BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 429
Deborah V. Ortiz, Chair Hearing date: August 18, 2000
AB 429 (Correa) as amended 8/14/00 FISCAL: YES
STRS: AD HOC COLA FOR CERTAIN STRS RETIREES
HISTORY :
Sponsor: STRS Board of Administration
California Federation of Teachers (CFT)
Prior legislation: SB 713 (Burton)
Ch 632/Stats 2000
SB 400 (Ortiz)
Ch 555/Stats 2000
ASSEMBLY VOTES :
NOT APPLICABLE - NEW BILL WITH SENATE AMENDMENTS
SUMMARY :
Would provide an ad hoc increase of 1% to 6% to the annual
allowance for STRS retirees.
BACKGROUND :
1) Existing STRS law , pursuant to Chapter 632 of 1999,
established a minimum annual allowance of $15,000 to $20,000
payable to specified STRS retirees and their survivors in
varying amounts according to the member's years of credited
STRS service.
Chapter 632 provided that:
a) the minimum allowance is $15,000 for members with 20
years of service and increases by $500 per year for each
additional year of service, so that the minimum allowance
is $20,000 with 30 or more years of service, and
b) the increased amount to be paid under Chapter 632 is
equal to the minimum amount minus the amount paid from all
David Felderstein AB 429
Date: 8/16/00 Page 1
other "supplemental" STRS benefits, including the quarterly
"SBMA" (Supplemental Benefits Maintenance Account)
payments that are made to restore the value of current
benefits to 75% of the purchasing power of the initial
monthly benefit.
2) Existing PERS law , pursuant to Chapter 555 of 1999,
provided a 1% to 6% increase to the allowances of retired
PERS state and school members, the size of the increase
depending on when they retired.
ANALYSIS :
1) This bill would increase the monthly STRS allowance paid
to retired members and beneficiaries, excluding the minimum
allowance paid under Chapter 632 of 1999, by the percentage
opposite the year of retirement or death according to the
following schedule:
-------------------------------------------------------------
|Period during which |Percentage |
|retirement | |
|or death occurred | |
|------------------------------+------------------------------|
|36 months ending Dec. 31, |0.0% |
|2000 | |
|------------------------------+------------------------------|
|12 months ending Dec. 31, |1.0% |
|1997 | |
|------------------------------+------------------------------|
|24 months ending Dec. 31, |2.0% |
|1996 | |
|------------------------------+------------------------------|
|60 months ending Dec. 31, |3.0% |
|1994 | |
| | |
|------------------------------+------------------------------|
|60 months ending Dec. 31, |4.0% |
|1989 | |
|------------------------------+------------------------------|
|120 months ending Dec. 31, |5.0% |
David Felderstein AB 429
Date: 8/16/00 Page 2
|1984 | |
|------------------------------+------------------------------|
|Dec. 31, 1974 or earlier |6.0% |
-------------------------------------------------------------
2) This bill provides that the ad hoc increase would be
subject to the 2% cost-of-living adjustment (COLA) paid
annually.
FISCAL EFFECT :
According to preliminary estimates by the STRS actuary, the
proposed ad-hoc benefit would result in the following
actuarial impact over the first three full fiscal years (in
millions of dollars):
------------------------------------------------------------------
| |2001-02|2002-03|2003-04|
| | | | |
|------------------------------------------+-------+-------+-------|
|Total benefit payment increase |$104.0 |$99.5 |$95.1 |
|------------------------------------------+-------+-------+-------|
|Annual increase in contributions needed |$90 |$94 |$98 |
|to fund benefit | | | |
------------------------------------------------------------------
Total cost would be $889 million.
Administrative Costs - This bill contains one time costs of up
to $100,000 for computer system modifications, to modify
attributes and possibly to develop a separate item on the
warrant stubs, plus other minor and absorbable administrative
costs associated with issuing the ad hoc payments to eligible
retirees.
OPPOSITION :
None to date.
# # # # #
David Felderstein AB 429
Date: 8/16/00 Page 3