BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 227
Adam B. Schiff, Chairman Hearing date: March 31, 1997
SB 227 (Solis) As amended 3/17/97 FISCAL: yes
STRS AND PERS: RECIPROCITY FOR ENTERING AND EXITING STATE
EMPLOYEES
HISTORY :
Sponsor: California Community Colleges,
Chancelloros Office
Prior legislation: AB 2916 (OoConnell) 1994
vetoed
SUMMARY :
Would provide:
1) that State Teacherso Retirement System (STRS) members
employed by a community college district, who are
subsequently employed by a state agency involved in
education policy which requires membership in the Public
Employeeso Retirement System (PERS), remains a member of
STRS unless he/she files an election to participate in
PERS,
2) the PERS members employed by the Board of Governors
of the California Community Colleges, who are
subsequently employed by a community college district
which requires membership in STRS, become STRS members
unless they file an election to remain, and
3) that specified employees of the Board of Governors of
the California Community Colleges employed after 7/1/91
may elect to be subject to the First Tier retirement
plan.
BACKGROUND :
The committee is advised that this bill has been introduced
because of the difficulty experienced by the California
Community Colleges Chancellor's Office in recruiting
individuals with direct experience in the community
colleges to advise the Chancellor on matters of policy in
the community colleges.
Generally, these individuals are nearing retirement age,
and to accept employment with the Chancellor's Office would
subject the individual to membership in the PERS Tier 2
retirement plan.
PERS Tier 2 provides:
1) a retirement formula which is significantly lower
than the formula provided for service credit under STRS
(PERS Tier 2 = 1.25% at age 65; STRS = 2% at age 60), and
2) a 10 year minimum vesting period. Those who serve
less than 10 years do not receive a retirement benefit;
only a return of accumulated employee contributions with
interest, and none of the employer contribution.
PERS membership in state employment also requires
membership in the federal Social Security system (6.25% of
compensation), which is not required as a STRS member.
ANALYSIS :
1) SECTIONS 1 and 3(a)
Existing STRS law does not allow a STRS member performing
creditable service in a community college or school
district, who later accepts a position for any state
agency, to continue membership in STRS for service
performed with the state agency.
Likewise, existing PERS law does not allow a PERS member
employed by the Board of Governors of the Community
Colleges, who later accepts a position with a community
college, from continuing membership in PERS for service
performed with the community college district.
This bill :
a) would permit STRS members who are employed by a
community college district, who subsequently become
employed by any state agency involved with educational
policy to perform duties that require membership in a
different retirement system (e.g. PERS), to elect in
writing within 90 days after the individual's entry into
the new position to remain in STRS,
b) would allow members who left STRS-covered employment
to accept a position with an eligible state agency prior
to the effective date of this bill to also make an
election prior to March 31, 1998,
c) would allow PERS members who are employed by the
Board of Governors of the California Community Colleges,
who subsequently are employed by a community college
district to perform duties that require membership in a
different public retirement system (e.g. STRS), to elect
in writing within 90 days after the individual's entry
into the new position to remain in PERS.
2) SECTION 3(b)
Existing PERS law provides that any person who first enters
state employment after 7/1/91 shall be a members of the
PERS Second Tier of benefits.
This bill allows employees of the Board of Governors of the
California Community College, who were employed after
7/1/91 and had previously been covered by PERS with another
public employer, to elect to be subject to PERS First Tier
benefits.
3) SECTION 2
Existing Education Code provisions permit the temporary
loan of employees under an interjurisdictional exchange.
This program, however, has limitations that are said to not
permit the flexibility sought by the Board of Governors in
retaining qualified and experienced individuals.
This bill would:
a) permit the Board of Governors of the California
Community Colleges to enter into an agreement with any
district or publicly funded organization for the loan or
temporary assignment to the Board of Governors of a
person employed by any district or publicly funded
community college organization within the system,
b) provide that the temporary assignment shall not
exceed two years, except that extension of an additional
two years shall be authorized when the Board of Governors
finds it necessary to meet a compelling program or
management need,
c) provide that any temporary loan or assignment shall
be made only with the consent of the employee, and
d) provide that the Board of Governors may also enter
into an agreement with any community college district for
the loan or temporary assignment of an employee of the
chancelloros office to any community college district
within the system.
FISCAL IMPACT :
The committee is advises that there could be a savings in
state costs to provide retirement benefits to individuals
accepting positions with the Chancellor's Office.
According to the STRS bill analysis, the following are the
applicable contribution rates:
PERS TIER 2 STRS
Employer Contribution Rate 9.345% 8.25%
Social Security/Medicare 7.65% 1.65 *
Other STRS Costs n/a 3.8% **
Total employer costs 16.995% 13.70%
Employee Contribution Rate None 8.00%
* Medicare tax withholding is required for employers hired
after March 31, 1986.
** The Elder Full Funding Act provides for a state
contribution of 4.3% of prior year payroll. This converts
to 3.8% when assessed against current year payroll.
COMMENTS :
1) The committee is advised that AB 2916 (O'Connell) 1994
would have provided certain STRS members who are
subsequently employed to perform service with specified
state agencies to elect to remain in STRS.
This bill passed the Legislature but was vetoed by the
Governor. The Governor's veto message stated that:
a) the bill would have provided a more costly benefit to
a select group of employees and therefore was
inequitable, and
b) retirement benefits should be discussed and agreed
upon through collective bargaining.
2) SUPPORT :
STRS, if amended (staff position only)
3) OPPOSITION :
Department of Personnel Administration
PERS, unless amended (staff position only)
David Felderstein SB 227
March 27, 1997