BILL ANALYSIS
AB 2456
Page 1
ASSEMBLY THIRD READING
AB 2456 (Wright)
As Amended May 26, 2000
Majority vote
PUBLIC EMPLOYEES 7-0 APPROPRIATIONS 21-0
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|Ayes:|Correa, Pescetti, Briggs, |Ayes:|Migden, Campbell, |
| |Dutra, Firebaugh, Honda, | |Ackerman, Alquist, |
| |Knox | |Aroner, Ashburn, Brewer, |
| | | |Cedillo, Corbett, Davis, |
| | | |Kuehl, Maldonado, Papan, |
| | | |Romero, Runner, Shelley, |
| | | |Thomson, Wesson, Wiggins, |
| | | |Wright, Zettel |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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 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 DROP no later than
January 1, 2002.
3)Specifies that a CalSTRS member may elect to participate in
DROP once they have five years of service credit and have
reached age 60.
4)Specifies that a member participating in DROP would continue
to make member contributions to be credited to their DROP
account and agree to participate in the program for at lease
one calendar year.
5)Specifies that a member's election to participate in DROP may
be rescinded within 90 days after the date it is made.
AB 2456
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6)Specifies that members who participate in DROP are not
eligible to participate in the Reduced Workload Program.
7)Specifies that members who have participated in DROP and
reinstate to active service are not eligible to participate in
DROP again.
8)Specifies that a member's DROP account will be credited
monthly with the retirement allowance the member would have
received if the member had retired on the date he or she began
participating in DROP and the normal employer and employee
contributions less an amount needed to offset the actuarial
and administrative costs of the program. Additionally, the
amounts will be credited with any applicable cost-of-living
adjustments and interest equal to the annual DROP interest
rate adopted by the Teachers' Retirement Board.
EXISTING LAW establishes within CalSTRS two distinct benefit
structures: 1) a defined benefit program for persons employed on
a full-time basis; and, 2) a cash balance benefit program for
persons employed on a part-time basis.
CalSTRS does not contain a DROP.
FISCAL EFFECT : No increased costs to the Teachers' Retirement
Fund.
COMMENTS : SB 1312 (Baca), pending in the Senate, would
establish 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.
As designed in this bill, 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 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
AB 2456
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encourage faculty to teach longer and allow grades K-14 to
retain quality teachers.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004984