BILL ANALYSIS Ó
AB 2404
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
2404 (Cooley)
As Amended August 2, 2016
Majority vote
--------------------------------------------------------------------
|ASSEMBLY: |79-0 |(May 5, 2016) |SENATE: | 37-0 |(August 11, |
| | | | | |2016) |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
Original Committee Reference: P.E.,R., & S.S.
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)Reduces the number of optional settlement choices for members
of CalPERS, JRS I and JRS II that retire on or after 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:
AB 2404
Page 2
a) Return of Remaining Contributions Option 1,
b) The 100% Beneficiary Option 2,
c) The 100% Beneficiary Option 2 with Benefit Allowance
Increase,
d) The 50% Beneficiary Option 3,
e) The 50% Beneficiary Option 3 with Benefit Allowance
Increase,
f) The Flexible Beneficiary Option 4, which provides a
specified dollar or percentage of the member's unmodified
allowance to one or more beneficiaries; and
g) 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)Makes clear in each option that if there is a survivor who is
different from the option beneficiary, then the option
beneficiary allowance is the amount that exceeds the amount
deemed payable to the survivor.
4)Revises and recasts various administrative provisions in
connection with optional settlements provided to members of
CalPERS, JRS I, and JRS II.
5)Makes clarifying and technical changes to update
AB 2404
Page 3
cross-references related to retirement payment options.
The Senate amendments restore and recast several existing
optional settlements that allow, among other things, a member's
monthly allowance to increase to the unmodified level if the
member's designated beneficiary predeceases the member.
EXISTING LAW:
Allows a retiring CalPERS member to receive a lifetime benefit
paid to the member alone (the unmodified allowance), or elect
one of 12 optional settlements that reduce his or her 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: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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.
AB 2404
Page 4
"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."
According to the sponsor of the bill, CalPERS, the changes
proposed in this bill will "?simplify members' retirement
choices, help mitigate member risk, and improve the customer
experience. They will also help to reduce complexity in the
administration of the retirement system, simplify our benefit
payment processes, and increase the effectiveness of our member
counseling activities and communications."
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
FN:
0003701