BILL ANALYSIS
Subject matter was not heard in Assembly policy committee this
legislative
Session, should be noted in the last paragraph of the background
section of the
CSA analysis. Language will vary depending on the circumstance.
AB 821
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 821 (Public Employees)
As Amended August 31, 2000
Majority vote
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|ASSEMBLY: |68-8 |(June 1, 1999) |SENATE: |30-2 |(August 31, |
| | | | | |2000) |
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Original Committee Reference: P.E.,R. & S.S.
SUMMARY : Changes the period to be used for computing "final
compensation" for retirement benefits for members of the State
Teachers' Retirement System (CalSTRS), with 25 or more years of
service, from the average of the three highest years'
compensation to the highest compensation earnable by a member
during a 12-month period.
The Senate amendments :
1)Delete classified school employee members of the Public
Employees' Retirement System (CalPERS) from the provisions of
the bill.
2)Limit the application of this bill to only those CalSTRS
members with 25 or more years of service credit.
EXISTING LAW :
1)Defines "final compensation" for members of CalSTRS as the
highest average annual compensation earnable by a member
during any period of three consecutive years of paid
employment covered by CalSTRS. Additionally, for CalSTRS
members whose salary has been reduced because of a reduction
in school funds, final compensation may be defined as the
highest average annual compensation earnable during any three
non-consecutive 12-month periods.
2)Provides that one-year final compensation is also available
Subject matter was not heard in Assembly policy committee this
legislative
Session, should be noted in the last paragraph of the background
section of the
CSA analysis. Language will vary depending on the circumstance.
AB 821
Page 2
for CalSTRS members if it has been included in a written
collective bargaining agreement. The written agreement must
also include a mechanism to pay CalSTRS the actuarial
difference between the one-year final compensation and the
three-year final compensation plus CalSTRS's administrative
costs.
3)Defines "final compensation" for classified school employees
who are members of CalPERS as the highest average annual
compensation earnable during any three consecutive years of a
member's CalPERS employment.
AS PASSED BY THE ASSEMBLY , this bill:
1)Changed the definition of final compensation from a three-year
average to one year for all CalSTRS members.
2)Changed the definition of final compensation from a three-year
average to one year for all classified school employees who
are members CalPERS.
3)Specified that the costs of this bill will be paid for from
funds in the Teachers' Retirement Fund.
FISCAL EFFECT : According to CalSTRS, this bill would result in
a total present value cost of $4 billion and would be paid for
out of surplus CalSTRS funds.
COMMENTS : Under CalSTRS, benefit payments are computed based
upon various factors, including the employee's final
compensation. For example, the retirement allowance for a
CalSTRS member is calculated using the following formula: years
of service credit multiplied by the age factor (generally 2% at
age 60) multiplied by final compensation equals the persons
unmodified retirement allowance.
Supporters state that this bill would create a basis of
determining final compensation comparable to that used for
CalPERS state and school employees. Additionally, proponents
contend that this bill would help improve the adequacy of school
Subject matter was not heard in Assembly policy committee this
legislative
Session, should be noted in the last paragraph of the background
section of the
CSA analysis. Language will vary depending on the circumstance.
AB 821
Page 3
employee retirement benefits that have traditionally lagged
behind those of other public employees.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0007268