BILL ANALYSIS Ó
AB 2404
Page 1
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL
SECURITY
Rob Bonta, Chair
AB 2404
(Cooley) - As Amended April 12, 2016
SUBJECT: Public Employees' Retirement System: optional
settlements
SUMMARY: Eliminates and combines several of the optional
retirement benefit settlements available to members of the
California Public Employees' Retirement System (CalPERS), the
Judges' Retirement System (JRS I), and the Judges' Retirement
System II (JRS II), that retire on or after January 1, 2018, in
order to simplify members' retirement choices and administration
of these retirement systems. Specifically, this bill:
1)Limits availability of current optional settlements to members
of CalPERS, JRS I and JRS II that retire on or before December
31, 2017.
2)Allows members of CalPERS., JRS I and JRS II that retire on or
after January 1, 2018 to elect an unmodified allowance, as
defined, or the following optional settlements:
a) Return of Remaining Contributions Option 1,
AB 2404
Page 2
b) The 100 Percent Beneficiary Option 2,
c) The 50 Percent Beneficiary Option 3,
d) The Flexible Beneficiary Option 4, which provides a
specified dollar or percentage of the member's unmodified
allowance to one or more beneficiaries; and
e) Optional Settlement 5, which provides for a partial
present distribution of the actuarial present value of a
portion of the unmodified monthly allowance of specified
members of the State Peace Officer/Firefighter and State
Patrol benefits plans.
3)Revises and recasts various administrative provisions in
connection with optional settlements provided to members of
CalPERS, JRS I and JRS II.
4)Makes clarifying and technical changes to update
cross-references related to retirement payment options.
EXISTING LAW:
Allows a retiring CalPERS member to receive a lifetime benefit
paid to the member alone (the unmodified allowance), or elect
one of twelve optional settlements that reduce his or her
AB 2404
Page 3
lifetime benefit in order to provide a lump sum payment or
continuing allowance to a designated beneficiary or
beneficiaries upon their death. The actuarial reduction to the
member's benefit is cost-neutral to CalPERS and is based on his
or her age at retirement, and age of the designated beneficiary
or beneficiaries. A member must make this irrevocable election
once CalPERS has provided an estimate of the modified allowance
he or she will receive upon retirement, and based on the option
and beneficiary or beneficiaries selected.
FISCAL EFFECT: Unknown.
COMMENTS: According to the author, "In 2013, CalPERS
participated in a Cost Effectiveness Measurement Benchmarking
(CEM) Analysis and was found to have the most complicated set of
pension payment options when compared with similar retirement
systems. Some options are redundant and provide the same
benefit using different language. Other options provide
adjusted benefits under certain circumstances. These options
are infrequently chosen by members and require CalPERS staff to
perform manual calculations that slow retirement estimate
processing.
"The complexity of CalPERS' current retirement plan design
creates administrative burdens that negatively impacts customer
service and educational efforts. This bill streamlines the
CalPERS plan design by consolidating redundant retirement
options. This bill also simplifies estimate processing,
education activities, and payment processes."
AB 2404
Page 4
REGISTERED SUPPORT / OPPOSITION:
Support
California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)
319-3957
AB 2404
Page 5