BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1220|
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UNFINISHED BUSINESS
Bill No: SB 1220
Author: Torres (D)
Amended: 8/11/14
Vote: 21
SENATE PUBLIC EMPLOY. & RETIRE. COMM. : 4-0, 4/21/14
AYES: Torres, Walters, Block, Gaines
NO VOTE RECORDED: Evans
SENATE APPROPRIATIONS COMMITTEE : 6-0, 5/5/14
AYES: De Le�n, Walters, Gaines, Hill, Lara, Steinberg
NO VOTE RECORDED: Padilla
SENATE FLOOR : 33-0, 5/12/14
AYES: Anderson, Beall, Berryhill, Block, Cannella, Corbett,
Correa, De Le�n, DeSaulnier, Fuller, Galgiani, Hancock,
Hernandez, Hill, Hueso, Huff, Jackson, Lara, Leno, Lieu, Liu,
Mitchell, Monning, Morrell, Padilla, Pavley, Roth, Steinberg,
Torres, Vidak, Walters, Wolk, Wyland
NO VOTE RECORDED: Calderon, Evans, Gaines, Knight, Nielsen,
Wright, Yee
ASSEMBLY FLOOR : 76-1, 8/18/14 - See last page for vote
SUBJECT : State teachers retirement
SOURCE : California State Teachers Retirement System
DIGEST : This bill makes various technical, conforming, or
non-controversial changes to the Teachers' Retirement Law (TRL)
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to facilitate efficient administration of the State Teachers'
Retirement Plan, which includes the Defined Benefit Program
(DB), the Defined Benefit Supplement Program (DBS), and the Cash
Balance Benefit Program (CB).
Assembly Amendments (1) specify earnable compensation for a
member who is performing outgrowth activities; (2) clarify the
calculation for the annual adjustment to the compensation cap
for members subject to the Public Employees' Pension Reform Act
of 2013 (PEPRA); (3) specify that the definition of employer
shall be in compliance with the requirements defining
governmental plan specified in Internal Revenue Code (IRC); (4)
provide the California State Teachers' Retirement System
(CalSTRS) the authority to issue a refund payment by direct
deposit if requested by the member; (5) clarify various
provisions relating to the calculation of benefits; and (6)
specify that Education Code Parts 13.5 and 14 cannot be waived
by the State Board of Education.
ANALYSIS :
Existing law:
1. Establishes California State Teachers' Retirement System
(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, 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,
which primarily is for part-time educators who do not
participate in, or are not eligible for, the DB; and (c) the
DBS, which takes contributions from members and employers for
service performed that is not eligible for coverage in the DB
(such as teaching classes in excess of a full-time load,
coaching, or other designated activities).
3. Creates, due to enactment of 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
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members.
4. 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.
5. Defines "creditable service" for the DB and CB by providing
a list of activities that are considered creditable service,
including employment in a charter school that is eligible for
state apportionment.
6. Allows two or more public agencies to join together and
operate collectively under a joint powers authority (JPA);
however, JPAs are not explicitly included in the current
definition of employer in the TRL.
7. Gives CalSTRS the authority to select, purchase, or acquire
an office building for the purposes of establishing a
permanent headquarters facility for the system.
8. Specifies which employer and member contributions on
compensation are to be credited to the DBS, including
contributions on compensation not eligible for credit in the
DB.
9. Restricts an employer from paying member contributions to
the DB, as specified.
10.Allows a retired member to terminate his/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.
11.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.
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12.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.
13.Establishes that government benefit providers are to treat
same-sex married couples equally in all areas of benefit
administration, including taxes and survivor benefits.
14.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
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.
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
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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
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 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 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 IRC 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.
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13.Provides CalSTRS the authority to issue a refund payment by
direct deposit if requested by the member, in lieu of mailing
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
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anew beneficiary election may become invalid for retired
members who reinstate into active service.
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.
Prior Legislation
AB 1381 (Assembly Public Employees, Retirement and Social
Security Committee, Chapter 559, Statutes of 2013) made various
changes in the TRL to conform with the provisions of PEPRA.
AB 340 (Furutani, Chapter 296, Statutes of 2012) made major
revisions to the public retirement systems' laws.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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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.
SUPPORT : (Verified 8/18/14)
California State Teachers' Retirement System (source)
California Teachers Association
ARGUMENTS IN SUPPORT : According to CalSTRS, "This bill is
necessary to permit continued effective administration of the
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."
CTA "supports necessary clarification in previously enacted
legislation that is contained in their measure."
ASSEMBLY FLOOR : 76-1, 8/18/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, John A. P�rez, V. Manuel P�rez,
Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, Atkins
NOES: Donnelly
NO VOTE RECORDED: Gomez, Mullin, Vacancy
JL:k 8/18/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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