BILL NUMBER: AB 429 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 14, 2000
AMENDED IN ASSEMBLY MAY 20, 1999
AMENDED IN ASSEMBLY APRIL 29, 1999
INTRODUCED BY Assembly Member Correa
FEBRUARY 12, 1999
An act to add Section 22404 to amend
Sections 22141, 24415, and 24417 of, and to add Sections 24410.6 and
24410.7 to, the Education Code, relating to the State Teachers'
Retirement System.
LEGISLATIVE COUNSEL'S DIGEST
AB 429, as amended, Correa. State Teachers' Retirement System:
gain-sharing revenue supplemental benefits
.
Under the State Teachers' Retirement Law, retired members and
nonmember spouses, disabled members, and beneficiaries of the Defined
Benefit Program, as defined, receive monthly allowances that are
subject to supplementary increases to preserve their purchasing
power.
This bill would increase the monthly allowance amounts payable to
retired members and nonmember spouses, disabled members, and
beneficiaries according to a specified schedule, payable commencing
on or before July 1, 2001, and provide for a cost-of-living
adjustment, as specified, and additional supplemental increases to
those benefits to preserve their purchasing power, as specified.
Under the Teachers' Retirement Law, interest earned on assets of
the retirement fund that is not credited to accounts maintained
pursuant to the Defined Benefit Program, as defined, and other income
with respect to the program, is allocated to provide benefits under
the program. Existing law requires that an actuarial valuation of
the assets and liabilities of the State Teachers' Retirement Plan be
performed at least once every 6 years.
This bill would provide that gain-sharing revenue, defined as the
annual actuarial value of investment returns, interest, and other
income with respect to the Defined Benefit Program that exceeds the
expected return for that period provided in the most recent actuarial
valuation of assets, shall be allocated first to eliminate unfunded
accrued actuarial liabilities, as specified; then to specified
reserves; and then to provide increased benefits or credits against
contributions for active and retired members pursuant to future
legislation, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22404 is added to the Education
SECTION 1. Section 22141 of the Education Code is amended to read:
22141. Notwithstanding Section 22140, "improvement factor" means
an increase of 2 percent in benefits provided under Sections 24408
and 24409 for each year commencing on September 1, 1981 , and
under Section 24410.5 for each year commencing September 1, 2001, and
under Sections 24410.6 and 24110.7 for each year commencing
September 1, 2002 . The factor shall not be compounded nor
shall it be applicable to annuities payable from the accumulated
annuity deposit contributions or the accumulated tax-sheltered
annuity contributions. The Legislature reserves the right to adjust
the amount of the improvement factor up or down as the economic
conditions dictate. No adjustments of the improvement factor shall
reduce the monthly retirement allowance or benefit below that which
would be payable to the recipient under this part had this section
not been enacted.
SEC. 2. Section 24410.6 is added to the Education Code, to read:
24410.6. (a) Any increase provided pursuant to Section 24410.5 to
a retired member, an option beneficiary, or a surviving spouse who
is also receiving an increased allowance pursuant to Section 24410.7
is, effective September 1, 2001, subject to the 2 percent
cost-of-living adjustment described in Section 22140 or 22141. Any
increase provided pursuant to Section 24410.5 to a retired member, an
option beneficiary, or a surviving spouse who is also receiving the
increase provided in Section 24410.7 is, effective September 1, 2002,
subject to the 2 percent cost-of-living adjustment described in
Section 22140 or 22141.
(b) Any increase provided pursuant to Section 24410.5 and Section
24410.7 is in addition to any payments received under Section 24415.
SEC. 3. Section 24410.7 is added to the Education Code, to read:
24410.7. (a) The monthly allowance payable on the effective date
of this section, excluding annuities payable from accumulated annuity
deposit contributions and tax-sheltered annuity contributions and
benefits payable pursuant to Sections 24410.5 and 24410.6, to retired
members and nonmember spouses, disabled members, and beneficiaries,
including option beneficiaries, shall be increased by the percentage
set forth opposite the applicable period during which retirement,
disability, or death occurred set forth in the following schedule:
Period during which retirement,
disability, or death occurred: Percentage:
36 months ending Dec. 31, 2000 0.0%
12 months ending Dec. 31, 1997 1.0%
24 months ending Dec. 31, 1996 2.0%
60 months ending Dec. 31, 1994 3.0%
60 months ending Dec. 31, 1989 4.0%
120 months ending Dec. 31, 1984 5.0%
Dec. 31, 1974 or earlier 6.0%
(b) The increase provided pursuant to this section is in addition
to any payments received by a retired member or nonmember spouse,
disabled member, or beneficiary, including an option beneficiary,
under Section 24415.
(c) Benefits payable under this section shall be initially payable
by the system on or before July 1, 2001.
SEC. 4. Section 24415 of the Education Code is amended to read:
24415. (a) The proceeds of the Supplemental Benefit Maintenance
Account shall be distributed annually in quarterly supplemental
payments commencing on September 1, 1990, to retired members,
disabled members, and beneficiaries , as defined in subdivision
(a) of Section 22107 . The amount available for distribution
in any fiscal year shall not exceed the amount necessary to restore
purchasing power up to 75 percent of the purchasing power of the
initial monthly allowance after the application of all allowance
increases authorized by this part, including those specified in
Section 24412 , and excluding those provided pursuant to
Sections 24410.5, 24410.6, and 24410.7 .
(b) The net revenues to be distributed shall be allocated among
those retired members, disabled members, and beneficiaries , as
defined in subdivision (a) of Section 22107, whose allowances,
after sequentially applying the annual improvement factor as defined
in Sections 22140 and 22141, and the annual supplemental payment as
defined specified in Section 24412,
have the lowest purchasing power percentage. The purchasing power
calculation for each individual shall be based on the change in the
All Urban California Consumer Price Index between June of the
calendar year of retirement and June of the fiscal year preceding the
fiscal year of distribution. In any year in which the purchasing
power of the allowances of all retired members, disabled members, and
beneficiaries , as defined in subdivision (a) of Section 22107,
equals not less than 75 percent and additional funds remain
from the allocation authorized by this section, those funds shall
remain in the Supplemental Benefit Maintenance Account for allocation
in future years.
(c) The allowance increase shall not be applicable to annuities
payable from the accumulated annuity deposit contributions or the
accumulated tax-sheltered annuity contributions.
(d) The benefits increases provided
by subdivision (b) are not cumulative, not part of the base
allowance, and will be payable only to the extent that funds are
available from the Supplemental Benefit Maintenance Account. The
board shall inform each recipient of the contents of this
subdivision.
(e) The adjustments authorized by this section are vested only up
to the amount payable as a result of the annual appropriation made
pursuant to Section 22954 and shall not be included in the base
allowance for purposes of calculating the annual improvement defined
by Sections 22140 and 22141.
(f) Notwithstanding subdivision (b), for purposes of restoring the
purchasing power of benefits provided pursuant to Section 24410.5
for members and beneficiaries receiving benefits pursuant to
subdivision (b), the purchasing power calculation shall be based on
75 percent of the change in the All Urban California Consumer Price
Index between January 2000 and June of the fiscal year preceding the
fiscal year of distribution, after the application of increases
authorized by Section 24412 that are made to the allowances provided
pursuant to Section 24410.5.
(g) Notwithstanding subdivision (b), for purposes of restoring the
purchasing power of benefits provided pursuant to Sections 24410.6
and 24410.7 for members and beneficiaries receiving benefits pursuant
to subdivision (b), the purchasing power calculation shall be based
on 75 percent of the change in the All Urban California Consumer
Price Index between January 2001 and June of the fiscal year
preceding the fiscal year of distribution, after the application of
increases authorized by Section 24412 that are made to the allowances
provided pursuant to Sections 24410.6 and 24410.7.
SEC. 5. Section 24417 of the Education Code is amended to read:
24417. (a) The proceeds of an auxiliary Supplemental Benefit
Maintenance Account shall be distributed annually in quarterly
supplemental payments, commencing when funds in the Supplemental
Benefit Maintenance Account are insufficient to support 75 percent,
to retired members, disabled members, and beneficiaries , as
defined in subdivision (a) of Section 22107 . The amount
available for distribution in any fiscal year shall not exceed the
amount necessary to restore purchasing power up to 75 percent of the
purchasing power of the initial monthly allowance after the
application of all allowance increases authorized by this part,
including those specified in Section Sections
24412 and Section 24415 , and
excluding those provided pursuant to Sections 24410.5, 24410.6, and
24410.7 .
(b) The net revenues to be distributed shall be allocated among
those retired members, disabled members, and beneficiaries , as
defined in subdivision (a) of Section 22107, whose allowances,
after sequentially applying the annual improvement factor as defined
in Sections 22140 and 22141, and the annual supplemental payment as
defined specified in Section
Sections 24412 and Section
24415, have the lowest purchasing power percentage. The purchasing
power calculation for each individual shall be based on the change in
the All Urban California Consumer Price Index between June of the
calendar year of the benefit effective date and June of
the fiscal year preceding the fiscal year of distribution.
(c) The allowance increase shall not be applicable to annuities
payable from the accumulated annuity deposit contributions or the
accumulated tax-sheltered annuity contributions.
(d) The benefits increases provided
by subdivision (b) are not cumulative, nor part of the base
allowance, and will be payable only to the extent that funds are
available from the Supplemental Benefit Maintenance Account and the
auxiliary Supplemental Benefit Maintenance Account. The board shall
inform each recipient of the contents of this subdivision.
(e) The distributions authorized by this section are vested only
up to the amount payable as a result of the annual appropriation made
pursuant to Section 22954 and shall not be included in the base
allowance for purposes of calculating the annual improvement defined
by Section Sections 22140 and 22141.
(f) Notwithstanding subdivision (b), for purposes of restoring the
purchasing power of benefits provided pursuant to Section 24410.5
for members and beneficiaries receiving benefits pursuant to
subdivision (b), the purchasing power calculation shall be based on
75 percent of the change in the All Urban California Consumer Price
Index between January 2000 and June of the fiscal year preceding the
fiscal year of distribution, after the application of increases
authorized by Section 24412 that are made to the allowances provided
pursuant to Section 24410.5.
(g) Notwithstanding subdivision (b), for purposes of restoring the
purchasing power of benefits provided pursuant to Sections 24410.6
and 24410.7 for members and beneficiaries receiving benefits pursuant
to subdivision (b), the purchasing power calculation shall be based
on 75 percent of the change in the All Urban California Consumer
Price Index between January 2001 and June of the fiscal year
preceding the fiscal year of distribution, after the application of
increases authorized by Section 24412 that are made to the allowances
provided pursuant to Sections 24410.6 and 24410.7.
Code, to read:
22404. (a) As used in this section:
(1) "Expected earnings" means the aggregate amount of the return
on investments, interest, and other earnings with respect to the
Defined Benefit Program that would have been received by the
retirement fund during any fiscal year if the fund's assets had
increased by the actuarially assumed interest rate used in the most
recent actuarial valuation of the assets and liabilities of the plan
performed pursuant to Section 22311.
(2) "Gain-sharing revenue" means the amount by which the actuarial
value of the return on investments, interest, and other earnings
with respect to the Defined Benefit Program received by the
retirement fund for any fiscal year, as reported by the actuary,
exceeds the expected earnings for the same period.
(b) Notwithstanding any other provision of law, the board shall
allocate gain-sharing revenue as follows in the following order of
priority:
(1) The amount necessary to eliminate any unfunded actuarial
accrued liability associated with benefits in effect on or before
July 1, 1990, shall be allocated to the appropriate accounts.
(2) An amount determined by the board, based on a recommendation
from the actuary, that adequately protects the fund in the event
future earnings fall below expected earnings shall be allocated to
reserves under this part.
(3) An amount determined by the board, based on a recommendation
from the actuary, that would provide additional revenue for
allocation pursuant to paragraph (4) in fiscal years in which no
additional gain-sharing revenue is generated.
(4) Any remaining gain-sharing revenue shall be allocated to
active member funds and retired member funds in the Defined Benefit
Program to provide improvements in benefits or credits for
contributions, or both, pursuant to any subsequently enacted
legislation that expressly refers to this section or otherwise
specifies that gain-sharing revenue shall be the source of funding
for those benefits or contributions. For purposes of this paragraph,
gain-sharing revenues shall be allocated proportionately to active
member funds and to retired member funds based on the percentage of
the actuarial accrued liability of the retirement fund with respect
to the Defined Benefit Program that is attributable (A) to actuarial
liabilities for future benefits payable to currently active and
inactive members, or (B) to actuarial liabilities for benefits
payable to currently retired members and their beneficiaries,
respectively.