BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2233
Nell Soto, Chair Hearing date: June 21, 2004
AB 2233 (PER & SS Cmte.) as amended June 8, 2004
FISCAL: NO
STRS: ANNUAL HOUSEKEEPING TECHNICAL BILL
HISTORY :
Sponsor: State Teachers Retirement Board
Prior legislation: Annual technical bill
ASSEMBLY VOTES :
PER & SS 8-0 5/05/04
Assembly Floor 74-0 5/17/04
SUMMARY :
Would make technical non-substantive changes to State
Teachers' Retirement System Law (STRS Law).
BACKGROUND AND ANALYSIS :
1) Existing STRS law :
a) establishes the STRS Defined Benefit (DB) Program, and
b) requires the governing board of a school district to
grant an employee a leave of absence to enable the employee
to serve as an elected officer of an employee organization.
2) This bill makes technical changes to various provisions of
the STRS Law and declares that any act that amends or repeals
any of the sections amended by this act shall prevail over
this act.
Specifically, this bill :
a) adds the term "spouse" to clarify the nonmember spouse
David Felderstein
Date: June 10, 2004 Page 1
payment requirements for purchasing additional service
credit,
b) adds the term "Employees'" to clarify service performed
under the San Francisco City and County Employees'
Retirement System is excluded under the STRS DB Program,
c) eliminates the text "age and" to clarify that only
additional service credit is granted to DB Program members
under the 2-Year Retirement Incentive Program,
d) replaces the text "purchase additional service credit"
with "redeposit refunded accumulated retirement
contributions" to clarify redeposit conditions under the DB
Program,
e) adds conforming language to clarify the rights of
registered domestic partners, as provided in Chapter 421 of
2003 ,
e) eliminates the term "annual" in order to allow the
System to issue the earnings limit in advance of the
calendar year for which it is effective by using the CCPI
from the immediately preceding June,
f) replaces the term "allowance" with "benefit" to clarify
the actuarial reduction applied to the retirement benefit
when a member elects the Partial Lump Sum under the DB
Program, and
g) clarifies the authority of the Teachers' Retirement
Board to set the employer contribution rate as a plan
amendment.
COMMENTS :
1) Arguments in Support
According to STRS, this bill is the annual technical
"housekeeping" bill. This bill makes various grammatical,
technical and conforming changes to the STRS Law to
facilitate efficient administration.
David Felderstein
Date: June 10, 2004 Page 2
2) OPPOSITION :
None to date
3) Section by section analysis
A section by section analysis, compiled by the sponsor STRS,
is attached below.
A) Nonmember spouse purchase of additional service credit
Existing STRS law permits a nonmember spouse who is awarded a
separate account to purchase additional service credit in
which he or she has a community property interest.
This bill adds the word "spouse" in one provision requiring
all contributions and interest payments for the purchase of
additional service credit by the nonmember spouse are due
before the effective date of the nonmember spouse's
retirement.
Education Code section affected by amendment: 22663.
David Felderstein
Date: June 10, 2004 Page 3
B) Adds "Employees'" to the San Francisco City and County
Retirement System
Existing STRS law excludes service performed under the San
Francisco City and County Retirement System from coverage in
the DB Program.
This bill adds the term "Employees'" to clarify that existing
law refers to the San Francisco City and County Employees'
Retirement System.
Education Code section affected by amendment: 22705.5.
C) Clarification of two years additional service credit
granted under the DB Program
Section 22714 authorizes participating school districts,
community colleges and county offices of education to provide
an additional two years of service credit as a retirement
incentive to eligible members of the DB Program, if the
school district is able to demonstrate a cost savings.
This bill deletes the text "age and" to clarify that only
additional service credit is granted to DB Program members
under that specific section.
Education Code section affected by amendment: 22714.
D) Redeposit conditions under the DB Program
Section 23023 permits members to redeposit any previously
refunded accumulated retirement contributions, including
interest, and the payment must be paid in full prior to
retirement.
This bill deletes inappropriate references in that section to
the purchase of additional service credit, and replaces it
with a correct reference to refunded accumulated retirement
contributions. It also clarifies System requirements for
members who elect to redeposit previously refunded
contributions and interest under the DB Program.
Education Code section affected by amendment: 23023.
David Felderstein
Date: June 10, 2004 Page 4
E) Clarification of rights of registered domestic partners
AB 205 (Goldberg), Chapter 421 of 2003 , extends on and after
January 1, 2005, the rights, protections, responsibilities,
obligations and duties of current, former and surviving
married spouses to current, former and surviving registered
domestic partners in California.
This bill makes technical and conforming changes to the TRL
to clarify the rights of registered domestic partners with
respect to benefits and services under the Plan, as provided
in Chapter 421 of 2003 .
Education Code sections affected by amendment: 22007.5,
22171, 22650, 22651, 22661, 23812, 25000.9, 26002.5, 26004,
26140, 27400, 27401 and 27406.
David Felderstein
Date: June 10, 2004 Page 5
F) Eliminates requirement for witness signature on
beneficiary designation form
Existing STRS law permits members of the DB Program to
designate on a form, one or more beneficiaries for any
benefit payable under STRS at the time of a member's death.
A member must also have the beneficiary designation form
signed by two witnesses who are not designated as a
beneficiary for benefits.
This bill eliminates the requirement for the witness
signatures on the beneficiary designation form, in order to
reduce errors or omissions on the form due to incomplete
witness signatures.
Education Code section affected by amendment: 23300.
G) Calculation of the earnings limitation for Disability
Retirement
Existing STRS law permits a DB Program member who is
receiving a Disability Retirement benefit to earn up to the
specified limit in one calendar year without a reduction in
his or her retirement allowance. That limit is adjusted each
year by the increase in the California Consumer Price Index.
This bill deletes the word "annual" to provide for the
correct calculation of the increase in the earnings limit.
Education Code section affected by amendment: 24114.
H) Clarification of the post-retirement earnings limitation
calculation and average compensation earnable
Existing STRS law establishes a maximum amount of creditable
earnings a retired member can earn in a school year.
This bill provides clarifying language that the amount of the
earnings limitation be adjusted each year by the percentage
change in the average compensation earnable.
The term "compensation" was inadvertently left out of Chapter
903, Statutes of 2002 (SB 1983-Soto), which changed the basis
for calculating the post-retirement compensation limitation
David Felderstein
Date: June 10, 2004 Page 6
from the All Urban California Consumer Price Index to the
average compensation earnable of active members, as amended
in Chapter 859, Statutes of 2003 (SB 627-PE&R). This bill
provides clarity in the terminology used to describe the
compensation that would be earned if a member worked on a
full-time basis.
Education Code section affected by amendment: 24214.
David Felderstein
Date: June 10, 2004 Page 7
I) "Unmodified" Allowance Payable under the Partial Lump Sum
Existing STRS law permits a DB Program member who is age 60
and three months or age 60 with 30 years or more of service
credit in the month he or she retires to receive part of
their monthly service retirement benefit in a lump sum
payment, in exchange for receiving a permanently reduced
monthly benefit. However, the language is unclear that the
allowance payable under this provision refers to the benefit
payable before any modifications (unmodified allowance).
This bill clarifies that the actuarial reduction applies to
the member's entire benefit.
Education Code section affected by amendment: 24221.
J) Clarification of Board authority to set the employer
contribution rate under the DB Program
Section 44987 permits DB Program members to take a leave of
absence to serve as an elected officer of an employee
organization, without loss of compensation. Section 22711
requires the employer to contribute funds at a rate set by
the Board. The text "contribution rate shall be the" were
inadvertently left out that adds conforming language to
Section 44987 in order to clarify the authority of the Board.
This bill corrects that drafting error.
Education Code section affected by amendment: 44987.
This bill also includes a provision that provides that any
other bill that amends a section that is amended in this bill
supercedes the changes made by this bill.
David Felderstein
Date: June 10, 2004 Page 8
#####
David Felderstein
Date: June 10, 2004 Page 9