BILL NUMBER: AB 2456 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 26, 2000
INTRODUCED BY Assembly Member Wright
(Coauthor: Senator Alarcon)
FEBRUARY 24, 2000
An act to add Chapter 38 (commencing with Section 24980) to Part
13 of Division 1 of Title 1 of the Education Code, relating to state
teachers' retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 2456, as amended, R. Wright. State teachers' retirement:
deferred retirement option program.
The State Teachers' Retirement Law prescribes service and
disability retirement benefits for members of the Defined Benefit
Program of the State Teachers' Retirement System.
This bill would establish the Deferred Retirement Option Program
as a supplemental benefit program in the Defined Benefit Program, as
specified. The bill would direct the board of administration of the
system to implement the program no later than January 1, 2002, except
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. Chapter 38 (commencing with Section 24980) is added to
Part 13 of Division 1 of Title 1 of the Education Code, to read:
CHAPTER 38. DEFERRED RETIREMENT OPTION PROGRAM
Article 1. General Provisions
24980. This chapter shall be known and may be cited as the
"Deferred Retirement Option Program."
24980.1. The Deferred Retirement Option Program is hereby created
to add flexibility to the system. It provides members who elect to
participate in the program access to a lump sum or additional monthly
payments for a specific period in addition to their normal monthly
retirement allowance.
24980.2. The design and administration of the Deferred Retirement
Option Program shall conform with the applicable provisions of Title
26 of the United States Code and the Revenue and Taxation Code.
24980.3. If any provision of this chapter or application thereof
to any person or circumstance is held invalid, that invalidity shall
not affect other provisions or applications of this chapter that can
be given effect without the invalid provision or application, and to
this end the provisions of this chapter are severable.
24980.4. The board shall implement the Deferred Retirement Option
Program pursuant to the provisions of this chapter no later than
January 1, 2002, unless the board determines, by resolution, that the
implementation tasks cannot be completed until a later date, in
which case the board shall implement the program pursuant to this
chapter no later than January 1, 2003.
24980.5. The board any adopt regulations to implement the
program.
Article 2. Definitions
24982.1. "Program" means the Deferred Retirement Option Program
established by this chapter.
24982.2. "Deferred retirement calculation date" means the date 36
months prior to the member's actual retirement date as of which the
allowance under the program shall be calculated as provided in
Chapter 26 (commencing with Section 24100) of this part or Chapter 27
(commencing with Section 24201) of this part.
24982.3. "Program payment" means the amount to be paid to the
member as a result of his or her participation in the program, as
calculated in Section 24984.
Article 3. Eligibility
24983.1. A member shall be eligible to elect to participate in
the program at any time after having met the minimum service
requirements applicable for a service retirement and reached normal
retirement age.
24983.2. A member who elects to participate in the program shall
voluntarily :
(a) Make this election on a form prescribed and retained by the
board prior to retirement.
(b) Designate his or her deferred retirement calculation date,
which date shall be equal to 36 months prior to the member's actual
date of retirement and shall be subsequent to the date on which the
member met the minimum service requirements for a service retirement
and achieved normal retirement age.
(c) Receive benefits from the system upon retirement at the time
and in the manner provided in this chapter.
(b) Continue to make member contributions pursuant to Chapter 15
(commencing with Section 22900).
(c) Cease, from and after the date the member begins participating
in the program, to accrue benefits under Chapter 1 (commencing with
Section 20000) through Chapter 31 (commencing with Section 24600).
(d) Have benefits credited to a Deferred Retirement Option Program
Account pursuant to Section 24984.1.
(e) Accrue benefits from and after the date the member begins
participating in the program pursuant to the terms of this chapter.
(f) Agree to continue to participate in the program for at least
one calendar year prior to termination of employment.
(g) Receive benefits from the Defined Benefit Program upon
termination of employment at the time and in the manner provided in
this part.
(h) Execute waivers with respect to age and other discrimination
in employment laws as are required by the employer or the system.
24983.3. The election to participate in the program shall
be irrevocable. may be rescinded within 90 days after
the date it is made. If the member rescinds the program election,
the member's benefits shall be calculated as if the member had never
entered the program.
24983.4. Members who participate in the program may not
participate in the reduced worktime program, as provided in Section
22713.
24983.5. Members who participate in the program and reinstate
from retirement shall not be eligible to again participate in the
program upon subsequent retirement.
Article 4. Calculation of Benefits
24984. Upon the termination of employment and retirement of a
member who has elected to participate in the program, the system
shall calculate the following amounts:
(a) (1) The member's monthly service retirement allowance as it
would have been had the member retired on the deferred retirement
calculation date in accordance with the optional settlement selected
by the member; or
(2) The amount of service used to calculate a disability
retirement allowance shall be reduced by the deferred retirement
period.
(b) The benefit improvement factors that would have been
applicable under Section 24402, assuming the deferred retirement
calculation date is the base year for the adjustment.
(c) The member's program payment, which payment shall be the
amount calculated under subdivision (a), multiplied by 36, plus the
benefit improvement factor calculated under subdivision (b). The
program payment shall be credited with interest.
Article 5. Distributions
24985.1. Upon the termination of employment and retirement under
the system, a member who has elected to participate in the program
shall:
(a) Receive the member's program payment, as calculated pursuant
to subdivision (c) of Section 24984.
(b) Begin receiving a monthly retirement allowance in the amount
calculated pursuant to subdivision (a) of Section 24984.
24985.2. The member shall select one of the following as the form
of distribution of the member's program payment:
(a) A single lump-sum payment.
(b) Installment payments for a period of years pursuant to Section
24985.3.
24985.3. (a) The member may elect to receive the actuarial
equivalent of the program payment in monthly installments over a
period established by the board.
(b) The unpaid balance of the member's program payment shall be
credited with interest.
Article 4. Accounts
24984.1. A Deferred Retirement Option Program Account is a
nominal, bookkeeping account established within the plan for each
participating member of the program. No plan assets shall be
separately segregated for any program account. A member shall not
have a claim on any specific assets of the plan.
24984.2. The amount credited to a member's program account shall
be fully vested, except to the extent deemed necessary by the board
in its sole discretion to maintain the system's tax-qualified status
under the Internal Revenue Code.
24984.3. The right of a member to a benefit under this chapter is
not subject to execution or any other process whatsoever, except to
the extent permitted by Section 704.110 of the Code of Civil
Procedure, and is unassignable, except as specifically provided under
this part. Notwithstanding any provision of this chapter to the
contrary, contributions, benefits, and service credit with respect to
qualified military service shall be provided in accordance with
Section 414(u) of Title 26 of the United States Code.
24984.4. A member's program account shall be credited monthly
with an amount that represents both of the following:
(a) The service retirement allowance that the member would have
received if the member had retired on the date the member began
participation in the program.
(b) The normal contributions under Chapter 15 (commencing with
Section 22900) and Chapter 16 (commencing with Section 22950) made by
the member and employer during the period of participation in the
program less an amount, determined by the board based on an actuarial
valuation, needed to offset the actuarial and administrative costs
of the program.
24984.5. The monthly amounts credited to a member's program
account shall reflect any cost-of-living adjustments otherwise
applicable to members who retired on the date the member commenced
participation in the program.
24984.6. The program account shall be credited monthly with
interest pursuant to the following:
(a) Each account shall be credited monthly with interest at the
nominal monthly interest rate equivalent to the annual effective
Deferred Retirement Option Program interest rate adopted by the
board.
(b) The nominal monthly interest rate shall apply to the balance
in each account as of the beginning of each month and shall be
applied before the monthly amounts described in Section 24984.4 for
that month have been credited to the account.
24984.7. The board shall provide a statement to the participating
member that displays the value, or balance, of the member's program
account and summarizes any credits to the account or other
transactions that occurred after the immediately preceding valuation
date. The statement of account shall be provided at least once
annually to each participating member.
Article 5. Beneficiary Designation
24985.1. Except as specified in Section 24986.3, the
participating member may designate a person or persons as
beneficiaries at the time the member elects to participate in the
program. The beneficiary or beneficiaries shall be designated on a
form prescribed by the board, signed by the member, and delivered to
a plan representative prior to the effective date of the member's
election under this chapter.
24985.2. Notwithstanding Section 24985.1, the member's
beneficiary designation shall not be given effect and shall be
overridden to the extent that designation would impair the rights of
any surviving spouse under applicable federal or state law.
24985.3. Unless otherwise provided in the beneficiary designation
form, each designated beneficiary shall be entitled to equal shares
of the lump-sum distribution that may be payable from the member's
program account upon the death of the member.
24985.4. If the participating member dies without a valid
beneficiary designation on file, or if no designated beneficiary
survives the member, any balance remaining in the member's program
account shall be payable to the member's estate.
Article 6. Additional Provisions
24986.1. If a member becomes disabled while participating in the
program, the member shall be eligible to apply for disability
retirement and shall be subject to the same disability eligibility
requirements as if the member were not in the program. If the board
approves the application for disability retirement benefits:
(a) The disability retirement benefit shall be calculated using
the factors of age, service, and final compensation in effect the day
before the effective date of participation in the program.
(b) All amounts in the member's program account shall be
distributed pursuant to Section 24987.4.
24986.2. If a member dies within one calendar year after the date
the member begins participation in the program, the member shall be
deemed to have retired on the date of death and died after
retirement.
24986.3. If a member marries while participating in the program,
the marriage shall be deemed to have occurred prior to the member's
retirement for purposes of satisfying any applicable benefit
eligibility requirement. In addition, the member may, within two
months of the date of the marriage, revise the beneficiary election
made under Section 24985.1. If there is a change in the beneficiary
designation, the new designation shall be retroactive to the
effective date of the member's election to participate in the program
for all purposes, including determination of the member's program
account balance.
24986.4. (a) Participation in the program may be terminated by
voluntary or involuntary termination of employment or retirement for
service at any time; provided, however, that if termination occurs
prior to the first anniversary of the date the member began
participation in the program, the member shall not begin to receive
any benefits pursuant to Section 24987.1 or 24987.4 until that first
anniversary date.
(b) If a termination for cause is reversed, a member's
participation in the program, less any benefits previously
distributed pursuant to Section 24987.4, shall be reinstated.
(c) The member's participation in the program shall be terminated
by the death of the member or the approval of disability retirement
benefits by the board.
24986.5. A member who elects to participate in the program shall
have all of the rights, privileges, and benefits, and is subject to
all other terms and conditions, of active employment.
24986.6. The member's employer shall continue to make
contributions to the plan based on the member's active compensation
while the member is a participant in the program.
Article 7. Distributions
24987.1. Upon the termination of participation in the program and
retirement for service, a member shall:
(a) Receive the amounts credited to the member's program account,
including interest prescribed by Section 24987.5.
(b) Begin receiving a monthly retirement allowance in the amount
being credited to the member's program account.
24987.2. Application for a retirement benefit shall be made on an
application form prescribed by the board.
24987.3. The employer shall certify on a form prescribed by the
board that the participating member's employment has terminated.
24987.4. A member shall select one of the following as the form
of distribution of the member's program account:
(a) A single lump-sum payment.
(b) Substantially level installment payments for a period of years
pursuant to the provisions of Section 24987.5.
24987.5. (a) The member may elect to receive payment of the
program account in equal monthly installments over a period
established by the board and in accord with applicable provisions of
the Internal Revenue Code.
(b) The balance in the member's account during the installment
payout period shall be credited with interest monthly at the same
rate as is being credited to program accounts for currently active
members.
(c) No benefit maintenance payment pursuant to Chapter 29
(commencing with Section 24400) of this part shall be made to the
monthly amount being paid pursuant to this section.
24985.4.
24987.6. Notwithstanding any other provision of this
chapter, a member, nonmember spouse, or beneficiary shall not be
permitted to elect a distribution under this chapter that does not
satisfy the requirements of Section 401(a)(9) of Title 26 of the
United States Code, including the incidental death benefit
requirements of Section 401(a)(9)(G) of Title 26 of the United States
Code and the regulations thereunder. The required beginning date of
distributions that reflect the entire interest of the member shall
be as follows:
(a) In the case of a lump-sum distribution to the member, the
lump-sum payment shall be made not later than April 1 of the calendar
year following the later of the calendar year in which the member
attains the age of 70 and one-half years or the calendar year in
which the member terminates all employment for the employer.
(b) In the case of a distribution to the member in the form of
installment payments, payment shall begin not later than April 1 of
the calendar year following the later of the calendar year in which
the member attains the age of 70 and one-half years or the calendar
year in which the member terminates all employment subject to
coverage by the plan.
(c) In the case of a benefit payable on account of the member's
death, distributions shall be paid no later than December 31 of the
calendar year in which the fifth anniversary of the member's date of
death occurs unless the beneficiary is the member's spouse in which
case distributions shall commence on or before the later of either:
(1) December 31 of the calendar year immediately following the
calendar year in which the member dies.
(2) December 31 of the calendar year in which the member would
have attained the age of 70 and one-half years.
Article 6. Beneficiaries
24986. The beneficiary or beneficiaries entitled to receive any
remaining balance of the monthly installments specified in Section
24985.3 shall be the same beneficiary or beneficiaries designated by
the member to receive the postretirement death benefit provided by
Chapter 24 (commencing with Section 23880) of this part.