BILL NUMBER: AB 2177 CHAPTERED 09/30/00 CHAPTER 1030 FILED WITH SECRETARY OF STATE SEPTEMBER 30, 2000 APPROVED BY GOVERNOR SEPTEMBER 30, 2000 PASSED THE ASSEMBLY AUGUST 29, 2000 PASSED THE SENATE AUGUST 28, 2000 AMENDED IN SENATE AUGUST 25, 2000 AMENDED IN SENATE AUGUST 7, 2000 AMENDED IN SENATE JUNE 12, 2000 INTRODUCED BY Committee on Public Employees, Retirement and Social Security (Correa (Chair), Firebaugh, Honda, and Knox) FEBRUARY 23, 2000 An act to amend Sections 20677, 20962, 20966, and 21354.1 of, and to add Sections 3562.2, 20635.1, 20636.1, 20687.1, and 20831.1 to, the Government Code, relating to school employees' retirement, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 2177, Committee on Public Employees, Retirement and Social Security. School employees' retirement: contributions. (1) Under the Public Employees' Retirement Law, a member's service retirement allowance is calculated as a percentage of the member's final compensation for each year of credited service; however, compensation and hours for overtime are excluded for purposes of that calculation. Overtime is defined under existing law for these purposes as service performed in excess of the normal hours of work for full-time employees, as specified. This bill would provide that, for school members, overtime shall be service in excess of 40 hours of work per week. (2) The Public Employees' Retirement Law defines compensation earnable for the purposes of that law. This bill would provide an alternative definition of compensation earnable for school members and would require a school employer who fails or refuses to report an employee's compensation earnable to pay administrative costs, as specified. (3) Under the Public Employees' Retirement Law, member contribution rates and service retirement benefits are reduced by specified amounts if the member's service is included in the federal system. This bill would delete both of those reductions with respect to school members whose service is included in the federal system. By increasing the contributions of those members, the bill would make an appropriation to the Public Employees' Retirement Fund, a continuously appropriated special fund. (4) Under the Public Employees' Retirement Law, specified employees of the California State University police department are classified as state peace officer/firefighter members and, as such, are subject to a member contribution rate of 8% of compensation in excess of $238 per month. This bill would provide that, if not in conflict with a memorandum of understanding between the Trustees of the California State University and the recognized employee organization, those members shall be subject to a contribution rate of 8% of compensation in excess of $863 per month. (5) Existing law defines "scope of representation" for purposes of employer-employee relations of the California State University to mean wages, hours of employment, and other terms and conditions of employment. This bill would add to that definition any retirement benefits available to a state member under the Public Employees' Retirement Law. (6) This bill would incorporate additional changes to Section 20677 of the Government Code proposed by AB 2642 to take effect if this bill and that bill are enacted and become effective on or before January 1, 2001, and this bill is enacted last. (7) This bill would incorporate additional changes to Section 21354.1 of the Government Code proposed by SB 1396 to take effect if this bill and that bill are enacted and become effective on or before January 1, 2001, and this bill is enacted last. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 3562.2 is added to the Government Code, to read: 3562.2. Notwithstanding subdivision (r) of Section 3562, for purposes of the California State University only, "scope of representation" also means any retirement benefits available to a state member under Part 3 (commencing with Section 2000) of Title 2. SEC. 2. Section 20635.1 is added to the Government Code, to read: 20635.1. Notwithstanding Section 20635, and Section 45102 of the Education Code, when the compensation of a school member is a factor in any computation to be made under this part, there shall be excluded from those computations any compensation based on overtime put in by a member whose service retirement allowance is a fixed percentage of final compensation for each year of credited service. For the purposes of this part, overtime for school members is the aggregate service performed by an employee as a member for all school employers and in all categories of employment in excess of 40 hours of work per week, and for which monetary compensation is paid. If a school member concurrently renders service in two or more positions, one or more of which is full time, service in the part-time position shall constitute overtime. If two or more positions are permanent and full time, the position with the highest payrate or base pay shall be reported to this system. SEC. 3. Section 20636.1 is added to the Government Code, to read: 20636.1. (a) Notwithstanding Section 20636, and Section 45102 of the Education Code, "compensation earnable" by a school member means the payrate and special compensation of the member, as defined by subdivisions (b) and (c), and as limited by Section 21752.5. (b) (1) "Payrate" means the normal monthly rate of pay or base pay of the member paid in cash to similarly situated members of the same group or class of employment for services rendered on a full-time basis during normal working hours. For noncertificated members, where the normal work schedule is less than 40 hours per week, payments for additional services rendered, not to exceed 40 hours per week, shall be reported as compensation earnable for all months of the year in which work is performed. "Payrate," for a member who is not in a group or class, means the monthly rate of pay or base pay of the member, paid in cash and pursuant to publicly available pay schedules, for services rendered on a full-time basis during normal working hours, subject to the limitations of paragraph (2) of subdivision (e). (A) For the purposes of this section, "noncertificated members" shall mean members who retain membership under this system while employed with a school employer in positions not subject to coverage under the Defined Benefit Program under the State Teacher's Retirement System. (B) For the purposes of this section, and Sections 20962 and 20966, "certificated members" shall mean members who retain membership under this system while employed in positions subject to coverage under the Defined Benefit Program under the State Teacher's Retirement System. (2) The computation for any leave without pay of a member shall be based on the compensation earnable by him or her at the beginning of the absence. (3) The computation for time prior to entering state service shall be based on the compensation earnable by him or her in the position first held by him or her in state service. (c) (1) Special compensation of a school member includes any payment received for special skills, knowledge, abilities, work assignment, workdays or hours, or other work conditions. (2) Special compensation shall be limited to that which is received by a member pursuant to a labor policy or agreement or as otherwise required by state or federal law, to similarly situated members of a group or class of employment that is in addition to payrate. If an individual is not part of a group or class, special compensation shall be limited to that which the board determines is received by similarly situated members in the closest related group or class that is in addition to payrate, subject to the limitations of paragraph (2) of subdivision (e). (3) Special compensation shall be for services rendered during normal working hours and, when reported to the board, the employer shall identify the pay period in which the special compensation was earned. (4) Special compensation may include the full monetary value of normal contributions paid to the board by the employer, on behalf of the member and pursuant to Section 20691, provided that the employer' s labor policy or agreement specifically provides for the inclusion of the normal contribution payment in compensation earnable. (5) The monetary value of any service or noncash advantage furnished by the employer to the member, except as expressly and specifically provided in this part, shall not be special compensation unless regulations promulgated by the board specifically determine that value to be "special compensation." (6) The board shall promulgate regulations that delineate more specifically and exclusively what constitutes "special compensation" as used in this section. A uniform allowance, the monetary value of employer-provided uniforms, holiday pay, and premium pay for hours worked within the normally scheduled or regular working hours that are in excess of the statutory maximum workweek or work period applicable to the employee under Section 201 et seq. of Title 29 of the United States Code shall be included as special compensation and appropriately defined in those regulations. (7) Special compensation does not include any of the following: (A) Final settlement pay. (B) Payments made for additional services rendered outside of normal working hours, whether paid in lump sum or otherwise. (C) Any other payments the board has not affirmatively determined to be special compensation. (d) Notwithstanding any other provision of law, payrate and special compensation schedules, ordinances, or similar documents shall be public records available for public scrutiny. (e) (1) As used in this part, "group or class of employment" means a number of employees considered together because they share similarities in job duties, work location, collective bargaining unit, or other logical work related grouping. Under no circumstances shall one employee be considered a group or class. (2) Increases in compensation earnable granted to any employee who is not in a group or class shall be limited during the final compensation period applicable to the employees, as well as the two years immediately preceding the final compensation period, to the average increase in compensation earnable during the same period reported by the employer for all employees who are in the same membership classification, except as may otherwise be determined pursuant to regulations adopted by the board that establish reasonable standards for granting exceptions. (f) As used in this part, "final settlement pay" means any pay or cash conversions of employee benefits that are in excess of compensation earnable, that are granted or awarded to a member in connection with or in anticipation of a separation from employment. The board shall promulgate regulations that delineate more specifically what constitutes final settlement pay. SEC. 4. Section 20677 of the Government Code is amended to read: 20677. (a) (1) The normal rate of contribution for a state miscellaneous member whose service is not included in the federal system shall be 6 percent of the compensation in excess of three hundred seventeen dollars ($317) per month paid that member for service rendered on and after July 1, 1976. The normal rate of contribution for a school member or a local miscellaneous member shall be 7 percent of the compensation paid that member for service rendered on and after June 21, 1971. (2) The normal rate of contribution for a state miscellaneous or industrial member, who has elected to be subject to Section 21353.5 and whose service is not included in the federal system, shall be 6 percent of the member's compensation. (3) The normal rate of contribution as established under this subdivision for a member whose service is included in the federal system, and whose service retirement allowance is reduced under Section 21353, 21353.5, 21354, or 21354.1 because of that inclusion, shall be reduced by one-third as applied to compensation not exceeding four hundred dollars ($400) per month for service after the date of execution of the agreement including service in the federal system and prior to termination of the agreement with respect to the coverage group to which he or she belongs. Notwithstanding the foregoing, effective January 1, 2001, the normal rate of contribution for school members whose service is included in the federal system shall not be reduced pursuant to this paragraph as applied to compensation earned on or after that date. (b) (1) The normal rate of contribution for a state miscellaneous member whose service has been included in the federal system shall be 5 percent of compensation in excess of five hundred thirteen dollars ($513) per month paid that member for service rendered on and after July 1, 1976. (2) The normal rate of contribution for a state miscellaneous or industrial member, who has elected to be subject to Section 21353.5 and whose service has been included in the federal system, shall be 5 percent of compensation, subject to the reduction specified in paragraph (3) of subdivision (a). (c) The normal rate of contribution for a state miscellaneous or state industrial member who is subject to Section 21076 or Section 21077 shall be 0 percent. (d) A member who elected to become subject to Section 21353 solely for service rendered on or after the effective date of the election, as authorized by subdivision (c) of Section 21070 during the period between November 1, 1988, and October 31, 1989, is not required to make the contributions specified in Section 21073. (e) A member who elects to become subject to Section 21353 or 21354.1, as applicable, shall contribute at the rate specified in paragraph (1) of subdivision (a) or paragraph (1) of subdivision (b), as determined by the member's status with the federal system, and the rate shall be applied from the first of the month following the date of the election. A member who makes the election shall also contribute for service prior to the date the contribution rate was applied, in the manner specified in Section 21073 or 21073.1, as applicable. SEC. 4.5. Section 20677 of the Government Code is amended to read: 20677. (a) (1) The normal rate of contribution for a state miscellaneous member whose service is not included in the federal system shall be 6 percent of the compensation in excess of three hundred seventeen dollars ($317) per month paid that member for service rendered on and after July 1, 1976. (2) The normal rate of contribution for a school member or a local miscellaneous member shall be 7 percent of the compensation paid that member for service rendered on and after June 21, 1971. (3) Notwithstanding paragraph (2), the normal rate of contribution for a local miscellaneous member shall be 8 percent of the compensation paid that member for service rendered on and after the date the member's contracting agency elects to make local miscellaneous members subject to the benefit formula provided in Section 21354.3. (4) Notwithstanding paragraph (2), the normal rate of contribution for a local miscellaneous member shall be 9 percent of the compensation paid that member for service rendered on and after the date the member's contracting agency elects to make local miscellaneous members subject to the benefit formula provided in Section 21354.4. (5) The normal rate of contribution for a state miscellaneous or industrial member, who has elected to be subject to Section 21353.5 and whose service is not included in the federal system, shall be 6 percent of the member's compensation. (6) The normal rate of contribution as established under this subdivision for a member whose service is included in the federal system, and whose service retirement allowance is reduced under Section 21353, 21353.5, 21354, or 21354.1, 21354.3, or 21354.4 because of that inclusion, shall be reduced by one-third as applied to compensation not exceeding four hundred dollars ($400) per month for service after the date of execution of the agreement including service in the federal system and prior to termination of the agreement with respect to the coverage group to which he or she belongs. Notwithstanding the foregoing, effective January 1, 2001, the normal rate of contribution for school members whose service is included in the federal system shall not be reduced pursuant to this paragraph as applied to compensation earned on or after that date. (b) (1) The normal rate of contribution for a state miscellaneous member whose service has been included in the federal system shall be 5 percent of compensation in excess of five hundred thirteen dollars ($513) per month paid that member for service rendered on and after July 1, 1976. (2) The normal rate of contribution for a state miscellaneous or industrial member, who has elected to be subject to Section 21353.5 and whose service has been included in the federal system, shall be 5 percent of compensation, subject to the reduction specified in paragraph (6) of subdivision (a). (c) The normal rate of contribution for a state miscellaneous or state industrial member who is subject to Section 21076 or 21077 shall be 0 percent. (d) A member who elected to become subject to Section 21353 solely for service rendered on or after the effective date of the election, as authorized by subdivision (c) of Section 21070 during the period between November 1, 1988, and October 31, 1989, is not required to make the contributions specified in Section 21073. (e) A member who elects to become subject to Section 21353 or 21354.1, as applicable, shall contribute at the rate specified in paragraph (1) of subdivision (a) or paragraph (1) of subdivision (b), as determined by the member's status with the federal system, and the rate shall be applied from the first of the month following the date of the election. A member who makes the election shall also contribute for service prior to the date the contribution rate was applied, in the manner specified in Section 21073 or 21073.1, as applicable. SEC. 5. Section 20687.1 is added to the Government Code, to read: 20687.1. (a) The normal rate of contribution for state peace officer/firefighter members subject to Section 21363.3 shall be 8 percent of the compensation in excess of eight hundred sixty-three dollars ($863) per month paid those members. The Legislature reserves the right to increase the rate of contribution of those peace officer/firefighter members as it may find appropriate from time to time. (b) If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached between the Trustees of the California State University and the recognized employee organization pursuant to Chapter 12 (commencing with Section 3560) of Division 4 of Title 1, the memorandum of understanding shall be controlling without further legislative action, except that if those provisions of a memorandum of understanding require the expenditure of funds, those provisions shall not become effective unless approved by the Legislature in the annual Budget Act. SEC. 6. Section 20831.1 is added to the Government Code, to read: 20831.1. Any school employer that fails or refuses to report an employee's compensation earnable required by this chapter within the applicable time limitations shall be required to pay administrative costs of five hundred dollars ($500) per member as a reimbursement to this system's current year budget. SEC. 7. Section 20962 of the Government Code is amended to read: 20962. One year of service credit shall be granted for service rendered and compensated in a fiscal year in full-time employment for any of the following: (a) One academic year of service for persons employed on an academic year basis by the University of California, the California State University system, or school employees who are certificated members, under terms and conditions prescribed by the board. (b) Ten months of service for persons employed on a monthly basis. (c) Two hundred fifteen days of service after June 30, 1951, and 250 days prior to July 1, 1951, for persons employed on a daily basis. (d) One thousand seven hundred twenty hours of service after June 30, 1951, and 2,000 hours prior to July 1, 1951, for persons employed on an hourly basis. (e) Nine months of service for state employees represented by State Bargaining Unit 3 and subject to the 9-12 pay plan or leave plan, provided a memorandum of understanding has been agreed to by the state employer and the recognized employee organization to become subject to this subdivision. A fractional year of credit shall be given for service rendered in a fiscal year in full-time employment for less than the time prescribed in this section. SEC. 8. Section 20966 of the Government Code is amended to read: 20966. For the purpose of calculating retirement allowances, credit for service rendered on a part-time basis in each fiscal year shall be based on the ratio that the service rendered bears: (a) To one academic year if rendered on an academic year basis, for members employed by the University of California, the California State University system, or school employees who are certificated members, under terms and conditions prescribed by the board. (b) To 10 months if rendered on a monthly basis. (c) To 215 days if the service was rendered after June 30, 1951, or to 250 days if the service was rendered prior to July 1, 1951, for services rendered on a daily basis. (d) To 1,720 hours if the service was rendered after June 30, 1951, or to 2,000 hours if the service was rendered prior to July 1, 1951, for service rendered on an hourly basis. SEC. 9. Section 21354.1 of the Government Code is amended to read: 21354.1. (a) The combined current and prior service pensions for school members, state miscellaneous or state industrial members, or university members who are subject to the provisions of this section is a pension derived from the contributions of the employer sufficient, when added to the service retirement annuity that is derived from the accumulated normal contributions of the member at the date of retirement, to equal the fraction of one-fiftieth of the member's final compensation set forth opposite the member's age at retirement, taken to the preceding completed quarter year, in the following table, multiplied by the number of years of current and prior service, except service in a category of membership other than that of a school member, state miscellaneous or state industrial member, or university member or service covered under this retirement formula with which the member is entitled to be credited at retirement: Age at retirement Fraction 50 ................................... 0.550 50 1/4 ............................... 0.573 50 1/2 ............................... 0.595 50 3/4 ............................... 0.618 51 ................................... 0.640 51 1/4 ............................... 0.663 51 1/2 ............................... 0.685 51 3/4 ............................... 0.708 52 ................................... 0.730 52 1/4 ............................... 0.753 52 1/2 ............................... 0.775 52 3/4 ............................... 0.798 53 ................................... 0.820 53 1/4 ............................... 0.843 53 1/2 ............................... 0.865 53 3/4 ............................... 0.888 54 ................................... 0.910 54 1/4 ............................... 0.933 54 1/2 ............................... 0.955 54 3/4 ............................... 0.978 55 ................................... 1.000 55 1/4 ............................... 1.008 55 1/2 ............................... 1.016 55 3/4 ............................... 1.024 56 ................................... 1.032 56 1/4 ............................... 1.040 56 1/2 ............................... 1.048 56 3/4 ............................... 1.055 57 ................................... 1.063 57 1/4 ............................... 1.071 57 1/2 ............................... 1.079 57 3/4 ............................... 1.086 58 ................................... 1.094 58 1/4 ............................... 1.102 58 1/2 ............................... 1.110 58 3/4 ............................... 1.118 59 ................................... 1.125 59 1/4 ............................... 1.134 59 1/2 ............................... 1.141 59 3/4 ............................... 1.149 60 ................................... 1.157 60 1/4 ............................... 1.165 60 1/2 ............................... 1.173 60 3/4 ............................... 1.180 61 ................................... 1.188 61 1/4 ............................... 1.196 61 1/2 ............................... 1.203 61 3/4 ............................... 1.211 62 ................................... 1.219 62 1/4 ............................... 1.227 62 1/2 ............................... 1.235 62 3/4 ............................... 1.243 63 and over .......................... 1.250 (b) The fraction specified in the above table shall be reduced by one-third as applied to that part of final compensation that does not exceed four hundred dollars ($400) per month for all service of a member any of whose service has been included in the federal system. This subdivision shall not apply to school members whose service is included in the federal system with respect to service performed on or after January 1, 2001. (c) This section shall supersede Section 21353 for all school members, all university members, and all state miscellaneous members, with respect to service rendered for the California State University or the legislative or judicial branch of government, who retire on or after January 1, 2000. (d) This section shall also supersede Section 21353 for state miscellaneous or state industrial members, for service not subject to subdivision (c), who are employed by the state on or after January 1, 2000, and who do not elect under Section 21070.5 to be subject to Second Tier benefits. (e) Operation and application of this section are subject to the limitations set forth in Section 21251.13. SEC. 9.5. Section 21354.1 of the Government Code is amended to read: 21354.1. (a) The combined current and prior service pensions for school members, state miscellaneous or state industrial members, local miscellaneous members employed by a county superintendent of schools specified in subdivision (e), or university members who are subject to the provisions of this section is a pension derived from the contributions of the employer sufficient, when added to the service retirement annuity that is derived from the accumulated normal contributions of the member at the date of retirement, to equal the fraction of one-fiftieth of the member's final compensation set forth opposite the member's age at retirement, taken to the preceding completed quarter year, in the following table, multiplied by the number of years of current and prior service, except service in a category of membership other than that of a school member, state miscellaneous or state industrial member, or university member or service covered under this retirement formula with which the member is entitled to be credited at retirement: Age at retirement Fraction 50 ................................... 0.550 50 1/4 ............................... 0.573 50 1/2 ............................... 0.595 50 3/4 ............................... 0.618 51 ................................... 0.640 51 1/4 ............................... 0.663 51 1/2 ............................... 0.685 51 3/4 ............................... 0.708 52 ................................... 0.730 52 1/4 ............................... 0.753 52 1/2 ............................... 0.775 52 3/4 ............................... 0.798 53 ................................... 0.820 53 1/4 ............................... 0.843 53 1/2 ............................... 0.865 53 3/4 ............................... 0.888 54 ................................... 0.910 54 1/4 ............................... 0.933 54 1/2 ............................... 0.955 54 3/4 ............................... 0.978 55 ................................... 1.000 55 1/4 ............................... 1.008 55 1/2 ............................... 1.016 55 3/4 ............................... 1.024 56 ................................... 1.032 56 1/4 ............................... 1.040 56 1/2 ............................... 1.048 56 3/4 ............................... 1.055 57 ................................... 1.063 57 1/4 ............................... 1.071 57 1/2 ............................... 1.079 57 3/4 ............................... 1.086 58 ................................... 1.094 58 1/4 ............................... 1.102 58 1/2 ............................... 1.110 58 3/4 ............................... 1.118 59 ................................... 1.125 59 1/4 ............................... 1.134 59 1/2 ............................... 1.141 59 3/4 ............................... 1.149 60 ................................... 1.157 60 1/4 ............................... 1.165 60 1/2 ............................... 1.173 60 3/4 ............................... 1.180 61 ................................... 1.188 61 1/4 ............................... 1.196 61 1/2 ............................... 1.203 61 3/4 ............................... 1.211 62 ................................... 1.219 62 1/4 ............................... 1.227 62 1/2 ............................... 1.235 62 3/4 ............................... 1.243 63 and over .......................... 1.250 (b) The fraction specified in the above table shall be reduced by one-third as applied to that part of final compensation that does not exceed four hundred dollars ($400) per month for all service of a member any of whose service has been included in the federal system. This subdivision shall not apply to school members whose service is included in the federal system with respect to service performed on or after January 1, 2001. (c) This section shall supersede Section 21353 for all school members, all university members, and all state miscellaneous members, with respect to service rendered for the California State University or the legislative or judicial branch of government, who retire on or after January 1, 2000. (d) This section shall also supersede Section 21353 for state miscellaneous or state industrial members, for service not subject to subdivision (c), who are employed by the state on or after January 1, 2000, and who do not elect under Section 21070.5 to be subject to Second Tier benefits. (e) This section shall apply to the San Diego County Superintendent of Schools if that agency elects to make its miscellaneous members subject to this section by amendment to its contract made in the manner prescribed for approval of contracts. This section shall be operative with respect to the agency from the effective date of the amendment to the agency's contract until January 1, 2004, and shall only be applicable to the agency's miscellaneous members who retire for service during that period. SEC. 10. Section 4.5 of this bill incorporates amendments to Section 20677 of the Government Code proposed by both this bill and AB 2642. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2001, (2) each bill amends Section 20677 of the Government Code, and (3) this bill is enacted after AB 2642, in which case Section 4 of this bill shall not become operative. SEC. 11. Section 9.5 of this bill incorporates amendments to Section 21354.1 of the Government Code proposed by this bill and SB 1396. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2001, (2) each bill amends Section 21354.1 of the Government Code, and (3) this bill is enacted after SB 1396, in which case Section 21354.1 of the Government Code, as amended by SB 1396, shall remain operative only until the operative date of this bill, at which time Section 9.5 of this bill shall become operative, and Section 9 of this bill shall not become operative.