BILL ANALYSIS
AB 2456
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Date of Hearing: April 12, 2000
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Lou Correa, Chair
AB 2456 (Wright) - As Introduced: February 24, 2000
SUBJECT : State teachers' retirement: deferred retirement
option program
SUMMARY : Establishes the Deferred Retirement Option Program
(DROP) as a supplemental program for members of the Defined
Benefit Program of the State Teachers' Retirement System
(CalSTRS). Specifically, this bill :
1)Specifies that the DROP is being established in CalSTRS to
provide added flexibility to the system by allowing DROP
participants to have access to a lump sum benefit or
additional monthly payments for a specified period of time in
addition to their normal retirement allowance.
2)Requires the CalSTRS Board to implement the DROP no later than
January 1, 2002.
3)Specifies that a CalSTRS member may elect to participate in
the DROP once they have five years of service credit and have
reached age 60.
4)Specifies that a member participating in the DROP would select
a date 36 months prior to the actual retirement date and the
member's monthly retirement allowance would be determined
based on the member's age, service credit and salary on that
date. In addition, the member would receive the lump sum
value or annuitized payment from the DROP account equal to
their monthly retirement allowance multiplied by 36 plus the
2% simple cost of living adjustment.
5)Specifies that a member's election to participate in the DROP
is irrevocable.
6)Specifies that members who participate in the DROP are not
eligible to participate in the Reduced Workload Program.
7)Specifies that members who have participated in the DROP and
reinstate to active service are not eligible to participate in
AB 2456
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the DROP again.
EXISTING LAW establishes within CalSTRS two distinct benefit
structures: a defined benefit program for persons employed on a
full-time basis and a cash balance benefit program for persons
employed on a part-time basis.
Under existing law, CalSTRS does not contain a DROP.
FISCAL EFFECT : Unknown
COMMENTS : SB 1312 (Baca) introduced last year, would establish
the DROP as a supplemental benefit program in the Public
Employees' Retirement System for state and school members and
for those local members whose employing agency elects to be
subject to the program. SB 1312 passed both houses of the
Legislature in 1999 and is currently on the Senate Inactive
File.
As designed in this bill, the DROP would give CalSTRS members
the ability to take part of their retirement income as a lump
sum in addition to receiving a monthly retirement allowance.
Supporters contend that establishing a DROP within CalSTRS will
encourage qualified and experienced teachers to stay in the
classroom and continue teaching for an additional three years in
order to receive the DROP benefit.
Supporters further point out that the state will need
approximately 300,000 teachers in grades K-14 within the next
decade and that this bill will provide an option that will
encourage faculty to teach longer and allow grades K-14 to
retain quality teachers.
REGISTERED SUPPORT / OPPOSITION :
Support
Faculty Association of California Community Colleges (Sponsor)
United Teachers Los Angeles (Co-sponsor)
Small School Districts' Association
Opposition
None on file.
AB 2456
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Analysis Prepared by : Karon Green / P.E., R. & S.S. /
(916)319-3957