BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 3094
Nell Soto, Chair Hearing date: June 21, 2004
AB 3094 (PER & SS Cmte.) as amended May 24, 2004
FISCAL: YES
PERS, STRS '37 ACT: OVERPAYMENT OF BENEFITS
HISTORY :
Sponsor: Public Employees Retirement System (PERS)
State Teachers Retirement System (STRS)
Prior legislation: None
ASSEMBLY VOTES :
PER & SS 9-0 4/21/04
Appropriations 20-0 4/28/04
Assembly Floor 79-0 5/26/04
SUMMARY :
Would create procedures for the Public Employees Retirement
System (PERS), the State Teachers Retirement System (STRS)
and the twenty county retirement systems under the County
Employees Retirement Act of 1937 ('37 Act) to recover benefit
overpayments in the event of the death of a benefit
recipient.
BACKGROUND AND ANALYSIS :
1) Existing retirement law :
a) provides that any person entitled to receive benefits
from any state, county, or district retirement system may
authorize the payment of the benefits to be directly
deposited by electronic fund transfer into the person's
account at a financial institution of his or her choice,
and
b) prohibits an officer, employee, or agent of a state or
local agency or department from requesting or receiving
from a financial institution the financial information of a
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Date: June 17, 2004 Page 1
customer except under specified conditions.
2) This bill :
a) requires retirement benefit payments from PERS, STRS or
'37 Act county systems directly deposited by electronic
fund transfer following the date of death of a person
entitled to receive the benefits to be refunded to the
retirement system, and
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Date: June 17, 2004 Page 2
b) adds an exemption to the provisions of the California
Right to Financial Privacy Act to require a financial
institution to provide these public retirement systems with
certain information about accounts of a customer who
received direct deposit transfers from the retirement
system after the date of his or her death.
FISCAL EFFECT :
Savings will result as these public retirement systems are
allowed to use less extensive legal procedures (e.g.,
subpoenas) to recover benefit overpayments.
COMMENTS :
1) Arguments in support
According to PERS, some retirees receive retirement
allowances via direct deposit to their bank accounts. If
PERS is not informed immediately of a retiree's death, the
payments continue until PERS is notified. Sometimes other
parties who have access to those accounts withdraw the funds
paid to the deceased retiree. Financial institutions will
not release the names and addresses of these individuals
without subpoenas, which are costly and increase
administrative expenses for the retirement systems.
This bill would require financial institutions to disclose
the names and addresses of financial account owners, or any
people having access to the accounts, to PERS, STRS and '37
Act county retirement systems for all overpayment cases,
without the need for individual subpoenas to be issued.
Because of the legal and procedural complexities associated
with promulgating interrogatories and the issuing and serving
of subpoenas, and based upon cost-effectiveness issues, it
was determined that referrals of overpayment cases would only
be made to PERS' legal office if the overpayment amounts
exceed $2,500. Overpayments of less than $2,500 are
presently being written off. Over the past four years at
PERS, 274 cases have been written off, amounting to a total
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Date: June 17, 2004 Page 3
loss of $528,411.
This bill would allow these public retirement systems to
obtain necessary information from financial institutions
without subpoenas.
The law protects individuals' rights to privacy with regard
to their financial and personal records. Entities such as
police and sheriff's departments and other state agencies
have narrowly defined exemptions allowing only specific types
of information to be obtained under specific situations.
This bill would be similarly narrow. It would only allow
PERS, STRS and '37 Act county retirement systems to obtain
the names and addresses of persons withdrawing funds from an
annuitant's account following the annuitant's death. It
would not allow the systems to obtain any other information
in any other circumstances.
If automatic payments have been paid to a retiree's account
and withdrawn by the survivor or beneficiary who is entitled
to an ongoing monthly allowance following the retiree's
death, these retirement systems do not attempt to collect
those payments. The survivor's or beneficiary's ongoing
allowance can be adjusted over a period of months to reflect
any overpayments that may have occurred.
2) SUPPORT :
American Federation State County Municipal Employees
(AFSCME)
State Association of County Retirement Systems
3) OPPOSITION :
None to date
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Date: June 17, 2004 Page 4
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Date: June 17, 2004 Page 5