BILL ANALYSIS �
AB 1819
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Date of Hearing: April 26, 2012
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 1819 (Ammiano) - As Amended: March 29, 2012
SUBJECT : Charter schools: State Teachers' Retirement Plan.
SUMMARY : Requires charter schools to make the California State
Teachers' Retirement System (CalSTRS) and the California Public
Employees' Retirement System (CalPERS) available to their
employees and eliminates the requirement for charter schools to
inform applicants of the retirement coverage offered at the
school.
EXISTING LAW :
1)Requires a charter school to indicate the manner by which
staff members will be covered by CalSTRS, CalPERS or Social
Security in their charter. If a charter school chooses to
make CalSTRS and/or CalPERS available, all employees of the
charter school who qualify for membership in the system are
entitled to coverage. In addition, all provisions of existing
law apply in the same manner that they do to other public
schools in the district that granted the charter.
2)Requires full-time educators performing creditable service to
automatically become members of the CalSTRS Defined Benefit
Program, unless they have previous service covered by CalPERS
and choose to remain covered by CalPERS.
3)Requires a charter school that offers CalSTRS, CalPERS or
both, to inform all applicants of what coverage they would
have and that accepting employment in the charter school may
exclude them from further coverage in their current retirement
system.
FISCAL EFFECT : Unknown.
COMMENTS : According to information provided to the Committee
from CalSTRS, charter schools are currently able to elect which
retirement system or systems will cover employees. CalSTRS
states there are 989 active charter schools, and 908 of those
schools have elected CalSTRS.
AB 1819
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The Internal Revenue Service (IRS) is currently exploring
proposed regulations to define the term "governmental plan"
under Internal Revenue Code section 414(d). Generally, IRC �
414(d) defines a governmental plan as a "plan established and
maintained for its employees by the Government of the United
States, by the government of any State or subdivision thereof,
or by any agency or instrumentality of the foregoing." However,
the underlying terms are not defined in the Code. The IRS and
U.S. Treasury Department issued a notice as a first step toward
developing comprehensive regulatory guidance for governmental
plans. The official process can span the course of a year or
longer.
While the IRS has yet to officially propose these regulations,
based on the information provided in the advance notice, CalSTRS
believes public charter schools in California operated by
nonprofit organizations probably would not be considered
agencies or instrumentalities of the state or a political
subdivision. Therefore, employees of these charters may not be
able to participate in either CalPERS or CalSTRS if the
regulations are adopted.
According to the author, "AB 1819 seeks to ensure that employees
of charter schools in California have adequate access to public
retirement benefits. Employees of charter schools are funded by
public dollars and serve public school children populations, and
should have the option to choose a defined benefit plan for
their service to our children and communities. A second-rate
retirement is another slap in the face for these already
under-paid and under-appreciated employees, and does not reflect
their service and sacrifices made to educate our children."
Opponents state, "AB 1819 would impose new costs on charter
schools that already strive to maintain financial stability in
the face of daunting challenges. Given charter schools' limited
resources, it is fiscally prudent for the school's
administration to develop a retirement plan that provides the
right benefits for the right costs. Many of them do offer
CalSTRS and CalPERS under existing law. However, many charter
schools provide alternative retirement options, including 401(k)
and 403(b) retirement plans. This flexibility affords charter
schools the ability to provide their employees with retirement
plans that best fit the needs of the employees."
AB 1819
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The Committee recommends that the bill be amended to state that
this requirement will only go into place to the extent allowed
under federal law and regulations.
REGISTERED SUPPORT / OPPOSITION :
Support
California Federation of Teachers (Sponsor)
Opposition
California Charter Schools Association Advocates
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957