BILL ANALYSIS
AB 1852
Page 1
Date of Hearing: April 21, 2004
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Gloria Negrete McLeod, Chair
AB 1852 (Mullin) - As Amended: March 18, 2004
SUBJECT : State teachers' retirement.
SUMMARY : Authorizes a member of the State Teachers' Retirement
System (CalSTRS) to earn a longevity bonus and purchase prior
military service under certain conditions. Specifically, this
bill :
1)Authorizes any periods of service to be aggregated to
constitute a period of 3 school years for the purpose of
defining a final compensation period.
2)Allows a member of the Defined Benefit Program to receive
credit for a period of time during which he or she served in
the uniformed services, up to one year, without paying any
employee contributions if the period of service occurred
between September 11, 2001 and July 30, 2005, and other
conditions exist.
3)Permits a member who is 50 years of age to retire and receive
specified longevity benefits if he or she has 25 years of
credited service.
4)Authorizes a member who retires with 30 or more years of
service, in lieu of an increase to his or her monthly
retirement allowance, to receive a lump-sum payment upon
retirement equal to the actuarial present value of the
increase to the monthly retirement allowance.
5)The bill would also make related technical changes.
EXISTING LAW
1)Retirement benefits of a member of the Defined Benefit Program
of the State Teachers' Retirement Plan are calculated, in
part, based upon the member's final compensation. Final
compensation, for members with fewer than 25 years of service
who are not classroom teachers, is defined for this purpose as
the highest average annual compensation earnable by the member
AB 1852
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during a period of 3 consecutive school years.
2)Authorizes a member of the Defined Benefit Program of the
State Teachers' Retirement Plan to receive credit, as
specified, for the period of time during which he or she
served in the uniformed services, if the member or participant
makes the employee contributions to the retirement fund that
he or she would have otherwise been required to make during
that period and other conditions exist.
3)Allows a member of the Defined Benefit Program of the State
Teachers' Retirement Plan who is 50 years of age to retire and
receive specified benefits if he or she has 30 years of
credited service.
4)Authorizes specified members of the Defined Benefit Program of
the State Teachers' Retirement Plan who retire prior to
January 1, 2011, to receive a specified lump-sum payment upon
retirement and an actuarially reduced monthly allowance.
5)Provides a member of the program with a specified increase to
his or her monthly allowance, if the member retires with 30 or
more years of service.
FISCAL EFFECT : Actuarial estimates from CalSTRS are not
available at this time, however, potentially significant
employer costs (in excess of $1 million based on SB 979
(Cedillo) (2002)) for military service costs to cover employee
contributions. Also, significant employer costs for aggregating
non-consecutive years for final compensation purposes.
Administrative costs would also be substantial.
COMMENTS :
Arguments in Support
According to the California Teachers' Association (sponsors),
the bill contains the following elements:
1)Educators called to active military service since September
11, 2001 would not lose STRS service credit while they are
away from school defending their country.
2)For members with fewer than 25 years of service (not receiving
a pension based on their single highest 12 months of service,
but on the average of their highest three consecutive years),
the bill provides that the pension shall be based on the
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highest three years, regardless of whether they are
consecutive years.
3)Allow STRS members to retire at 50 with 25, instead of 30
years of service.
4)Allow members to receive the actuarial estimate of their
longevity incentive ($200, $300 or $400 per month for teaching
to 30, 31, or 32 years, respectively) in a lump sum at the
time of retirement, instead of the monthly payments for life.
Existing law provides that to get service credit, you can either
work the time, or buy a limited amount of "air time." Those in
the National Guard called to active duty do not get service
credit in STRS while they are away from school. This bill helps
the families of teachers who are called to active duty and would
have a lower pension due to the time they are not teaching.
CalSTRS fiduciaries report that the fund is able to absorb the
modest cost of this bill, which represents just a few minutes of
daily fluctuations on its $115 billion portfolio.
REGISTERED SUPPORT / OPPOSITION :
Support
California Teachers Association (Sponsor)
California Federation of Teachers
Opposition
Faculty Association of Community Colleges
Analysis Prepared by : Clem Meredith / P.E., R. & S.S. / (916)
319-3957