BILL ANALYSIS
Appropriations Committee Fiscal Summary
3094 (Negrete McLeod)
Hearing Date: 8/4/04 Amended: 5/24/04
Consultant: Maureen Brooks Policy Vote: P. E. & R.
5-0
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BILL SUMMARY: AB 3094 provides that all retirement
payments from a public retirement system that are directly
deposited by electronic funds transfer following the date
of death of the member will be refunded to the retirement
system. The bill requires the financial institution to
provide the retirement system with the name and address of
any co-owner of the account.
Fiscal Impact (in thousands)
Major Provisions 2004-05 2005-06
2006-07 Fund
Refund of overpayments -------potentially significant revenue----
Various
STAFF COMMENTS:
This bill may result in approximately $150,000 in revenue
annually to CalPERS, and $270,000 annually to CalSTRS.
Additionally, there will be some administrative cost
savings from less legal proceedings.
Many retires of the California Public Employees Retirement
System (CalPERS), the California State Teachers' Retirement
System (CalSTRS), and of the 1937 Act County Retirement
System ('37 Act) have their monthly retirement allowance
directly deposited into their bank account. These payments
continue until the system is notified of the death of the
member. Sometimes other parties have access to the
members accounts and withdraw the funds that had been paid
to the deceased retirees. Financial institutions will not
disclose the names and addresses of financial account
owners without subpoenas which are costly and increase
administrative expenses to the retirement systems.
According to CalPERS, because of the legal and procedural
complexities associated with promulgating interrogatories
and the issuing and service of subpoenas, it was determined
that referrals of overpayment cases would only be made if
the overpayment exceeds $2,500. Overpayments of less than
$2,500 are currently being submitted for write-off. Over
the past 4 years at CalPERS, 274 cases have been written
off amounting to a total loss of $528,411. AB 3094 will
allow CalPERS, CalSTRS, and the '37 Act System to obtain
the necessary information from financial institutions
without subpoenas so that the systems can recover
overpayments.
If automatic payments have been paid to a deceased
retiree's account and withdrawn by the survivor or
beneficiary who is entitled to an ongoing allowance
following the retiree's death, the retirement systems do
not attempt to collect the overpayment. Instead, the
survivor's allowance is adjusted over a period of months to
reflect any overpayments that may have occurred.