BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2663
Gloria Negrete McLeod, Chair Hearing date: June 25, 2012
AB 2663 (Asm. PER&SS Comm) as amended 6/20/12
FISCAL: YES
CALSTRS ANNUAL HOUSEKEEPING BILL: MAKES VARIOUS CHANGES TO
THE TEACHERS' RETIREMENT LAW
HISTORY :
Sponsor: California State Teachers' Retirement System
Other legislation: SB 349 (Negrete McLeod),
Chapter 703, Statutes of 2011
ASSEMBLY VOTES :
PER & SS 6-0 4/26/12
Appropriations 17-0 5/09/12
Assembly Floor 75-0 5/17/12
SUMMARY :
AB 2663 makes technical, clarifying and non-controversial
changes to various sections of the Education Code
administered by the California State Teachers' Retirement
System (CalSTRS) and of the Public Resources Code to improve,
and continue effective administration of the System.
BACKGROUND AND ANALYSIS :
1)Existing law :
a) {Creditable compensation} - provides that salary or
other remuneration that the board determines is paid for
the principal purpose of enhancing a member's benefit
shall not be applied to the Defined Benefit Program (DB)
but shall instead be credited to the Defined Benefit
Supplement Program (DBS). The terminology salary or
other remuneration is a more expansive term than
creditable compensation and creates confusion as to
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whether non creditable compensation can be credited to
the DBS. Only creditable compensation can be applied to
the DB or DBS programs.
b) {Investments & Payroll Report} - requires the board
to report annually to the fiscal committees of the
Legislature and to the Department of Finance regarding
return on investments and the payroll subject to the
system.
c) {Subpoena Power} - provides CalSTRS authority to
subpoena documents from employers to verify creditable
compensation.
d) {Earnings Limitation Notice} - requires employers to
provide notice of earnings limitations to retired
members who return to work without reinstating in order
not to incur a reduction to their retirement allowance.
e) {CalSTRS Annual Report} - requires the board to file
an annual report with the Governor and the Legislature
by March 1st of each year and specifies what subject
matter shall be included in the report.
f) {Investment Contracts Report} - requires the board to
submit to the Governor, Legislature, and the Joint
Legislative Budget Committee a report on the nature,
duration, and cost of investment contract services used
by the board.
g) {Reporting Requirements by Employers} - provides that
county superintendents and other employing agencies
shall furnish any information concerning any member or
beneficiary the board may require.
h) {Sick Leave Credit - Last Employer Definition} -
provides that a member shall receive service credit for
accumulated and unused sick leave to which the member is
entitled on his or her final day of employment with the
member's last employer.
i) {Sick Leave Credit - Last Employer Cost Allocation} -
provides that the board shall bill employers for service
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credit granted for unused excess sick leave and shall
deem excess sick leave from prior employers to be
granted by the last employer if the member was permitted
to use the excess sick leave accumulated from prior
employers at the last employer.
j) {Liens for Employer Nonpayment} - allows CalSTRS to
direct the State Controller to withhold funds from any
county superintendent who fails to make payment of any
assessment of the board as specified.
aa) {Survivor Benefit Allowance} - provides members who
joined CalSTRS on or after October 15, 1992, disability
benefits under Coverage B for as long as the member is
disabled, in contrast to members who joined CalSTRS
prior to that date who receive disability benefits only
until age 60.
bb) {Workers Compensation Offset} - allows the board to
reduce a member's disability allowance under Coverage B
to offset moneys received by the member for workers
compensation benefits. The offset is limited to the
amount the member receives from one of three possible
workers compensation benefits: temporary disability,
permanent disability, or vocational rehabilitation.
cc) {Limitations on Post-Retirement Compensation} -
allows the board to reduce a retired member's service
retirement allowance as specified to meet federal
prohibitions against pension distributions prior to age
60 or prior to separation from employment. Existing law
also allows the board to reduce a retired member's
service retirement allowance to offset income received
by the member for post-retirement employment as
specified. Currently, the two offsets are applied
independently and can result in a combined reduction
that is greater than the member's retirement allowance
for the year in which the excess compensation was
earned.
dd) Same as m) - discusses affected parallel sections.
ee) {Purchasing Power Report} - requires the board to
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submit a report to the Governor and the Legislature by
June 1st of each year regarding the effect of inflation
on the purchasing power of benefits provided by the
Defined Benefit Program.
ff) {Benefit Payment Information } - provides that for
members who receive their benefit allowance via
electronic funds, CalSTRS need only mail payment
information if there is a net change in the benefit.
Because an annual enhancement or an adjustment to an
income tax withholding tax table by the Internal Revenue
Service (IRS) or the Franchise Tax Board (FTB) can
affect the net amount, CalSTRS must mail payment
information regarding those minor changes even if
members have indicated that they do not wish to receive
such notices.
gg) {Disability Benefit Annuity} - allows a member to
elect to receive a disability allowance as an annuity as
specified.
hh) {403bCompare Website} - establishes the
403bCompare.com website and requires 403b vendors who
desire to offer 403b products to members to register and
make data available on the website as specified unless
their products were offered to members prior to the
website's implementation.
ii) Same as m) - discusses affected parallel sections.
jj) {State School Lands Revenue} - provides that revenue
generated from the use of State School Lands (land
granted to California by the federal government to
support schools) and Lieu Lands (properties purchased
with the proceeds from the sale of school lands) during
the prior year is transferred to CalSTRS each year for
the purpose of providing annual supplemental payments in
quarterly installments.
aaa) {Chaptering Out Language} - current law provides that
if two bills are chaptered in the same legislative
session and make changes to the same sections that are
in conflict, the amendments from the bill chaptered last
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will prevail.
1)This bill :
Would make several technical, clarifying and
non-controversial changes to various sections of the
Education Code administered by CalSTRS to improve and
continue effective administration of the System.
Specifically, this bill :
a) {Creditable compensation} - makes this subdivision
consistent with other, relevant sections by replacing
the broader terminology salary or other remuneration
with the term creditable compensation, clarifying that
only creditable compensation can be applied to the DBS
programs.
b) {Investments & Payroll Report} - eliminates the
requirement that the board report annually to the fiscal
committees of the Legislature and to the Department of
Finance regarding return on investments and the payroll
subject to the system and consolidates the report
subject matter with the CalSTRS annual report provided
for in Section 22324 as amended by this bill.
c) {Subpoena Power} - grants CalSTRS additional subpoena
authority to compel witnesses to attend and testify
before the board.
d) {Earnings Limitation Notice} - requires employers,
when providing notice of earnings limitations to retired
workers, to reference in the notice the specific
earnings limitations that authorized the return to work.
e) {CalSTRS Annual Report} - adds specified subject
matter to the annual report the board must file with the
Governor and the Legislature by March 1st of each year
and thus, consolidates other reports the board is
required to submit to the Legislature and Governor into
the annual report.
f) {Investment Contracts Report} - eliminates the report
on the nature, duration, and cost of investment contract
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services used by the board and consolidates the report
subject matter with the CalSTRS annual report.
g) {Reporting Requirements by Employers} - allows
CalSTRS to determine the form, including electronic,
that county superintendents and other employing agencies
shall use to furnish any information concerning any
member or beneficiary the board may require.
h) {Sick Leave Credit - Last Employer Definition} -
clarifies that a member shall receive service credit for
accumulated and unused sick leave to which the member is
entitled on his or her final day of employment from all
CalSTRS covered employers during the member's last
school year of employment not just the last employer.
Requires that CalSTRS accept from each employer from
which the member is entitled to have his or her unused
sick leave credited for service, certification that the
sick leave has not been transferred to another employer.
i) {Sick Leave Credit - Last Employer Cost Allocation} -
provides that, if the member was employed by more than
one employer in his or her last year of employment and
is entitled to service credit from more than one of
those employers, the board shall allocate the cost for
the service credit granted to the employer for the
period in which the member was eligible to use the
excess sick leave.
j) {Liens for Employer Nonpayment} - clarifies that
CalSTRS may direct the State Controller to withhold
funds from, in addition to the county superintendent,
the district superintendent, chancellor of a community
college district, or other employing agency that reports
directly to the board and who fails to make payment of
any assessment of the board as specified.
aa) {Survivor Benefit Allowance} - eliminates obsolete,
inapplicable boilerplate language from the provision
that provides Coverage B disability benefits. The
language provides a survivor benefit if a member dies
within 4 months of the termination of his or her
disability benefit. This condition will never happen
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because Coverage B provides disability retirement as
long as the member is disabled with no limit on age as
exists under Coverage A, from which the language was
likely copied.
bb) {Workers Compensation Offset} - clarifies that a
reduction to a member's disability allowance to offset
moneys received by the member from workers compensation
shall apply against all classes of workers compensation
received, i.e. temporary disability, permanent
disability, and vocational rehabilitation.
cc) {Limitations on Post-Retirement Compensation} -
clarifies that the maximum amount that a member's
retirement allowance can be reduced for the combined
offsets related to complying with federal early
distribution prohibitions and the state post-retirement
earnings limitations cannot be greater than the member's
retirement allowance for the year in which the excess
compensation was earned.
dd) Same as m) - reciprocal changes made to affected
parallel sections.
ee) {Purchasing Power Report} - eliminates a required
report regarding the effect of inflation on the
purchasing power of benefits provided by the Defined
Benefit Program and consolidates the report subject
matter with the CalSTRS annual report.
ff) {Benefit Payment Information} - allows CalSTRS to not
send payment information regarding net changes in the
benefit amount if a member does not want to receive that
payment information.
gg) {Disability Benefit Annuity} - makes a technical
change to reference the correct subsection that allows a
member to elect to receive a disability allowance as an
annuity.
hh) {403bCompare Website} - clarifies that the
403bCompare.com website was implemented on November 30,
2004, and that as of that date 403b vendors who desire
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to offer 403b products to members must register and make
data available on the website as specified.
ii) Same as m) - reciprocal changes made to affected
parallel sections.
jj) {State School Lands Revenue} - corrects an incorrect
reference to the Teachers' Retirement Law in the Public
Resources Code that provides that revenue generated from
the use of State School Lands (land granted to
California by the federal government to support schools)
and Lieu Lands (properties purchased with the proceeds
from the sale of school lands) during the prior year is
transferred to CalSTRS each year for the purpose of
providing annual supplemental payments in quarterly
installments.
aaa) {Chaptering Out Language} - contains language that
specifically provides that any other bill that changes
sections that are also changed in this bill and that is
chaptered in the 2012 calendar year and that takes
effect on or before January 1, 2013, shall supersede the
changes made by this bill.
COMMENTS :
1)Arguments in Support
According to the sponsor, "AB 2663 will help ensure
continued effective and efficient plan administration and
compliance with federal law and make conforming changes to
reconcile difference between the DB and CB programs."
2)SUPPORT :
California State Teachers' Retirement System (CalSTRS),
Sponsor
3)OPPOSITION :
None to date
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