation by State Bargaining Unit 18 on or after
January 1, 2007.

(4) State employees on an approved leave of absence employed
before January 1, 2007, who return to active employment on or
after January 1, 2007.

SEC. 14.  

Section 20037.13 of the Government Code is amended
to read:

20037.13.  

(a) Notwithstanding Sections 20035 and 20037, for
the purposes of determining any pension or benefit with respect
to benefits based on service with the state, “final compensation”
means the highest annual compensation that was earnable by the
state member during begin delete the end delete begin insert any end insert consecutive 36-month period of
employment begin delete immediately end delete preceding the effective date of his or
her retirement or the date of his or her last separation from state
service begin delete or during any other period of 36 consecutive months during
his or her membership in this system that the member designates
on the application for retirement. end delete begin insert if earlier. end insert

(b) This section shall only apply to a member appointed to a
career executive assignment, as defined in Section 18546, who at
the time of appointment meets one or more of the following
criteria:

(1) He or she previously had, but does not currently have,
permanent status in the civil service.

(2) He or she is a person described in Section 18990 who was
not, within the past 12 months, employed by the Legislature for
two or more consecutive years.

(3) He or she is a person described in Sections 18992 who was
not, within the past 12 months, holding a nonelected exempt
position in the executive branch.

(c) A state entity that employs a person described in subdivision
(b) in a career executive assignment shall notify the Controller of
this person’s employment status and the Controller shall forward
this information to the system.

SEC. 15.  

Section 20037.14 of the Government Code, as
amended by Section 127 of Chapter 296 of the Statutes of 2011,
is repealed.

begin delete

20037.14.  

(a) Notwithstanding Sections 20035 and 20037,
final compensation for a person who is employed by the state for
the first time and becomes a state member of the system on or after
October 31, 2010, and is represented by State Bargaining Unit 5
or 8, means the highest average annual compensation earnable by
the member during the consecutive 36-month period immediately
preceding the effective date of his or her retirement, or the date of
his or her last separation from state service if earlier, or during any
other period of 36 consecutive months during his or her state
membership that the member designates on the application for
retirement.

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 5 or 8 or in a class related to State
Bargaining Unit 5 or 8 as an employee who is excepted from the
definition of “state employee” in subdivision (c) of Section 3513,
or an officer or employee of the executive branch of state
government who is not a member of the civil service.

(c) This section does not apply to:

(1) Former state employees previously employed before October
31, 2010, who return to state employment on or after October 31,
2010.

(2) State employees hired prior to October 31, 2010, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to October 31, 2010, who
become subject to representation by State Bargaining Unit 5 or 8
on or after October 31, 2010.

(4) State employees on an approved leave of absence employed
before October 31, 2010, who return to active employment on or
after October 31, 2010.

end delete

SEC. 16.  

Section 20037.14 of the Government Code, as added
by Section 11 of Chapter 163 of the Statutes of 2010, is amended
to read:

20037.14.  

(a) Notwithstanding Sections 20035 and 20037,
final compensation for a person who is employed by the state for
the first time and becomes a state member of the system on or after
October 31, 2010, and is represented by State Bargaining Unit 5
or 8, means the highest average annual compensation earnable by
the member during begin delete the end delete begin insert any end insert consecutive 36-month period
begin delete immediately end delete preceding the effective date of his or her begin delete retirement, end delete
begin insert retirement end insert or the date of his or her last separation from state service
if begin delete earlier, or during any other period of 36 consecutive months
during his or her state membership that the member designates on
the application for retirement. end delete begin insert earlier. end insert

(b) This section applies to service credit accrued while a member
of State Bargaining Unit 5 or 8 or in a class related to State
Bargaining Unit 5 or 8 as an employee who is excepted from the
definition of “state employee” in subdivision (c) of Section 3513,
or an officer or employee of the executive branch of state
government who is not a member of the civil service.

(c) This section does not apply to:

(1) Former state employees previously employed before October
31, 2010, who return to state employment on or after October 31,
2010.

(2) State employees hired prior to October 31, 2010, who were
subject to Section 20281.5 during the first 24 months of state
employment.

(3) State employees hired prior to October 31, 2010, who
become subject to representation by State Bargaining Unit 5 or 8
on or after October 31, 2010.

(4) State employees on an approved leave of absence employed
before October 31, 2010, who return to active employment on or
after October 31, 2010.

SEC. 17.  

Section 20037.15 of the Government Code is amended
to read:

20037.15.  

(a)  Notwithstanding Sections 3517.8, 20035, and
20037, final compensation for a person who is employed for the
first time and becomes a member of the system on or after January
15, 2011, means the highest average annual compensation earnable
by the member during begin delete the end delete begin insert any end insert consecutive 36-month period
begin delete immediately end delete preceding the effective date of his or her begin delete retirement, end delete
begin insert retirement end insert or the date of his or her last separation from state service
if begin delete earlier, or during any other period of 36 consecutive months
during his or her state membership that the member designates on
the application for retirement. end delete begin insert earlier. end insert

(b) This section applies to the following:

(1) Service credit accrued while a member of State Bargaining
Unit 6 or 9 or in a class related to State Bargaining Unit 6 or 9 as
an employee who is excepted from the definition of “state
employee” in subdivision (c) of Section 3513, or an officer or
employee of the executive branch of state government who is not
a member of the civil service.

(2) Service credit accrued while a peace officer/firefighter
member represented by State Bargaining Unit 7 or in a class related
to peace officer/firefighter members in State Bargaining Unit 7 as
an employee who is excepted from the definition of “state
employee” in subdivision (c) of Section 3513, or an officer or
employee of the executive branch of state government who is not
a member of the civil service.

(3) Service credit accrued as an employee who is excepted from
the definition of “state employee” in subdivision (c) of Section
3513, or an officer or employee of the executive branch of state
government who is not a member of the civil service.

(4) Service credit accrued as an employee of the Legislature,
the judicial branch, or the California State University.

(c) This section does not apply to:

(1) Former employees previously employed before January 15,
2011, who return to employment on or after January 15, 2011, and
who were previously subject to a 12-month average.

(2) State employees hired prior to January 15, 2011, who were
subject to Section 20281.5 during the first 24 months of state
employment, and who were previously subject to a 12-month
average.

(3) State employees hired prior to January 15, 2011, who become
subject to representation by State Bargaining Unit 6, 7, or 9 on or
after January 15, 2011, and who were previously subject to a
12-month average.

(4) Employees on an approved leave of absence employed before
January 15, 2011, who return to active employment on or after
January 15, 2011, and who were previously subject to a 12-month
average.

(d) If this section is in conflict with a memorandum of
understanding that is current and in effect on January 15, 2011,
the memorandum of understanding shall be controlling while it
remains in effect. Upon expiration of the memorandum of
understanding that is in effect and current on January 15, 2011,
this section shall be controlling and may not be superseded by a
subsequent memorandum of understanding.

SEC. 18.  

Section 20537 of the Government Code is amended
to read:

20537.  

The board may charge interest on the amount of any
payment due and unpaid by a contracting agency until payment is
received. Interest shall be charged at the begin delete actuarial interest rate. end delete
begin insert greater of the annual return on the system’s investments for the
year prior to the year in which payments are not timely made or
a simple annual rate of 10 percent. end insert The interest shall be deemed
interest earnings for the year in which the late payment is received.

SEC. 19.  

Section 20572 of the Government Code is amended
to read:

20572.  

(a) If a contracting agency fails for 30 days after
demand by the board to pay begin insert in full end insert any installment of contributions
required by its contract, or fails for three months after demand
begin insert therefor end insert by the board begin delete therefor end delete to file any information required in
the administration of this system with respect to that begin insert contracting end insert
agency’s employees, or if the board determines that the begin insert contracting end insert
agency is no longer in existence, the board may terminate that
contract by resolution adopted by a majority vote of its members
effective 60 days after notice of its adoption has been mailed by
registered mail to the governing body of the contracting agency.

(b)  begin delete Notwithstanding end delete begin insert In addition to the interest obligations set
forth in end insert Section 20537, if a contracting agency fails to begin delete remit end delete begin insert pay
in full any installment of end insert the contributions when begin delete due, the agency
may be assessed interest at an annual rate of 10 percent and the
costs of collection, including reasonable legal fees, when necessary
to collect the amounts due. In the case of repeated delinquencies, end delete
begin insert due and the failure continues for a period of three months, end insert the
contracting agency may be assessed a penalty of 10 percent of the
begin delete delinquent amount. That end delete begin insert total amount due and unpaid, including
any accrued and unpaid interest. The end insert penalty may be assessed
once during each 30-day period that the begin insert outstanding end insert amount
remains unpaid. begin insert In addition, the contracting agency may be
assessed the costs of collection, including reasonable legal fees
and litigation costs, including, without limitation, legal fees and
legal costs incurred in bankruptcy, when necessary to collect any
amounts due. end insert

SEC. 20.  

Section 20577.5 of the Government Code is amended
to read:

20577.5.  

Notwithstanding Section 20577, the board may begin delete merge
a plan end delete begin insert elect not to impose a reduction, or to impose a lesser
reduction, on a plan end insert that has been terminated pursuant to Section
begin delete 20572 into the terminated agency pool without benefit reduction,
or with a lesser reduction, end delete begin insert 20572 end insert if (a) the board has made all
reasonable efforts to collect the amount necessary to fully fund
the liabilities of the begin delete plan, end delete begin insert plan end insert and (b) the board finds that begin delete the
merger of the plan into the terminated agency pool without benefit
reduction end delete begin insert not reducing the benefits, or imposing a lesser reduction, end insert
will not impact the actuarial soundness of the terminated agency
pool.

SEC. 21.  

Section 20578 of the Government Code is amended
to read:

20578.  

(a) Except as provided in subdivision (b), on and after
January 1, 1991, the rights and benefits of a former employee of
a contracting agency which terminated on or before January 1,
1991, or of his or her beneficiary, shall be the same as if the agency
had continued as a contracting agency. Any monthly allowance
of that individual, or of his or her beneficiary, that was reduced
pursuant to Section 20577 because the contracting agency failed
to pay the board the amount of the difference shall not be subject
to continued reduction on or after January 1, 1991. As of January
1, 1991, benefits shall be paid at the level provided in the contract
prior to that reduction. However, if a former employee of a
contracting agency that terminated on or before January 1, 1991,
becomes employed by another covered employer after the date of
termination, including an employer subject to reciprocity, the
benefits shall be calculated by using the highest compensation
earned by the individual.

In accordance with Section 20580, an individual who has
withdrawn his or her accumulated contributions from the
terminated agency shall not be permitted to redeposit any
withdrawn contributions upon again becoming a member of this
system.

begin delete

Except as provided in Section 20577.5, benefits shall be reduced
proportionally pursuant to Section 20577 prior to the transfer of
assets to the pool if the amount of the terminating agency’s assets
are less than the actuarial equivalent described in clause (1) of
subdivision (a) of Section 20576 and if the agency fails to pay the
difference.

end delete

(b) If a contracting agency has not paid the system for any deficit
in funding for earned benefits, as determined pursuant to Section
20577, members shall be entitled to the benefits to which members
of the plan were entitled 36 months prior to the date the agency
notified the board of its intention to terminate its contract or 36
months prior to the date the board notified the agency of its intent
to terminate the contract, whichever is earlier. Entitlement to earned
benefits under this subdivision shall be subject to Section 20577.5.

SEC. 22.  

Section 20638 of the Government Code is amended
to read:

20638.  

The begin delete average monthly salary end delete begin insert highest annual average
compensation end insert during any begin insert consecutive 12- or 36-month end insert period of
begin delete service end delete begin insert employment end insert as a member of a county retirement system
shall be considered compensation earnable by a member of this
system for purposes of computing final compensation for the
member provided:

(a) (1) Entry into employment in which he or she became a
member in one system occurred on or after October 1, 1957, and
within 90 days of discontinuance of employment as a member of
the other system.

(2) This subdivision shall not deny the benefit of this section to
any person retiring after October 1, 1963, who entered membership
prior to October 1, 1957, if he or she entered the employment in
which he or she became a member within 90 days of termination
of employment in which he or she was a member of the other
system, and he or she became a member within seven months of
entry into employment, or, if an employee of a district as defined
in Section 31468, became a member at the time the district was
included in a county retirement system.

(b) He or she retires concurrently under both systems and is
credited with the period of service under the county system at the
time of retirement.

SEC. 23.  

Section 20963 of the Government Code is amended
to read:

20963.  

(a) A state, school, or school safety member, whose
effective date of retirement is within four months of separation
from employment with the employer subject to this section that
granted the sick leave credit, shall be credited at his or her
retirement with 0.004 year of service credit for each unused day
of sick leave certified to the board by the employer. begin insert A day of
unused sick leave is the equivalent of an eight-hour day. end insert The
certification shall report only those days of unused sick leave that
were accrued by the member during the normal course of his or
her employment and shall not include any additional days of sick
leave reported for the purpose of increasing the member’s
retirement benefit. Reports of unused days of sick leave shall be
subject to audit and retirement benefits may be adjusted where
improper reporting is found. For purposes of this subdivision, sick
leave shall not include sick leave earned as a National Guard
member as described in Section 20380.5.

(b) Until receipt of certification from an employer concerning
unused sick leave, the board may pay an estimated allowance
pursuant to this section. At the time of receipt of the certification,
the allowance shall be adjusted to reflect any necessary changes.

(c) Notwithstanding any other provisions of this part, this section
shall not apply to local members other than local miscellaneous
members employed before July 1, 1980, by a school district that
is a contracting agency or those school safety members employed
before July 1, 1980, by a contracting agency that is a school district
or community college district, as defined in subdivision (i) of
Section 20057.

(d) This section shall not apply to any of the following:

(1) A person who becomes a school member on and after July
1, 1980, and any person who becomes a local member employed,
on and after July 1, 1980, by a school district that is a contracting
agency whether or not the person was ever a school member or
local member prior to that date.

(2) A state employee, with respect to sick leave credits earned
as a state member under Section 21353.5, except that the member
shall be entitled to receive credit under this section for the sick
leave he or she has earned as a state member subject to any other
retirement formula, provided the member has a sick leave credit
balance remaining at the time of retirement.

(e) For the purposes of this section, sick leave benefits provided
to state employees pursuant to the state sick leave system shall be
construed to mean compensation paid to employees on approved
leaves of absence because of sickness.

SEC. 24.  

Section 20963.1 of the Government Code is amended
to read:

20963.1.  

(a) A state member whose effective date of retirement
is within four months of separation from employment of the state,
shall be credited at his or her retirement with 0.004 year of service
for each unused day of educational leave credit, as certified to the
board by the employer. begin insert A day of unused educational leave is the
equivalent of an eight-hour day. end insert The provisions of this section
shall be effective for eligible state members who retire directly
from state employment on and after January 1, 2000.

(b) This section shall apply to eligible state members in state
bargaining units that have agreed to this section in a memorandum
of understanding, or as authorized by the Director of Human
Resources for classifications of state employees that are excluded
from the definition of “state employee” by paragraph (c) of Section
3513 of the Government Code.

SEC. 25.  

Section 20965 of the Government Code is amended
to read:

20965.  

A local miscellaneous member and a local safety
member, whose effective date of retirement is within four months
of separation from employment with the employer which granted
the sick leave credit, shall be credited at his or her retirement with
0.004 year of service credit for each unused day of sick leave
certified to the board by his or her employer. begin insert A day of unused sick
leave is the equivalent of an eight-hour day. end insert The certification shall
report only those days of unused sick leave that were accrued by
the member during the normal course of his or her employment
and shall not include any additional days of sick leave reported
for the purpose of increasing the member’s retirement benefit.
Reports of unused days of sick leave shall be subject to audit and
retirement benefits may be adjusted where improper reporting is
found.

This section shall not apply to any contracting agency nor to the
employees of a contracting agency until the agency elects to be
subject to this section by contract or by amendment to its contract
made in the manner prescribed for approval of contracts, except
that an election among the employees is not required, or, in the
case of contracts made after September 26, 1974, by express
provision in the contract making the contracting agency subject
to this section.

This section shall only apply to members who retire after the
effective date of the contract amendments.

SEC. 26.  

Section 21499 of the Government Code is amended
to read:

21499.  

(a) Notwithstanding Section 21498, when either an
initial payment of a preretirement or postretirement death allowance
or a preretirement or postretirement lump-sum benefit is payable
in an amount of ten dollars ($10) or more, it shall be authorized
to the Controller within 45 days of receipt by this system of all the
necessary information, including the return of warrants issued or
any overpayment outstanding after the date of the death of the
annuitant.

(b) If any payment is not made within that time limitation, the
payment shall also include interest at the begin delete greater of the interest
crediting rate specified in Section 20178 or the net earnings rate
(including capital gains and losses) in effect at the time the payment
is made, end delete begin insert default interest rate established in Section 1 of Article
XV of the California Constitution end insert for time following the expiration
of that time limitation.

SEC. 27.  

Section 21626.5 of the Government Code is amended
to read:

21626.5.  

begin insert (a) end insert begin insert   end insert For purposes of Section 21624, 21626, 21627,
21629, or 21630, a surviving domestic partner shall be treated in
the same manner as a surviving spouse if either:

begin delete

(a)

end delete

begin insert (1) end insert  The domestic partnership was registered for one year prior
to the member’s service retirement date or at the disability
retirement date and continuously until the date of the member’s
death.

begin delete

(b)

end delete

begin insert (2) end insert  The member retired prior to January 1, 2006, and both the
member and his or her domestic partner, who currently are in a
state-registered domestic partnership, sign an affidavit stating that,
at the time prescribed by the retirement system for married spouses
to qualify for survivor continuance, the member and the domestic
partner would have qualified to be registered as domestic partners
pursuant to Section 297 of the Family Code.

begin insert

(b) For purposes of Section 21624, 21626, 21627, 21629, or
21630, an individual who is the same gender as the member shall
be treated in the same manner as a surviving spouse if the following
conditions are satisfied:

end insert begin insert

(1) The individual entered into marriage with the member on
or after the date when individuals of the same gender were legally
allowed to enter into marriage and was married continuously until
the date of the member’s death.

end insert begin insert

(2) Either of the following applies:

end insert begin insert

(A) The member retired prior to the date when individuals of
the same gender were legally allowed to enter into marriage, and
both the member and his or her spouse, who are currently married,
sign an affidavit stating that, at the time prescribed by the
retirement system for spouses to qualify for a survivor continuance,
the member and the individual would have qualified to be legally
married had it been legally possible for people of the same gender
to marry.

end insert begin insert

(B) The individual originally qualified to become a surviving
spouse under subdivision (a).

end insert