BILL ANALYSIS Date of Hearing: July 15, 1997 ASSEMBLY COMMITTEE ON HIGHER EDUCATION Ted Lempert, Chair SB 227 (Solis) - As Amended: July 3, 1997 SENATE VOTE : 37-0 SUBJECT : Community colleges; officers and employees; retirement system. SUMMARY : Authorizes specified members of the State Teachers' Retirement System (STRS) and the Public Employees Retirement System (CalPERS) to move from one system to another, and establishes standards for those moves. Authorizes a "loan" or temporary assignment of a staff person from a community college district or organization to the Chancellor's Office, and vice versa. Specifically, this bill : 1) Authorizes STRS members employed by community college districts who are subsequently hired by the Board of Governors of the California Community College (Board) to elect to remain in the STRS system, if the STRS system is notified in writing within 60 days of hire. The bill would apply to changes in employment on or after January 1, 1998. 2) Authorizes a CalPERS member employed by the Board who is subsequently employed by a community college district to elect to have his or her community college service credited to the CalPers account. Would require specified notification of CalPERS and STRS. Would apply to changes in employment on or after January 1, 1998. 3) Authorizes a CalPERS member who changed employment and became a member of the CalPERS system on or after July 1, 1991, but before January 1, 1998, to elect to return to STRS coverage on or before March 1, 1998. Requires CalPERS to transfer the actuarial present value of the assets of the person who so returns to the STRS system. Provides that CalPERS is not required to identify and notify members who may be eligible for this option. 4) Authorizes the board to enter into an agreement with a community college district or publicly funded organization within the Community Colleges for the loan or temporary assignment to the board of an employee of a district, or to a district of an employee of the board. The temporary assignment is not to exceed two years, with a possible two year extension when compelling need is found. The loan or temporary assignment requires the consent of the employee. EXISTING LAW : 1) 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 CalPERS law does not allow a CalPERS member employed by the Board of Governors of the Community Colleges, who later accepts a position with a community college, from continuing membership in CalPERS for service performed with the community college district. SB 227 Page 3 2) Provides that any person who first enters state employment after 7/1/91 shall be a member of the CalPERS Second Tier of benefits. 3) Permits the temporary loan of employees under an interjurisdictional exchange. This program has limitations that apparently do not permit the flexibility sought by the Board of Governors in retaining qualified and experienced individuals. FISCAL EFFECT : Unknown. COMMENTS : 1) This bill is sponsored by the California Community College's Chancellor's Office, because of its difficulty in recruiting individuals with direct experience in the community colleges to advise the Chancellor. This is because the current Second Tier CalPERS package is perceived as inferior to the STRS package available to a community college employee, particularly one in mid-career. Specifically, CalPERS Tier 2 provides a retirement formula significantly lower than the formula provided for service credit under STRS (Tier 2 = 1.25% at age 65; STRS = 2% at age 60), and requires a 10 year vesting period. Further, CalPERS requires federal Social Security membership, which is not required of STRS members. 2) By authorizing current Tier 2 CalPERS members (1.25% at age 65) to return to coverage under the STRS system (2% at age 60) with only a transfer of the assets from CalPERS to STRS, the bill appears to create an unfunded liability for the STRS. Staff recommends that a provision be added to clarify that employees who elect to transfer to STRS are required to pay, prior to retirement, all contributions with respect to service in the CalPERS system at the contribution rate for additional service credit in effect at the time of the transfer to STRS. Additionally, although the bill implies with the use of the word "return" on page 6, line 4 that the CalPERS members were previously members of STRS, staff recommends that if it is the intent of the author to limit the bill in this way that the restriction be clearly set forth. 3) Similar legislation, AB 2916 (O'Connell) of the 1993-94 Regular Session would have provided a similar election process for STRS members. That bill was vetoed by the Governor. REGISTERED SUPPORT / OPPOSITION : None on file. Analysis prepared by : Rae Belisle / ahed / (916) 445-7632