BILL NUMBER: SB 2085 CHAPTERED
BILL TEXT
CHAPTER 1048
FILED WITH SECRETARY OF STATE SEPTEMBER 30, 1998
APPROVED BY GOVERNOR SEPTEMBER 30, 1998
PASSED THE SENATE AUGUST 30, 1998
PASSED THE ASSEMBLY AUGUST 26, 1998
AMENDED IN ASSEMBLY AUGUST 24, 1998
AMENDED IN ASSEMBLY JULY 6, 1998
AMENDED IN SENATE MAY 4, 1998
AMENDED IN SENATE APRIL 14, 1998
INTRODUCED BY Senator Burton
FEBRUARY 20, 1998
An act to amend Sections 22110.1, 22122.5, 22155.5, 22200, 22202,
22304, 22307, 22311, 22402, 26000, 26000.5, 26004, 26105, 26112,
26114, 26115, 26116, 26128, 26129, 26134, 26137, 26200, 26201, 26202,
26204, 26206, 26207.5, 26209, 26300, 26301, 26400, 26401, 26402,
26501, 26503, 26504, 26506, 26603, 26701, 26702, 26703, 26704, 27301,
27401, 27409, 28100, and 28101 of, to add Sections 22001.5, 22403,
and 26000.6 to, and to repeal Sections 26111, and 26207 of, the
Education Code, relating to the State Teachers' Retirement System,
and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 2085, Burton. State Teachers' Retirement System Cash Balance
Plan.
The State Teachers' Retirement Law prescribes retirement benefits
for eligible teachers in the public schools and the State Teachers'
Retirement System Cash Balance Plan provides retirement benefits for
other persons employed in instructional programs for less than 50% of
the full-time equivalent by school employers who have elected to
provide those benefits for those employees. The separate retirement
programs and their separate retirement funds are both administered by
the Teachers' Retirement Board.
This bill would merge those programs, would provide that both are
included in the State Teachers' Retirement Law, and that they would
both be known and cited as the State Teachers' Retirement Plan. The
bill would provide that costs of administration be divided
proportionately between the assets of the separate programs. The
bill would provide that a prior loan from the Teachers' Retirement
Fund to the Cash Balance Plan would be discharged by the creation of
the State Teachers' Retirement Plan. The bill would delete the Cash
Balance Fund and its various accounts, would require contributions,
earnings, and any other amounts provided under that plan to be
deposited in the Teachers' Retirement Fund and would provide that the
Teachers' Retirement Fund is continuously appropriated for the
payment of benefits under the Cash Balance Benefit Program. The bill
would delete the Cash Balance Benefit Plan Expense Account and would
authorize all administrative costs of the Cash Balance Benefit
Program from the Teachers' Retirement Fund. The bill would make
other related changes.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22001.5 is added to the Education Code, to
read:
22001.5. The Legislature hereby finds and declares that on July
1, 1996, the State Teachers' Retirement System Cash Balance Plan was
created and established to provide a retirement plan for persons
employed to perform creditable service for less than 50 percent of
the full-time equivalent for the position. The persons eligible for
the Cash Balance Plan were excluded from mandatory membership in the
State Teachers' Retirement System Defined Benefit Plan. Both plans
are administered by the Teachers' Retirement Board. Prior to the
creation and establishment of the Cash Balance Plan, the State
Teachers' Retirement System Defined Benefit Plan had been identified
simply as the State Teachers' Retirement System. As a result, the
system was identified as both the administrative body and the
retirement plan. The State Teachers' Retirement Law was amended to
identify the retirement plan as the State Teachers' Retirement System
Defined Benefit Plan in order to distinguish that plan from the Cash
Balance Plan. Because both plans were intended to provide for the
retirement of teachers and other persons employed in connection with
public schools of this state and schools supported by this state, a
merger of these two plans is now hereby made for the purpose of
establishing a single retirement plan that shall be known and may be
cited as the State Teachers' Retirement Plan consisting of the
different benefit programs set forth in this part and Part 14
(commencing with Section 26000). This plan shall be administered by
the Teachers' Retirement Board as set forth in this part and Part 14
(commencing with Section 26000). This part, together with Part 14
(commencing with Section 26000) shall be known and may be cited as
the Teachers' Retirement Law.
SEC. 2. Section 22110.1 of the Education Code is amended to read:
22110.1. "Cash Balance Benefit Program" means the benefit program
of the State Teachers' Retirement Plan as set forth in Part 14
(commencing with Section 26000).
SEC. 3. Section 22122.5 of the Education Code is amended to read:
22122.5. "Defined Benefit Program" means the Defined Benefit
Program provided in the State Teachers' Retirement Plan as set forth
in this part.
SEC. 4. Section 22155.5 of the Education Code is amended to read:
22155.5. "Plan" means the State Teachers' Retirement Plan.
SEC. 5. Section 22200 of the Education Code is amended to read:
22200. (a) The plan and the system are administered by the
Teachers' Retirement Board. The members of the board are as follows:
(1) The Superintendent of Public Instruction.
(2) The Controller.
(3) The Treasurer.
(4) The Director of Finance.
(5) One person who, at the time of appointment, is a member of the
governing board of a school district or a community college
district.
(6) Three persons who are either members of the Defined Benefit
Program or participants in the Cash Balance Benefit Program, as
follows:
(A) Two persons who, at the time of appointment, are classroom
teachers in kindergarten or grades 1 through 12.
(B) One person who, at the time of appointment, is a community
college instructor with expertise in the areas of business or
economics or both business and economics and who shall be appointed
by the Governor for a term of four years from a list submitted by the
Board of Governors of the California Community Colleges.
(7) One person who is either a retired member under this part or a
retired participant under Part 14 (commencing with Section 26000).
(8) One officer of a life insurance company appointed by the
Governor for a term of four years, subject to confirmation by the
Senate.
(9) One officer of a bank or a savings and loan institution who
has had at least five years of broad professional investment
experience handling various asset classes such as stocks, bonds, and
mortgage investments and who shall be appointed by the Governor for a
term of four years, subject to confirmation by the Senate.
(10) One person representing the public, appointed by the Governor
for a term of four years, subject to confirmation by the Senate.
(b) The members of the board described in paragraphs (5) and (7)
and subparagraph (A) of paragraph (6) of subdivision (a) shall be
appointed by the Governor for four-year terms from a list submitted
by the Superintendent of Public Instruction.
(c) The members of the board shall annually elect a chairperson
and vice chairperson.
SEC. 6. Section 22202 of the Education Code is amended to read:
22202. The board has exclusive control of the administration of
the funds. No transfers or disbursements of any amount from the
funds shall be made except upon the authorization of the board for
the purpose of carrying into effect the provisions of this part and
Part 14 (commencing with Section 26000).
SEC. 7. Section 22307 of the Education Code is amended to read:
22307. (a) The board may authorize the transfer and disbursement
of funds from the retirement fund for the purpose of carrying into
effect this part and Part 14 (commencing with Section 26000) upon the
signature of either or both of its chairperson and vice chairperson
or the chief executive officer or any employee of the system
designated by the chief executive officer.
(b) Notwithstanding Section 13340 of the Government Code, the
board may disburse funds for the payment of benefits to members and
beneficiaries of the Defined Benefit Program as well as to
participants and beneficiaries of the Cash Balance Benefit Program,
for the payment of refunds and for investment transactions and these
funds shall not be required to be appropriated through the annual
Budget Act. Funds for the payment of administrative expenses are not
continuously appropriated, and shall be appropriated by the annual
Budget Act.
SEC. 7.5. Section 22304 of the Education Code is amended to read:
22304. (a) The costs of administration of the plan shall be paid
from the retirement fund and those costs may not exceed the amount
made available by law during any fiscal period.
(b) The administrative costs of the plan shall be divided
proportionately in accordance with the assets of the Defined Benefit
Program and the Cash Balance Benefit Program.
SEC. 8. Section 22311 of the Education Code is amended to read:
22311. (a) The board shall keep in convenient form any data
necessary for the actuarial valuation of the plan.
(b) The board shall make an actuarial investigation into the
mortality, service, and other experience of members and beneficiaries
of the Defined Benefit Program as well as an actuarial review of the
goals regarding the sufficiency of the Gain and Loss Reserve with
respect to the Cash Balance Benefit Program. This investigation and
review shall include an actuarial valuation of the assets and
liabilities of the plan, and shall be performed at least once every
six years. The actuary shall perform the actuarial valuation using
actuarial assumptions adopted by the board and that are, in the
aggregate, reasonably related to the past experience of the plan and
the best estimate by the actuary of the future experience of the
plan. The report of the actuary of the results of the actuarial
valuation shall identify and include the components of normal cost
and adequate information to determine the effects of changes in
actuarial assumptions. Copies of the report on the actuarial
valuation shall be transmitted to the Governor and to the
Legislature. Upon the basis of any or all of the actuarial
investigation and valuation, the board shall adopt for the plan any
rates of return on investments, rates of contribution to the
retirement fund, mortality, service, and other tables it deems
necessary.
SEC. 9. Section 22402 of the Education Code is amended to read:
22402. Earned interest with respect to the Defined Benefit
Program that is not credited to accounts maintained pursuant to
either this part or Part 14 (commencing with Section 26000) and other
income with respect to the Defined Benefit Program shall be
allocated to provide benefits under this part.
SEC. 10. Section 22403 is added to the Education Code, to read:
22403. The Legislature hereby finds and declares that pursuant to
the authorizing legislation creating and establishing the Cash
Balance Plan, the board transferred one million dollars ($1,000,000)
in the form of a loan from the retirement fund holding assets at that
time exclusively for the State Teachers' Retirement System Defined
Benefit Plan to the newly created Cash Balance Plan. That loan
represented an asset receivable to the State Teachers' Retirement
System Defined Benefit Plan and a liability obligation to the State
Teachers' Retirement System Cash Balance Plan. As a result of the
merger of these two plans authorized under this part, the assets held
in the retirement fund shall hereby reflect the combined assets of
the State Teachers' Retirement Plan. That loan shall be discharged
by the creation and establishment of the State Teachers' Retirement
Plan pursuant to the merger.
SEC. 11. Section 26000 of the Education Code is amended to read:
26000. The Legislature hereby finds and declares that the State
Teachers' Retirement System Cash Balance Plan was created and
established on July 1, 1996, to provide a retirement plan for persons
employed to perform creditable service for less than 50 percent of
the full-time equivalent for the position. The persons eligible for
the Cash Balance Plan were excluded from mandatory membership in the
State Teachers' Retirement System Defined Benefit Plan. Both plans
are administered by the Teachers' Retirement Board. Because both
plans were intended to provide for the retirement of teachers and
other persons employed in connection with the public schools of this
state and schools supported by this state, a merger of these two
plans is now hereby made for the purpose of establishing a single
retirement plan that shall be known and may be cited as the State
Teachers' Retirement Plan consisting of the different benefit
programs set forth in this part and Part 13 (commencing with Section
22000). The plan shall be administered by the Teachers' Retirement
Board as set forth in this part and Part 13 (commencing with Section
22000). As a result of this merger, a Cash Balance Benefit Program
will be provided under the State Teachers' Retirement Plan and that
program is set forth in this part.
The governing board of a school district, community college
district, or county office of education may, by formal action, elect
to provide the benefits of the Cash Balance Benefit Program under
this part for their employees.
SEC. 12. Section 26000.5 of the Education Code is amended to read:
26000.5. (a) An employer whose governing board has elected to
provide the benefits of this part for its employees pursuant to
Section 26000 shall enter into an agreement with the State Teachers'
Retirement System. The agreement shall specify the terms and
conditions of the employer's formal action to provide the Cash
Balance Benefit Program and shall remain in effect unless or until
the employer exercises the right to discontinue the plan pursuant to
Chapter 17 (commencing with Section 28100).
SEC. 13. Section 26000.6 is added to the Education Code, to read:
26000.6. (a) An election by any employer to provide the benefits
of the Cash Balance Plan for their employees prior to the merger
described in Section 26000 shall be deemed to constitute an election
to provide the Cash Balance Benefit Program under the State Teachers'
Retirement Plan.
(b) Participation in the Cash Balance Plan by any participant
prior to the merger described in Section 26000 shall be deemed to
constitute participation in the Cash Balance Benefit Program under
the State Teachers' Retirement Plan.
(c) Any beneficiary under the Cash Balance Plan prior to the
merger described in Section 26000 shall be deemed to be a beneficiary
under the Cash Balance Benefit Program under the State Teachers'
Retirement Plan.
SEC. 14. Section 26004 of the Education Code is amended to read:
26004. Notwithstanding any other provision of law:
(a) The benefits payable to any participant or beneficiary under
this part shall be subject to the limitations imposed by Section 415
of Title 26 of the United States Code.
(b) The amount of compensation that is taken into account in
computing benefits under this part for a plan year shall not exceed
the annual compensation limit applicable to that plan year in
accordance with Section 401(a)(17) of Title 26 of the United States
Code as that section read on the effective date of this section and
as that section may be amended after that date. The determination of
compensation for a 12-month period shall be subject to the annual
compensation limit in effect for the calendar year in which the
12-month period begins. In a determination of average compensation
over more than one 12-month period, the amount of compensation taken
into account for each 12-month period shall be subject to the
respective annual compensation limit applicable to that period.
(c) Distributions from the plan under this part shall be made in
accordance with Section 401(a)(9) of Title 26 of the United States
Code, including the incidental death benefit requirements of Section
401(a)(9)(G) and the regulations thereunder. The required beginning
date of benefit payments that represent the entire interest of the
participant shall be as follows:
(1) In the case of a lump-sum distribution of a retirement
benefit, disability benefit, or termination benefit, the lump-sum
payment shall be made not later than April 1 of the calendar year
following the later of the calendar year in which the participant
attains the age of 701/2 years or the calendar year in which the
participant terminates all employment subject to coverage by the
plan.
(2) In the case of a retirement benefit or disability benefit that
is to be paid in the form of an annuity, payment of the annuity
shall begin not later than April 1 of the calendar year following the
later of the calendar year in which the participant attains the age
of 701/2 years or the calendar year in which the participant
terminates employment in all positions subject to coverage by the
plan, with the annuity to continue over the life of the participant
or the life of the participant and the participant's option
beneficiary, or over a period not to exceed the life expectancy of
the participant or the life expectancy of the participant and the
participant's option beneficiary.
(3) In the case of a death benefit, distributions shall commence
no later than the date provided in Section 27001.
(d) If a person becomes entitled to a distribution from the plan
under this part that constitutes an eligible rollover distribution
within the meaning of Section 401(a)(31) of Title 26 of the United
States Code, the person may elect under terms and conditions
established by the board to have the distribution or a portion
thereof paid directly to a plan that constitutes an eligible
retirement plan within the meaning of Section 401(a)(31), as
specified by that person. Upon the exercise of the election by a
person with respect to a distribution or a portion thereof, the
distribution from the plan of the amount so designated, once
distributable under the terms of the plan, shall be made in the form
of a direct rollover to the eligible retirement plan so specified.
(e) The amount of any benefit from the plan under this part which
is determined on the basis of actuarial assumptions shall be based on
actuarial assumptions adopted by the board pursuant to Section 26213
as a plan amendment with respect to the Cash Balance Benefit Program
and those assumptions shall preclude employer discretion and comply
with Section 401(a)(25) of Title 26 of the United States Code.
SEC. 15. Section 26105 of the Education Code is amended to read:
26105. "Annuitant Reserve" means the reserve account established
by the board within the State Teachers' Retirement Fund for the
payment of monthly annuities with respect to the Cash Balance Benefit
Program.
SEC. 16. Section 26111 of the Education Code is repealed.
SEC. 17. Section 26112 of the Education Code is amended to read:
26112. "Cash Balance Benefit Program" means the benefit program
set forth in this part of the State Teachers' Retirement Law.
SEC. 18. Section 26114 of the Education Code is amended to read:
26114. "Death benefit" means the benefit payable under this part
upon the death of the participant.
SEC. 19. Section 26115 of the Education Code is amended to read:
26115. "Defined Benefit Program" means the Defined Benefit
Program of the State Teachers' Retirement Plan as set forth in Part
13 (commencing with Section 22000).
SEC. 20. Section 26116 of the Education Code is amended to read:
26116. "Disability benefit" means an amount payable under this
part for permanent and total disability that is equal to the sum of
the participant's employee account and employer account as of the
disability date and is payable pursuant to either Section 26905 or
26906.
SEC. 21. Section 26128 of the Education Code is amended to read:
26128. "Fund" means the Teachers' Retirement Fund.
SEC. 22. Section 26129 of the Education Code is amended to read:
26129. "Gain and Loss Reserve" means the reserve account
established by the board within the fund with respect to the Cash
Balance Benefit Program to be drawn upon to the extent necessary to
credit interest to employee accounts and employer accounts at the
minimum interest rate during years in which the plan's investment
earnings with respect to the Cash Balance Benefit Program are not
sufficient for that purpose, and where necessary, to provide
additions to the Annuitant Reserve for monthly annuity payments.
SEC. 23. Section 26134 of the Education Code is amended to read:
26134. "Plan" means the State Teachers' Retirement Plan.
SEC. 24. Section 26137 of the Education Code is amended to read:
26137. "Retirement benefit" means an amount payable under this
part in the event of the participant's retirement for service that is
equal to the sum of the participant's employee account and employer
account as of the retirement date and that is payable pursuant to
either Section 26806 or 26807.
SEC. 25. Section 26200 of the Education Code is amended to read:
26200. Employee contributions, employer contributions, investment
earnings, and any other amounts provided under this part shall be
deposited into the Teachers' Retirement Fund. Disbursement of money
from the fund shall be made upon claims made pursuant to Section
26209 and duly audited in the manner prescribed for the disbursement
of other public funds. Notwithstanding Section 13340 of the
Government Code, the Teachers' Retirement Fund is continuously
appropriated for the payment of benefits and investment transactions
pursuant to this part. Disbursements may be made to return funds
deposited in the fund in error.
SEC. 26. Section 26201 of the Education Code is amended to read:
26201. Investment earnings shall be collected by the Treasurer,
and together with any other moneys received in connection with the
Cash Balance Benefit Program, shall be immediately deposited to the
credit of the Teachers' Retirement Fund and reported to the system.
SEC. 27. Section 26202 of the Education Code is amended to read:
26202. (a) The board shall establish a Gain and Loss Reserve
within the Teachers' Retirement Fund for the Cash Balance Benefit
Program. The board has sole authority to administer the Gain and
Loss Reserve to be drawn upon to the extent necessary to credit
interest to employee accounts and employer accounts at the minimum
interest rate during years in which the investment earnings of the
plan with respect to the Cash Balance Benefit Program are not
sufficient for that purpose, and, where necessary, to provide
additions to the Annuitant Reserve for monthly annuity payments.
(b) The board shall establish and periodically review goals
regarding the sufficiency of the Gain and Loss Reserve based on the
recommendation of the actuary.
(c) In the event that the total amount of investment earnings of
the plan with respect to the Cash Balance Benefit Program for any
plan year exceeds the sum of the total amount required to credit all
employee and employer accounts at the minimum interest rate for the
plan year plus the administrative costs of the plan with respect to
the Cash Balance Benefit Program for the plan year, the board shall
determine the amount, if any, that is to be credited to the Gain and
Loss Reserve for the plan year. That determination shall be made not
later than December 31 of the year following the plan year. In
determining whether an amount is to be credited to the Gain and Loss
Reserve, the board shall consider the sufficiency of the reserve in
light of the goal established for the sufficiency and the
recommendations of the actuary.
SEC. 28. Section 26204 of the Education Code is amended to read:
26204. The board shall establish an Annuitant Reserve within the
Teachers' Retirement Fund for the Cash Balance Benefit Program. The
board has sole authority to administer the Annuitant Reserve for the
payment of annuities. The board may transfer the credits from a
participant's employee account and employer account to the Annuitant
Reserve upon election of an annuity by the participant or beneficiary
of the participant.
SEC. 29. Section 26206 of the Education Code is amended to read:
26206. All administrative costs of the board and system for the
plan with respect to the Cash Balance Benefit Program shall be paid
from the Teachers' Retirement Fund.
SEC. 30. Section 26207 of the Education Code is repealed.
SEC. 31. Section 26207.5 of the Education Code is amended to read:
26207.5. In no event shall the funding of the Cash Balance
Benefit Program be a liability of the state or the General Fund, nor
shall the General Fund be used to offset or fund any liabilities
attributed to the operation of the Cash Balance Benefit Program.
SEC. 32. Section 26209 of the Education Code is amended to read:
26209. The board may authorize the transfer and disbursement of
funds from the Teachers' Retirement Fund for the purpose of carrying
into effect the Cash Balance Benefit Program upon the signature of
its chairperson, vice chairperson, the chief executive officer, or
any employee of the system designated by the chief executive officer.
SEC. 33. Section 26300 of the Education Code is amended to read:
26300. (a) Within 10 working days following the later of the
first day of employment, the date of the employer's governing board's
action to provide the Cash Balance Benefit Program, or the effective
date of the employer's governing board's action to provide the Cash
Balance Benefit Program, the employer shall make available to the
employee the following information:
(1) The employee's rights and responsibilities as a participant in
the program, the employer's responsibilities under the program, and
the benefits payable under the program.
(2) The employee's right to elect membership in the Defined
Benefit Program in lieu of participation in the Cash Balance Benefit
Program, the rights and responsibilities of a member and the employer
under the Defined Benefit Program, and benefits payable under the
Defined Benefit Program.
(b) Written acknowledgment by the employee that he or she has
received the information specified in subdivision (a) shall be
retained in the employer's files on a form prescribed by the system.
(c) If an employer's governing board's action to provide the Cash
Balance Benefit Program gives employees the right to elect other
coverage in lieu of the Cash Balance Benefit Program pursuant to
Section 26400, the employer shall, within 10 working days following
the later of the first day on which creditable service is performed,
the date of the employer's governing board's action to provide the
program or the effective date of the employer's governing board's
action to provide the program, notify existing employees of the
following:
(1) The employee's right to elect other coverage if offered by the
employer in lieu of participation in the Cash Balance Benefit
Program.
(2) The rights and responsibilities of the employer and a
participant in an alternative retirement plan if offered by the
employer.
(3) The benefits payable under an alternative retirement plan if
offered by the employer.
SEC. 34. Section 26301 of the Education Code is amended to read:
26301. (a) Employers shall report, on a form prescribed by the
system, contributions paid on behalf of each participant in each pay
period, along with all other information required by the system no
later than 15 calendar days following the last day of the pay period
in which the salary was paid, and the report is delinquent
immediately thereafter.
(b) The board may assess a penalty against the employer for a
report submitted late or in an unacceptable form.
SEC. 35. Section 26400 of the Education Code is amended to read:
26400. (a) A person employed to perform creditable service for
less than 50 percent of the full-time equivalent for the position
shall become a participant on the later of the first day on which
creditable service is performed for an employer that provides the
Cash Balance Benefit Program or the effective date of the employer's
governing board's action to provide the Cash Balance Benefit Program,
provided the person is not subject to mandatory membership in the
Defined Benefit Program except as provided in Section 26402.
(b) If the employer's governing board's action to provide the Cash
Balance Benefit Program gives employees the right to elect coverage
under social security or an alternative retirement plan offered by
the employer in addition to the Cash Balance Benefit Program, the
employee may elect within 60 calendar days of the later of the first
day on which creditable service is performed, the date of the
employer's governing board's action to provide the Cash Balance
Benefit Program, or the effective date of the employer's governing
board's action to provide the Cash Balance Benefit Program to be
covered by social security or to participate in the alternative
retirement plan in lieu of participating in the Cash Balance Benefit
Program. Any election shall not preclude an employee from
participating in the Cash
Balance Benefit Program at a later date so long as the Cash Balance
Benefit Program is provided by the employer and the employee is
eligible to participate in the Cash Balance Benefit Program.
(c) If subdivision (b) is applicable, the employer shall inform
employees pursuant to subdivision (c) of Section 26300 of their right
to make an election and the election shall be made on a form
prescribed by the system and filed with the employer. The election
shall become effective on the later of the first day on which
creditable service is performed or the effective date of the employer'
s governing board's action to provide the Cash Balance Benefit
Program.
(d) If the participant's basis of employment with an employer that
provides the Cash Balance Benefit Program changes to employment to
perform creditable service for 50 percent or more of the full-time
equivalent for the position, contributions to the Cash Balance
Benefit Program on behalf of the participant shall no longer be made
and creditable service performed for that employer and all other
employers shall be subject to coverage by the Defined Benefit Program
as of the first day of the pay period in which the change in the
participant's basis of employment occurred, except as provided in
Section 26402.
SEC. 36. Section 26401 of the Education Code is amended to read:
26401. (a) A member of the Defined Benefit Program who is
employed to perform creditable service for less than 50 percent of
the full-time equivalent for the position for an employer that
provides the Cash Balance Benefit Program may elect to become a
participant for creditable service subject to coverage under the Cash
Balance Benefit Program for that employer provided that the
creditable service is not performed for the same employer with whom
the member is also subject to mandatory membership in the Defined
Benefit Program.
(b) The election shall be made on a form prescribed by the system
and shall be filed with the employer within 60 calendar days of the
later of the first day of employment with an employer that provides
the Cash Balance Benefit Program, the date of the employer's
governing board's action to provide the Cash Balance Benefit Program,
or the effective date of the employer's governing board's action to
provide the Cash Balance Benefit Program.
(c) Employers shall make available to employees specified in
subdivision (a) information and forms provided by the system for
making an election regarding participation, and shall maintain the
written election by the employee in employer files. The election
shall become effective on the first day of the pay period following
the pay period in which the election is made.
(d) If an election is made pursuant to subdivision (a) and the
participant's basis of employment with that employer changes to
employment to perform creditable service for 50 percent or more of
the full-time equivalent for the position, contributions to the Cash
Balance Benefit Program on behalf of the participant shall no longer
be made and creditable service performed for that employer and all
other employers shall be subject to coverage under the Defined
Benefit Program as of the first day of the pay period in which the
change in the participant's basis of employment occurred, except as
provided in Section 26402.
SEC. 37. Section 26402 of the Education Code is amended to read:
26402. A member of the Defined Benefit Program who is employed by
an employer on a full-time basis to perform creditable service
subject to coverage under the Defined Benefit Program, may
participate in the Cash Balance Benefit Program for creditable
service performed for a different employer if the different employer
provides the Cash Balance Benefit Program and would otherwise
contribute to social security or an alternative retirement plan on
behalf of the member for that service.
SEC. 38. Section 26501 of the Education Code is amended to read:
26501. Except as provided in Section 26504, the participant shall
contribute an amount equivalent to 4 percent of salary.
SEC. 39. Section 26503 of the Education Code is amended to read:
26503. Except as provided in Sections 26504 and 26507, the
employer shall contribute an amount equivalent to 4 percent of salary
for each participant employed by the employer.
SEC. 40. Section 26504 of the Education Code is amended to read:
26504. The employer may enter into a collective bargaining
agreement to pay a different employer contribution rate and a
different employee contribution rate, provided all of the following
conditions are met:
(a) The sum of the employee contributions and employer
contributions for each participant shall equal or exceed 8 percent of
salary.
(b) The employee contribution rate shall not exceed the employer
contribution rate.
(c) The employee contribution rate and employer contribution rate
shall be the same for each participant employed by the employer.
(d) The employee contribution rate and employer contribution rate
shall be in one-quarter percent increments.
(e) The employee contribution rate and employer contribution rate
as determined under the collective bargaining agreement shall become
effective on the first day of the plan year following notification to
the system and shall remain in effect for at least one plan year.
However, the employee contribution rate and the employer contribution
rate as determined under the collective bargaining agreement may
become effective as of the first day of the plan year in which notice
is given if it is so provided in the collective bargaining agreement
and if a lump-sum contribution is made to the plan equal to the
additional employee and employer contributions, if any, that would
have been required if the contribution rates had been in effect on
the first day of the plan year. Interest shall be credited at the
minimum interest rate with respect to the lump-sum contribution
commencing with the first month after the contribution is made.
(f) The employer has filed notice of the employee contribution
rate and the employer contribution rate on a form prescribed by the
system.
SEC. 41. Section 26506 of the Education Code is amended to read:
26506. (a) Except as provided in subdivision (b), participants
shall not make voluntary pretax or post-tax contributions into the
Cash Balance Benefit Program, nor shall participants redeposit
amounts previously distributed from employee accounts or employer
accounts.
(b) Pursuant to terms and conditions established by the board,
participants may be permitted to transfer funds from eligible
retirement plans into the Cash Balance Benefit Program to the extent
that the transfers are allowable under and are completed in a manner
prescribed by applicable federal and state laws, and any related
regulations.
(c) Funds deposited with the Cash Balance Benefit Program by a
participant pursuant to subdivision (b) shall be credited to the
participant and identified separately from credits in the participant'
s employee and employer accounts. Funds so deposited shall be
credited with interest pursuant to Section 26604.
SEC. 42. Section 26603 of the Education Code is amended to read:
26603. All employee contributions shall be credited to employee
accounts and all employer contributions shall be credited to employer
accounts as of the first calendar day following the date the
contributions are received by the system.
SEC. 43. Section 26701 of the Education Code is amended to read:
26701. The right of a participant to a benefit under this part,
whether by lump sum or annuity, is not subject to execution or any
other process whatsoever, except to the extent permitted by Section
704.110 of the Code of Civil Procedure, and is unassignable except as
specifically provided under this part.
SEC. 44. Section 26702 of the Education Code is amended to read:
26702. (a) For the purpose of payments into or out of the fund
for adjustments of errors or omissions with respect to the Cash
Balance Benefit Program, the period of limitation shall be applied as
follows:
(1) No action may be commenced by or against the board, the
system, or the plan more than three years after all obligations to or
on behalf of the participant or beneficiary have been discharged.
(2) In cases where the system makes an error resulting in
incorrect payment to the participant or beneficiary, the system's
right to commence recovery shall expire three years from the date of
payment.
(3) If an erroneous payment is made due to lack of information or
inaccurate information regarding eligibility of a participant or
beneficiary to receive a benefit from the Cash Balance Benefit
Program, the period of limitation shall commence when the system
discovers the erroneous payment.
(b) Notwithstanding any other provision of this section, if any
erroneous payment has been made on the basis of fraud or intentional
misrepresentation by a participant or beneficiary, or other party in
relation to or on behalf of a participant or beneficiary, the
three-year period of limitation shall not be deemed to commence or to
have commenced until the system discovers the erroneous payment.
SEC. 45. Section 26703 of the Education Code is amended to read:
26703. The signature of the spouse of a participant shall be
required on a designation of beneficiary form or an application for a
retirement benefit, disability benefit, or termination benefit
under this part, unless the participant declares in writing, under
penalty of perjury, that one of the following conditions exists:
(a) The participant is not married.
(b) The participant does not know, and has taken all reasonable
steps to determine, the whereabouts of the spouse.
(c) The spouse is incapable of executing the acknowledgment
because of an incapacitating mental or physical condition.
(d) The participant and spouse have executed a marriage settlement
agreement pursuant to Part 5 (commencing with Section 1500) of
Division 4 of the Family Code that makes the community property law
inapplicable to the marriage.
(e) The current spouse has no identifiable community property
interest in the benefit.
SEC. 46. Section 26704 of the Education Code is amended to read:
26704. If a spouse refuses to sign a beneficiary designation, an
application for a retirement benefit, disability benefit, or
termination benefit payable under this part, the participant may
bring an action in court to enforce the spousal signature requirement
or to waive the spousal signature requirement. Either party may
bring an action pursuant to Section 1101 of the Family Code to
determine the rights of the party.
SEC. 47. Section 27301 of the Education Code is amended to read:
27301. (a) The plan's obligations under this part to a
participant or beneficiary who elected to receive a benefit in the
form of an annuity, cease upon distribution of the final monthly
payment of the annuity.
(b) Deposit in the United States mail of a warrant drawn as
directed by the participant or beneficiary and addressed as directed
by the participant or beneficiary constitutes distribution of the
benefit under this part.
(c) Deposit in the United States mail of a notice that the
requested electronic funds transfer has been made as directed by the
participant or beneficiary constitutes distribution of the benefit
under this part.
(d) Distribution under subdivision (b) or (c) pursuant to the
board's determination in good faith of the existence, identity, or
other facts relating to entitlement of persons constitutes a complete
discharge and release of the board, system, and plan from liability
for payments under this part.
SEC. 48. Section 27401 of the Education Code is amended to read:
27401. For purposes of this chapter, "nonparticipant spouse"
means the spouse or former spouse who is being or has been awarded a
community property interest in the benefits determined by reference
to the amounts credited to a participant's employee and employer
accounts or the participant's annuity. A nonparticipant spouse who
is awarded separate nominal accounts is not a participant in the Cash
Balance Benefit Program. A nonparticipant spouse who receives or is
awarded an interest in a participant's annuity is not a participant
in the Cash Balance Benefit Program.
SEC. 49. Section 27409 of the Education Code is amended to read:
27409. Upon being awarded separate nominal accounts or an
interest in the annuity of a participant, a nonparticipant spouse
shall provide the system with proof of his or her date of birth,
social security number, and any other information requested by the
system, in the form and manner requested by the system.
SEC. 50. Section 28100 of the Education Code is amended to read:
28100. (a) The employer may discontinue providing the Cash
Balance Benefit Program at anytime in accordance with the terms and
conditions of the employer's governing board's formal action to
provide the program.
(b) The employer shall notify the system of the decision to
discontinue the plan no less than 90 calendar days prior to the
effective date of discontinuance. Such notice shall be submitted on
a form prescribed by the system.
SEC. 51. Section 28101 of the Education Code is amended to read:
28101. (a) Upon discontinuation of the Cash Balance Benefit
Program by the employer, the system will hold the employee and
employer accounts for the benefit of the participant. The
participant is immediately vested in both employee and employer
accounts including accrued interest.
(b) Both employee and employer accounts will continue to be
credited with interest at the minimum interest rate so long as there
is an undistributed balance in such accounts.