BILL NUMBER: AB 654 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Mendoza
FEBRUARY 25, 2009
An act to amend Sections 22714, 22715, 23003, 23006, 23008, 26301,
and 26303 of, to amend, repeal, and add Section 22162 of, and to add
Section 23006.5 to, the Education Code, relating to state teachers'
retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 654, as introduced, Mendoza. State teachers' retirement.
(1) Under existing law, the State Teachers' Retirement Law,
retirement benefits under the Defined Benefit Program of the State
Teachers' Retirement Plan are based on the member's final
compensation and years of credited service. Generally, final
compensation is the highest average annual compensation earnable by
the member during a 3-year period. However, for a member with 25 or
more years of credited service, final compensation is the highest
average annual compensation earnable by the member during a one-year
period. That law authorizes the Governor, a school district,
community college district, or county office of education to grant
members of the Defined Benefit Program of the State Teachers'
Retirement Plan 2 additional years of service credit, if the member
retires for service within a designated period and certain conditions
are satisfied, including the transfer of a specified amount to the
Teachers' Retirement Fund.
This bill would require regular interest to be charged on the
unpaid balance if the transfer to the retirement fund is made in
installments. The bill would modify the definition of "regular
interest" for purposes of the State Teachers' Retirement Law.
(2) The law specifies the date by which member and employer
contributions are due in the office of the State Teachers' Retirement
System, and provides that payments thereafter shall be delinquent
and subject to interest, as specified. If a county superintendent of
schools, employing agency, school district, or community college
district that reports directly to the system fails to pay the
contributions, the Teachers' Retirement Board may assess penalties
and charge regular interest on the delinquent contributions.
This bill, instead, would require the board to assess interest at
the regular interest rate for any delinquent contributions, as
specified.
(3) The law requires the county superintendent of schools or
employing agency, and authorizes a school district or community
college district, with approval of the Teachers' Retirement Board, to
submit a report monthly to the State Teachers' Retirement System
containing information as the board may require in the administration
of the State Teachers' Retirement Plan. If those monthly reports are
submitted late or in an unacceptable form, or include late or
improper adjustments, the board is authorized to assess penalties
pursuant to a specified formula, or a fee of $500, whichever is
greater.
This bill, instead, would require the board to assess those
penalties, pursuant to a specified formula, or a fee of $500,
whichever is greater. The bill would additionally require the board
to assess penalties, pursuant to a specified formula, if a county
superintendent of schools, or an employing agency, school district,
or community college district that reports directly to the system,
includes in those monthly reports creditable compensation earned
during prior fiscal years.
(4) The law permits an employer to offer benefits under the Cash
Balance Benefit Program to certain employees who are employed less
than 50% of full time, and requires employers to transmit and report
contributions paid on behalf of each participant in each pay period,
along with all other information required by the system by specified
due dates. The board is authorized to collect interest for delinquent
contributions and to assess a penalty for a report submitted late or
in an unacceptable form pursuant to a specified formula, or a fee of
$500, whichever is greater.
This bill, instead, would require the board to collect interest on
delinquent contributions, as specified, and to assess penalties
against the employer for a report submitted late or in an
unacceptable form pursuant to a specified formula, or a fee of $500,
whichever is greater.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22162 of the Education Code is amended to read:
22162. "Regular interest" means interest that is compounded
annually based on the annual equivalent of the prior year's average
yield to maturity on the investment-grade fixed income securities
attributable to the Defined Benefit Program, but not on assets
attributable to the Defined Benefit Supplement Program. The regular
interest rate shall be adopted annually by the board as a plan
amendment with respect to the Defined Benefit Program.
This section shall become inoperative on June 30, 2010, and, as of
January 1, 2011, is repealed, unless a later enacted statute, that
becomes operative on or before January 1, 2011, deletes or extends
the dates on which it becomes inoperative and is repealed.
SEC. 2. Section 22162 is added to the Education Code, to read:
22162. "Regular interest" means interest that is equal to the
actuarially assumed rate of return on investments on assets of the
Defined Benefit Program. The regular interest rate shall be adopted
annually by the board as a plan amendment with respect to the Defined
Benefit Program.
This section shall become operative on July 1, 2010.
SEC. 3. Section 22714 of the Education Code is amended to read:
22714. (a) Whenever the governing board of a school district or a
community college district or a county office of education, by
formal action, determines pursuant to Section 44929 or 87488 that,
because of impending curtailment of, or changes in, the manner of
performing services, the best interests of the district or county
office of education would be served by encouraging certificated
employees or academic employees to retire for service and that the
retirement will result in a net savings to the district or county
office of education, an additional two years of service credit shall
be granted under this part to a member of the Defined Benefit Program
if all of the following conditions exist:
(1) The member is credited with five or more years of service
credit and retires for service under Chapter 27 (commencing with
Section 24201) during a period of not more than 120 days or less than
60 days, commencing no sooner than the effective date of the formal
action of the employer that shall specify the period.
(2) (A) The employer transfers to the
retirement fund an amount determined by the Teachers' Retirement
Board to equal the actuarial equivalent of the difference between the
allowance the member receives after receipt of service credit
pursuant to this section and the amount the member would have
received without the service credit and an amount determined by the
Teachers' Retirement Board to equal the actuarial equivalent of the
difference between the purchasing power protection supplemental
payment the member receives after receipt of service credit pursuant
to this section and the amount the member would have received without
the service credit. The payment for purchasing power shall be
deposited in the Supplemental Benefit Maintenance Account established
by Section 22400 and shall be subject to Section 24415. The transfer
to the retirement fund shall be made in a manner and a time period,
not to exceed eight years, that is acceptable to the Teachers'
Retirement Board. The employer shall transfer the required amount for
all eligible employees who retire pursuant to this section.
(B) Regular interest shall be charged on the unpaid balance if the
employer makes the transfer to the retirement fund in installments.
(3) The employer transmits to the retirement fund the
administrative costs incurred by the system in implementing this
section, as determined by the Teachers' Retirement Board.
(4) The employer has considered the availability of teachers or
academic employees to fill the positions that would be vacated
pursuant to this section.
(b) (1) The school district shall demonstrate and certify to the
county superintendent that the formal action taken would result in a
net savings to the district.
(2) The county superintendent shall certify to the Teachers'
Retirement Board that the result specified in paragraph (1) can be
demonstrated. The certification shall include, but not be limited to,
the information specified in subdivision (c) of Section 14502.1.
(3) The school district shall reimburse the county superintendent
for all costs to the county superintendent that result from the
certification.
(c) (1) The county office of education shall demonstrate and
certify to the Superintendent of Public Instruction that the formal
action taken would result in a net savings to the county office of
education.
(2) The Superintendent of Public Instruction shall certify to the
Teachers' Retirement Board that the result specified in paragraph (1)
can be demonstrated. The certification shall include, but not be
limited to, the information specified in subdivision (c) of Section
14502.1.
(3) The Superintendent of Public Instruction may request
reimbursement from the county office of education for all
administrative costs that result from the certification.
(d) (1) The community college district shall demonstrate and
certify to the chancellor's office that the formal action taken would
result in a net savings to the district.
(2) The chancellor shall certify to the Teachers' Retirement Board
that the result specified in paragraph (1) can be demonstrated. The
certification shall include, but not be limited to, the information
specified in subdivision (c) of Section 84040.5.
(3) The chancellor may request reimbursement from the community
college district for all administrative costs that result from the
certification.
(e) The opportunity to be granted service credit pursuant to this
section shall be available to all members employed by the school
district, community college district, or county office of education
who meet the conditions set forth in this section.
(f) The amount of service credit shall be two years.
(g) Any member of the Defined Benefit Program who retires under
this part for service under Chapter 27 (commencing with Section
24201) with service credit granted under this section and who
subsequently reinstates shall forfeit the service credit granted
under this section.
(h) Any member of the Defined Benefit Program who retires under
this part for service under Chapter 27 (commencing with Section
24201) with service credit granted under this section and who takes
any job with the school district, community college district, or
county office of education that granted the member the service credit
less than five years after receiving the credit shall forfeit the
ongoing benefit he or she receives from the additional service credit
granted under this section.
(i) This section does not apply to any member otherwise eligible
if the member receives any unemployment insurance payments arising
out of employment with an employer subject to this part within one
year following the effective date of the formal action under
subdivision (a), or if the member is not otherwise eligible to retire
for service.
SEC. 4. Section 22715 of the Education Code is amended to read:
22715. (a) Notwithstanding any other provisions of this part,
whenever the Governor, by executive order, determines that because of
an impending curtailment of, or change in the manner of performing
service, the best interest of the state would be served by
encouraging the retirement of state employees, and that sufficient
economies could be realized to offset any cost to state agencies
resulting from this section, an additional two years of service shall
be credited under this part to members of the Defined Benefit
Program, who are state employees, if the following conditions exist:
(1) The member is credited with five or more years of service and
retires during a period not to exceed 120 days or less than 60 days
commencing no sooner than the date of issuance of the Governor's
executive order specifying that period.
(2) (A) The appointing power, as defined in
Section 18524 of the Government Code, transfers to the retirement
fund an amount determined by the board to equal the actuarial
equivalent of the difference between the allowance the member
receives after the receipt of service credit under this section and
the amount the member would have received without the service credit.
The transfer to the retirement fund shall be made in a manner and
time period acceptable to the employer and the board.
(B) Regular interest shall be charged on the unpaid balance if the
employer makes the transfer to the retirement fund in installments.
(3) The appointing power determines that it is electing to
exercise the provisions of this section, pursuant to the Governor's
order, and certifies to the Department of Finance and to the
Legislative Analyst, as to the specific economies that would be
realized if the additional service credit toward retirement were
granted.
(b) As used in this section, "member" means a state employee who
is employed in a job classification, department, or other
organizational unit designated by the appointing power, as defined in
Section 18524 of the Government Code.
(c) The amount of service credit shall be two years regardless of
credited service, but shall not exceed the number of years
intervening between the date of the member's retirement under this
part and the date the member would be required to be retired because
of age. The appointing power shall make the payment with respect to
all eligible employees who retire pursuant to this section.
(d) Any member who qualifies under this section, upon subsequent
reinstatement under this part, shall forfeit the service credit
granted under this section.
(e) This section shall not be applicable to any member otherwise
eligible if that member receives any unemployment insurance payments
arising out of employment with an employer subject to this part
during a period extending one year beyond the date of issuance of the
executive order or if the member is not eligible to retire without
the additional credit available under this section.
(f) The benefit provided by this section shall not be applicable
to the employees of any appointing power until the Director of
Finance approves the transmittal of funds by that appointing power or
the Board of Regents or the Board of Trustees to the retirement fund
pursuant to paragraph (2) of subdivision (a).
(g) The Director of Finance shall approve the transmittal of funds
by the appointing power not sooner than 30 days after notification
in writing of the necessity therefor to the chairperson of the
committee in each house that considers appropriations and the
chairperson of the Joint Legislative Budget Committee, or not sooner
than any lesser time that the chairperson of the committee, or his or
her designee, may in each instance determine. If there is any
written communication between the Director of Finance and the
Legislative Analyst, a copy of the communication shall be transmitted
to the chairperson of each appropriate policy committee.
SEC. 5. Section 23003 of the Education Code is amended to read:
23003. (a) If a county
superintendent of schools or employing agency or school district or
community college district that reports directly to the system fails
to make payment of contributions as provided in Section 23002, the
board may assess penalties shall assess
interest at the regular interest rate for any delinquent
contributions under this part that exceed the amount specified in
Section 13943.2 of the Government Code. Interest shall accrue when
contributions become delinquent until payment for the
contributions and interest is received in full by the system .
(b) The board may charge regular interest on any delinquent
contributions under this part.
SEC. 6. Section 23006 of the Education Code is amended to read:
23006. (a) If a county superintendent of schools or employing
agency or school district or community college district that reports
directly to the system, submits monthly reports , as specified
by Section 23004, late , as defined in Section 23005,
or in unacceptable form, the board may
shall assess penalties.
(b) The board may assess penalties, based on the sum of the
employer and employee contributions required under this part by the
report for late or unacceptable submission of reports, at a rate of
interest equal to the regular interest rate or a fee of five hundred
dollars ($500), whichever is greater.
(b) The penalties shall be equal to the product of the sum of the
employer and employee contributions submitted late or in an
unacceptable form, and the regular interest rate for the period from
the time the reporting was due, as specified in Section 23005, to the
time acceptable reporting is received by the system, or a fee of
five hundred dollars ($500), whichever is greater.
SEC. 7. Section 23006.5 is added to the Education Code, to read:
23006.5. If a county superintendent of schools, or an employing
agency, school district, or community college district that reports
directly to the system, includes creditable compensation earned
during prior fiscal years in the monthly reports specified in Section
23004, the board shall assess penalties. The penalties shall be
equal to the product of the creditable compensation earned during
prior fiscal years and the contribution rate specified in Sections
22954 and 22955, plus the product of the creditable compensation
earned during prior fiscal years and the regular interest rate for
the period from July 1 of the fiscal year following the year in which
the creditable compensation is earned and the time the penalty is
received in full by the system.
SEC. 8. Section 23008 of the Education Code is amended to read:
23008. (a) If more or less than the required contributions
specified in this part and Section 44987 are paid to the system based
on any payment of creditable compensation to a member, proper
adjustments shall be made on a monthly report, by the county
superintendent, district superintendent, chancellor of a community
college district, or other employing agency who submitted the report,
within 60 days after discovery or notification by the system and any
refunds shall be made to the member within the same time period by
the employing agency.
(b) The board may shall assess
penalties for late or improper adjustments pursuant to
Section 23006. These penalties shall be no more than the regular
interest as defined in Section 22162. The penalty so assessed shall
be deemed interest earned in the year in which it was received
, as specified in Sections 23006 and 23006.5 .
(c) If a required report contains erroneous information and the
system, acting in good faith, disburses funds from the Teacher's
Retirement Fund based on that information, the county superintendent,
district superintendent, chancellor of a community college district,
or other employing agency who submitted the report shall reimburse
the retirement fund in full for the amount of the erroneous
disbursement. Reimbursement shall be made immediately upon
notification by the system.
SEC. 9. Section 26301 of the Education Code is amended to read:
26301. (a) Employers shall report contributions paid on behalf of
each participant in each pay period, along with all other
information required by the system no later than 10 working days
following the last day of the pay period in which the salary was
earned, and the report shall be delinquent immediately thereafter.
That report shall be submitted electronically in an encrypted format
provided by the system that ensures the security of the transmitted
participant data.
(b) The board may shall assess
a penalty penalties against the
employer for a report submitted late or in an unacceptable form. The
penalty penalties shall be
based upon equal to the sum of the employee and
employer contributions required to be reported under this part
at a rate of interest equal to the minimum interest rate,
accruing on the balance for the period between and the
regular interest rate for the period from the time the report
was due and the time an acceptable report is actually filed
received by the system , or a fee of five
hundred dollars ($500), whichever is greater.
SEC. 10. Section 26303 of the Education Code is amended to read:
26303. (a) Employers shall transmit to the plan the employee
contributions and employer contributions with respect to the Cash
Balance Benefit Program for salary paid to each participant during
the pay period no later than 10 working days following the last day
of the pay period in which the salary was earned.
(b) Payments shall be delinquent on the 11th working day
thereafter, and interest shall begin to accrue on delinquent
contributions that exceed the amount specified in Section 13943.2 of
the Government Code at the minimum
regular interest rate from that day until payment for the
contribution report contributions and
interest is received in full by the system. The board
may shall collect interest for late payment from
the employer under this subdivision.