BILL ANALYSIS �
AB 1819
Page 1
ASSEMBLY THIRD READING
AB 1819 (Ammiano)
As Amended May 2, 2012
Majority vote
PUBLIC EMPLOYEES 4-2 APPROPRIATIONS 12-5
-----------------------------------------------------------------
|Ayes:|Charles Calderon, Allen, |Ayes:|Fuentes, Blumenfield, |
| |Ma, Wieckowski | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Mansoor, Gorell |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
-----------------------------------------------------------------
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. These provisions will not apply to the extent they
would cause CalSTRS or CalPERS or their members to incur adverse
tax consequences under federal law.
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.
AB 1819
Page 2
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 : According to the Assembly Appropriations
Committee, this bill will result in more teachers and classified
employees becoming members of and/or accruing additional time
with CalSTRS and CalPERS respectively. Both the employee and
employer will contribute to the retirement systems. As a result
of the increased CalSTRS membership, there is a direct financial
impact to the state for increased CalSTRS contributions,
estimated at approximately $5 million.
To the extent CalSTRS and CalPERS are not fully funded, an
increase in members and/or benefits, places potential pressure
on the General Fund. In addition, any increase in local
education costs puts pressure on the General Fund/Proposition 98
funding formula.
.
COMMENTS : According to information provided to the Public
Employees, Retirement and Social Security 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.
The Internal Revenue Service (IRS) is currently exploring
proposed regulations to define the term "governmental plan"
under Internal Revenue Code (IRC) Section 414(d). Generally,
IRC Section 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
AB 1819
Page 3
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."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0003838