BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1352|
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CONSENT
Bill No: SB 1352
Author: Committee on Public Employment and Retirement
Introduced:2/19/16
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 4/11/16
AYES: Pan, Morrell, Beall, Hall, Moorlach
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
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
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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
retirement plan that has attributes of both a defined benefit
and defined contribution plan, including employee and
employer contributions and annuities.
4) Contains duplicative 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.
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.
6) Provides supplemental benefit payments to protect the
purchasing power of the member's base allowance.
7) Defines "credited interest".
8) 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
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service. Persons electing membership must do so on a form
determined by CalSTRS.
9) States how service shall be credited to the DB; limits a
member's creditable service to one credit per school year;
and provides that contributions in excess of the amount
required for one credit, except certain excluded excess
contributions, shall be credited the DBS.
10)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.
11)Requires, under the federal Uniformed Services Employment
and Reemployment Rights Act of 1994 (USERRA), that qualified
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.
12)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.
13)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.
14)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
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credits to qualify for the enhancement factors, existing law
credits the member with two-tenths of service credit for each
year of unused sick-leave.
15)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.
16)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.
17)Requires the board to acquire the services of an actuary to
provide information, as specified, including an actuarial
evaluation of the DB at least every six years and of the CB
and DBS plans annually.
18)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:
1)Repeals a duplicative code section that erroneously was never
chaptered out and amends the remaining section to clarify that
the accumulated DBS account balance is an amount of credits,
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as specified. Sections affected: 22101.5 (added by Chapter
74, Statutes of 2000), 22101.5(added by Chapter 1021, Statutes
of 2000)
2)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
3)Corrects typographical errors in the section defining
"credited interest". Section affected: 22120
4)Clarifies that the form electing membership in CalSTRS for
persons who transfer to a CalPERS covered position but have
the option to remain in CalSTRS or for persons previously in
the CB plan but newly eligible for the DB plan 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
5)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
6)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
7)Makes changes to statutory provisions administering the DBS
plan to conform to the USERRA. Sections affected: 24005,
24105, 24201.5, and 24204.
8)Clarifies that the effective date of a disability related
benefit be later than the last day of creditable compensation
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earned rather than the last day of the member's creditable
service. 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
9)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
10)Clarifies that, when determining whether the member has
enough service credits to qualify for specified enhancement
factors (e.g., one year final compensation, a career factor,
and a longevity bonus), the credit for unused sick-leave to
determine the member's eligibility 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
11)Clarifies that a specified 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
12)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
13)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
14)Eliminates the requirement that an annuitant in the CB plan
who wants to terminate the annuity and begin making
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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
CalSTRS to more effectively administer the Teachers' Retirement
Plan.
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
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.:YesLocal: No
SUPPORT: (Verified4/18/16)
California State Teachers' Retirement System (source)
OPPOSITION: (Verified4/18/16)
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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.
Prepared by:Glenn Miles / P.E. & R. / (916) 651-1519
4/20/16 15:58:14
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