BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          PUBLIC EMPLOYMENT AND RETIREMENT
                               Dr. Richard Pan, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 1352         Hearing Date:     4/11/16
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          |Author:    |Committee on Public Employment and Retirement        |
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          |Version:   |2/19/16    As introduced                             |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Glenn Miles                                          |
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          Subject:  State teachers' retirement

            SOURCE:   California State Teachers' Retirement System
          
           DIGEST:    This bill makes various technical, conforming, or  
          non-controversial changes to the Education Code related to the  
          California State Teachers' Retirement System (CalSTRS) to  
          improve the administration of the State Teachers' Retirement  
          Plan, which includes the Defined Benefit Program (DB), the  
          Defined Benefit Supplement Program (DBS), and the Cash Balance  
          Benefit Program (CB).

          ANALYSIS:
          
          Existing law:
          
          1)Establishes CalSTRS to provide retirement benefits for school  
            employees, as defined, through the DB, the DBS, and the CB.

          2)Requires school employers, as specified, to enroll their  
            employees into mandatory membership into the DB depending on  
            the type of employer (pre K-12 or community college district)  
            and whether that employer offers the CB or if they are a  
            DB-only employer.

          3)Establishes the CB to provide an alternative retirement  
            program for employees, primarily part-time or temporary  
            employees as defined, who are not mandated into the DB.  The  
            CB is optional for employers to offer and is a hybrid  







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            retirement plan that has attributes of both a defined benefit  
            and defined contribution plan, including employee and employer  
            contributions and annuities.

          4)Contains two Education Code sections with identical section  
            numbers for the definition of "accumulated Defined Benefit  
            Supplemental account balance".  The duplicate code sections  
            occurred when two simultaneous bills were chaptered in 2000  
            and the first was erroneously not "chaptered out" by the  
            second.

            This bill repeals the first code section and amends the second  
            section to clarify that the accumulated Defined Benefit  
            Supplemental account balance is an amount of credits, as  
            specified. Sections affected:  22101.5 (added by Chapter 74,  
            Statutes of 2000),       22101.5(added by Chapter 1021,  
            Statutes of 2000)

          5)Provides a disability allowance program for CalSTRS members  
            who joined the system prior to October 16, 1992, and who did  
            not elect to participate in the disability retirement program  
            (members after that date participate in the disability  
            retirement program).  The disability allowance provides 50  
            percent of the member's highest average annual compensation  
            until the member reaches the age to qualify for a service  
            retirement.  Upon reaching retirement age, the member then  
            receives the lower of either the disability allowance or the  
            service retirement benefit.  The service retirement benefit is  
            based on an age factor, a projected service factor, and a  
            projected final compensation factor determined as if the  
            member had not become disabled.

            Existing law also provides supplemental benefit payments to  
            protect the purchasing power of the member's base allowance.

            This bill clarifies which base allowance to use when  
            determining supplemental benefit payments for a member  
            potentially subject to a disability allowance/service  
            retirement conversion.  Sections affected:  22106.1, 24410

          6)Defines "credited interest".

            This bill corrects typographical errors in the section  
            defining "credited interest".  Section affected:  22120








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          7)Prescribes conditions under which persons in positions  
            otherwise excluded from membership in the DB may elect to  
            become a member, including the following:  transferring from a  
            position that is covered under CalSTRS to one covered under  
            CalPERS; and, working in part-time or substitute position  
            otherwise excluded from the DB but performing creditable  
            service.  Persons electing membership must do so on a form  
            determined by CalSTRS.

            This bill clarifies that the form electing membership in  
            CalSTRS must be received at CalSTRS headquarters office within  
            30 days after the date of the member's signature on the form.   
            It also clarifies that membership in the DB will become  
            effective beginning the first day of the pay period following  
            the election.  Sections affected:  22508, 22508.5, 22509, and  
            22515

          8)States how service shall be credited to the DB; limits a  
            member's creditable service to 1 credit per school year; and  
            provides that contributions in excess of the amount required  
            for 1 credit, except certain excluded excess contributions,  
            shall be credited the DBS.

            This bill adds conforming statutory references to exclude  
            additional contributions made as part of the full-funding plan  
            for CalSTRS by Chapter 47, Statutes of 2014, from excess  
            contributions that are credited to the DBS.  Section affected:  
             22703

          9)Authorizes service credit for a member's unused sick leave  
            upon service retirement and prescribes the calculation used to  
            determine the conversion of sick leave to service credit for  
            members employed by a school employer.

            This bill clarifies that when the member is employed by the  
            State instead of a school employer the conversion of sick  
            leave to service credit will be .004 years of service credit  
            for each day of unused sick leave, which is consistent with  
            the time base used to calculate service credit reported by the  
            State.  Section affected:  22717

          10)Requires, under the federal Uniformed Services Employment and  
            Reemployment Rights Act of 1994 (USERRA), that qualified  








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            pension funds treat returning military service members as if  
            they had no break in service. Existing state statutes  
            governing the DB and CB conform to USERRA.

            This bill makes changes to statutory provisions administering  
            the DBS plan to conform to USERRA.  Sections affected:  24005,  
            24105, 24201.5, and 24204.

          11)Provides that a disability allowance, a disability retirement  
            benefit, or a service retirement benefit related to a  
            disability becomes effective under specified conditions,  
            including that the effective date of the benefit be later than  
            the last day of the member's creditable service.

            This bill clarifies that the effective date of the disability  
            related benefit be later than the last day of creditable  
            compensation earned.  This distinction conforms to the  
            statutory intent of requiring a member to exhaust the member's  
            leave before initiating a disability benefit.  Sections  
            affected:  24005, 24105, 24201.5, and 24204

          12)Authorizes a member who is awaiting the determination of an  
            application for a disability allowance or disability  
            retirement benefit to apply for a service retirement from the  
            DB, if eligible.  Upon approval or denial of the pending  
            disability application, the member's retirement allowance is  
            adjusted appropriately.  The member is not permitted to opt  
            for a lump sum payment of the DB service retirement during the  
            pendency of the disability application determination.   
            However, a member may take a lump sum from the member's DBS  
            account.

            This bill clarifies that a member who applies for a service  
            retirement from the DB pending a disability determination and  
            who opts to take a lump sum distribution from the member's DBS  
            account is not eligible for a disability benefit or disability  
            annuity from the DBS.  Section affected:  24201.5

          13)Provides to eligible members who receive a service retirement  
            certain enhancement factors to use in calculating the member's  
            retirement allowance, including the following:  one year final  
            compensation; a career factor; and a longevity bonus.  In  
            determining whether the member has enough service credits to  
            qualify for the enhancement factors, existing law credits the  








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            member with two-tenths of service credit for each year of  
            unused sick-leave.

            This bill clarifies that the credit for unused sick-leave to  
            determine a member's eligibility for the enhancement factors  
            also applies when the member "re-retires" after having  
            previously received a disability allowance, a disability  
            retirement benefit, or a disability-related service  
            retirement.  Sections affected:  24209, 24209.3, 24211, 24212,  
            and 24213

          14)Authorizes a member to change or cancel the member's option  
            benefit and beneficiary election up to 30 days after the  
            effective date of the member's initial benefit payment.  The  
            member must make the change or cancelation on a  
            CalSTRS-provided form and ensure that CalSTRS receives the  
            form within 30 days of the date of the member's signature on  
            the form.

            This bill clarifies that the requirement that a member make a  
            change or cancelation of an option benefit or beneficiary  
            election on a CalSTRS-provided form within 30 days of the date  
            of the member's signature on the form also applies to changes  
            or cancelations made due to a dissolution of the member's  
            marriage.  Section affected: 24322

          15)Requires interest to continue to accrue on any amount that is  
            retained in the fund but otherwise payable to a member or  
            beneficiary who cannot be located after a good faith attempt.   
            However, no interest accrues on amounts that are made by  
            warrant drawn and subsequently canceled by the State  
            Controller after one year of being unclaimed.  Payments revert  
            to the fund and are available to pay the fund's liabilities  
            but should a member or beneficiary later appear with a legal  
            claim, the member or beneficiary shall receive payment.

            This bill clarifies that, in addition to payments made by  
            warrant and canceled by the State Controller, payments  
            rejected via electronic funds transfer shall also not accrue  
            interest when they revert to the fund.  Section affected:   
            24606

          16)Requires the board to acquire the services of an actuary to  
            provide information, as specified, including an actuarial  








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            evaluation of the DB at least every six years and of the CB  
            and DBS plans annually.

            This bill makes a technical change fixing an erroneous code  
            reference and clarifies various provisions to recognize that  
            the board does not formerly "adopt" actuarial valuations but  
            bases its decisions on the actuarial valuations provided by  
            the actuary.  Sections affected:  25001, 25006, and 26202

          17)Provides that members of the CB plan (e.g., part-time  
            employees who didn't qualify for the DB plan) who have  
            separated from employment, attained normal retirement age, and  
            have received an annuity from the CB plan for at least a year  
            may, may terminate their annuity and begin making  
            contributions and receiving employer contributions to the CB  
            plan upon returning to employment performing creditable  
            service and notifying CalSTRS, as specified.

            This bill would eliminate the requirement that an annuitant in  
            the CB plan who wants to terminate the annuity and begin  
            making contributions again while performing post-retirement  
            creditable service must have been receiving the annuity for at  
            least a year and must have attained normal retirement age.   
            This technical change aligns the CB plan with similar changes  
            previously made to the DB plan.  Sections affected:  26808,  
            26810

          Background

          CalSTRS sponsors an annual housekeeping bill to make various  
          technical and conforming changes to the Education Code to enable  
          CalTRS to more effectively administer the Teachers' Retirement  
          Plan.  





          Related/Prior Legislation
          
          AB 991 (Assembly Public Employees, Retirement, and Social  
          Security Committee, Chapter 123, Statutes of 2015), the annual  
          housekeeping bill, made various technical and conforming changes  
          to the Education Code to enable CalSTRS to more effectively  








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          administer  the Teachers' Retirement Plan.  

          SB 1220 (Torres, Chapter 755, Statutes of 2014), the annual  
          housekeeping bill, made various technical and conforming changes  
          to the Education Code to enable CalSTRS to more effectively  
          administer  the Teachers' Retirement Plan.  

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No


          SUPPORT:

          California State Teachers' Retirement System (source)

          OPPOSITION:

          None received

          ARGUMENTS IN SUPPORT:    According to the sponsor, this bill  
          will help ensure continued effective and efficient plan  
          administration for CalSTRS' internal and external customers.