BILL ANALYSIS �
SB 1220
Page 1
SENATE THIRD READING
SB 1220 (Torres)
As Amended August 11, 2014
Majority vote
SENATE VOTE :33-0
PUBLIC EMPLOYEES 7-0 APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Bonta, Allen, Harkey, |Ayes:|Gatto, Bigelow, |
| |Jone-Sawyer, Rendon, | |Bocanegra, Bradford, Ian |
| |Ridley-Thomas, Wieckowski | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Makes various technical, conforming, or
non-controversial changes to the Teachers Retirement Law (TRL)
to facilitate efficient administration of the California State
Teachers Retirement (CalSTRS) Plan, which includes the Defined
Benefit (DB) Program, the Defined Benefit Supplement (DBS)
Program, and the Cash Balance Benefit (CB) Program.
Specifically, this bill :
1)Defines the term "base allowance" and corrects various
references to a member's base allowance.
2)Clarifies that months not included in the normal school year
will not be considered a break-in service and ensures that
members are treated consistently when calculating final
compensation.
3)Makes minor punctuation corrections and removes unnecessary
references.
4)Specifies that when a member is performing outgrowth
activities, the compensation earnable for those activities is
determined as if the creditable compensation if earned at the
lowest pay rate for other creditable service activities that
SB 1220
Page 2
the member performs for the same employer during the same
year.
5)Clarifies the calculation for the annual adjustment to the
compensation cap for members subject to the Public Employees'
Pension Reform Act of 2013 (PEPRA).
6)Repeals an obsolete section and clarifies the definition of
creditable service and specifies that the clause related to
state apportionment is only meant to be applicable to charter
schools.
7)Defines "credited service" for 2% at 62 members so that even
though no contributions are made on compensation earned above
the limit (and therefore not eligible for a resulting benefit)
the member still earns appropriate service credit for the
amount of time worked.
8)Specifies that joint powers authorities (JPAs) are among the
entities considered to be employers so long as the JPA meets
specified criteria.
9)Specifies that the definition of employer shall be in
compliance with the requirements defining governmental plan
specified in Internal Revenue Code Section 414(d).
10)Clarifies that the time periods used to calculate final
compensation for the three-year timeframes are equal to 36
months in order to be consistent with the 12-month calculation
and requires employer certification that a member's salary was
reduced because of a reduction in school funds in order to use
36 non-consecutive months to calculate final compensation.
11)Inserts a reference to the principles supporting the
integrity of the Teachers' Retirement Fund with regard to
determining which compensation is not eligible for credit in
the DB Program and instead is credited to the DBS Program.
12)Clarifies that written employment agreements are included in
the provisions that restrict employers from paying the
member's portion of contributions to the DB Program.
13)Provides CalSTRS the authority to issue a refund payment by
direct deposit if requested by the member, in lieu of mailing
SB 1220
Page 3
a refund payment.
14)Clarifies that a member cannot currently be receiving a
retirement benefit when he/she subsequently applies for a
disability benefit.
15)Removes the unclear term "retiring" and clarifies that the
limit on backdating applies to a member who submits an
application to retire on or after the statutorily applicable
date.
16)Adds references to code sections authorizing retirement that
were previously left out of the provisions of law pertaining
to the longevity bonus and the career factor.
17)Clarifies various provisions relating to the calculation of
benefits.
18)Opens a window period in which a member who was married to a
same-sex spouse and who elected a beneficiary option under the
DB Program, or an annuity under the DBS Program, including
disability annuities, or the CB Program, prior to June 26,
2013, can change his/her option or annuity election if the
member was prevented from selecting the option of his/her
choice due to the federal age restrictions previously in place
that applied to same-sex spouse beneficiaries. The option or
annuity change become effective on either the date the
original election became effective or June 26, 2013, whichever
is later.
19)Comprehensively reorganizes the sections of Chapter 28 of the
TRL pertaining to option beneficiary elections, repeals
obsolete sections and references, aligns references to the new
section numbers, and clarifies the provisions of law related
to survivor benefit options, as specified.
20)Clarifies resulting changes to the member's benefit and when
and how a member may elect a new option beneficiary with
regard to the option beneficiary pre-deceasing the member.
21)Specifies the requirements for naming a new option
beneficiary upon re-retirement, and the situations in which
anew beneficiary election may become invalid for retired
members who reinstate into active service.
SB 1220
Page 4
22)Clarifies that with regard to dissolution of marriage, a
judgment of nullity, or an order of separate maintenance made
within one year of the termination of benefits and
reinstatement, CalSTRS will remove or change the option
election in accordance with the court order, and any
additional changes cannot be made until one year from the
termination effective date.
23)Clarifies that when a member has elected a compound option
under the DB Program, and also elects a DBS annuity, the DBS
annuity is subject to specified age restrictions imposed by
federal law.
24)Revises the definition of "vendor" to include a statewide
public education employee organization, or its affiliate, that
has entered into an agreement with a bank custodian to offer
403(b) products.
25)Allows a CB Program participant to apply for a retirement or
termination benefit without requiring employer certification
that employment has been terminated if no contributions are
reported by the employer within the previous 12 months,
consistent with the requirements in the DB Program.
26)Specifies that Education Code Parts 13.5 and 14 cannot be
waived by the State Board of Education.
27)Makes various technical, conforming, changes to the TRL.
EXISTING LAW :
1)Establishes CalSTRS, which provides retirement, death, and
disability benefits to over 868,000 members and retirees who
are or were educators in California k-12 schools and community
colleges.
2)Creates three retirement benefit programs in CalSTRS: a) the
DB Program, which covers all eligible members and provides a
retirement benefit based on age at retirement, years of
service, and the member's final compensation; b) the CB
Program, which primarily is for part-time educators who do not
participate in, or are not eligible for, the DB Program; and
c) the DBS Program, which takes contributions from members and
employers for service performed that is not eligible for
SB 1220
Page 5
coverage in the DB Program (such as teaching classes in excess
of a full-time load, coaching, or other designated
activities).
3)Creates, due to enactment of the PEPRA, two distinct groups of
employees: a) those first hired to perform CalSTRS creditable
activities prior to January 1, 2013 - the 2% at age 60
members; and b) those first hired to perform CalSTRS
creditable activities on or after that date - the 2% at age 62
members.
4)Defines creditable service by providing a list of activities
that are considered creditable service, including school
activities related to, and an outgrowth of, the instructional
and guidance program of the school when performed in addition
to other creditable service. These outgrowth activities
include assignments such as coach, club advisor, department
chair, and mentor teacher.
5)Provides for periodic increases to a retired members base
allowance to mitigate inflation and ensure adequate purchasing
power; however, the term base allowance is not always
consistently cited.
6)Defines "creditable service" for the DB Program and CB Program
by providing a list of activities that are considered
creditable service, including employment in a charter school
that is eligible for state apportionment.
7)Allows two or more public agencies to join together and
operate collectively under a JPA; however, JPAs are not
explicitly included in the current definition of employer in
the TRL.
8)Gives CalSTRS the authority to select, purchase, or acquire an
office building for the purposes of establishing a permanent
headquarters facility for the system.
9)Specifies which employer and member contributions on
compensation are to be credited to the DBS Program, including
contributions on compensation not eligible for credit in the
DB Program.
10)Restricts an employer from paying member contributions to the
SB 1220
Page 6
DB Program, as specified.
11)Authorizes CalSTRS to provide a requested refund of member
contributions, as specified, by placing the payment in the
mail, addressed to the address directed by the member.
However, CalSTRS is not specifically authorized to issue a
member's refund through direct deposit.
12)Allows a retired member to terminate his or her retirement
and reinstate to active, creditable service. After at least
one year of additional active service, the member, if
eligible, may apply for disability benefits. Termination of
the retirement benefit is required prior to applying for a
subsequent disability benefit.
13)Allows a member to submit an application for service
retirement during a period either before or after the chosen
retirement date, within specified parameters, including
limited backdating of the chosen retirement date. In
addition, an individual awaiting a disability determination
may apply for service retirement, as specified and if so
eligible. However, the term "retiring" as used in these
provisions is not clearly defined.
14)Allows a member receiving a disability retirement benefit to
terminate the disability benefit and later retire for service.
Upon subsequent service retirement, the member may be
eligible for the longevity bonus; however, the law omits
reference to that benefit enhancement from the service
retirement calculation. In addition, existing law
inconsistently applies the longevity bonus and career factor
when a member moves from disability allowance to service
retirement. Moreover, the age factor and the exclusion of the
children's portion of the disability allowance are missing
from the calculation of service retirement when a member moves
directly from disability allowance to service retirement.
15)Establishes that government benefit providers are to treat
same-sex married couples equally in all areas of benefit
administration, including taxes and survivor benefits.
16)Requires CalSTRS to administer an impartial website
information bank for vendors wishing to sell 403(b) products
in the state of California. Vendors must register with the
SB 1220
Page 7
Internet Web site and provide certain information on their
companies and the products offered. The Internet Web site,
known as 403bCompare, provides CalSTRS members and
participants, classified employees and eligible state
employees the ability to review and compare information about
tax-deferred retirement investment 403(b) products provided by
the registered vendors.
17)Defines a vendor who would be able to register an investment
product on the website as "a public retirement system,
broker-dealer, registered investment company, nonbank
custodian, or life insurance company qualified to do business
in California that provides 403(b) products."
18)Grants the State Board of Education authority to waive
portions of the Education Code, so that they do not apply to
school districts that request a waiver. However, there are
several provisions of the Education Code that cannot be
waived. Education Code Part 13, which governs the DB and DBS
programs, is included among those provisions that cannot be
waived. Education Code Part 13.5, which relates to health
care benefits programs, and Education Code Part 14, which
relates to the CB Program, were added to the Education Code
after the enactment of the waiver authority.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time special fund costs to CalSTRS of $55,000 to
$63,000; minor and absorbable ongoing program costs.
COMMENTS : According to CalSTRS, "This bill is necessary to
permit continued effective administration of the California
State Teachers' Retirement System. Any administrative costs
associated with this bill are minor and absorbable, and there
are no program costs resulting from this bill."
There is no registered opposition to this bill.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004689
SB 1220
Page 8