BILL ANALYSIS
AB 2700
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CONCURRENCE IN SENATE AMENDMENTS
AB 2700 (Lempert)
As Amended August 31, 2000
Majority vote
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|ASSEMBLY: |75-1 |(June 1, 2000) |SENATE: |40-0 |(August 31, |
| | | | | |2000) |
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Original Committee Reference: P.E.,R. & S.S.
SUMMARY : Makes all compensation received by a member of the
State Teachers' Retirement System (CalSTRS) creditable and
requires that contributions for service performed by a members
in excess of one year of service credit per school year be
placed in the Defined Benefit Supplement (DBS) Program. Reduces
the General Fund (GF) contribution to CalSTRS from 3.102% to
2.017% of prior year payroll.
The Senate amendments :
1)Delete provisions from this bill that would have required
CalSTRS to establish the DBS Program since the program was
established already this year by AB 1509 (Machado), Chapter
74, Statutes of 2000.
2)Reduce the GF contribution to CalSTRS from 3.102% to 2.017% of
the total of prior year teacher payroll.
3)Appropriate $600,000 from the Teachers' Retirement Fund to
CalSTRS for purposes of implementing the provisions of this
bill.
EXISTING LAW :
1)Specifies that CalSTRS calculate a member's retirement benefit
under the defined benefit program using:
a)The member's credited service;
b)A factor based on the member's age at retirement; and,
c)The member's final compensation. The member's service
credit is determined annually according to the creditable
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service performed by the member.
1)Defines creditable service as specified service performed for
an employer in a position requiring a credential, certificate
or permit under the Education Code, or under standards adopted
by the Board of Governors of the California Community Colleges
or under the provisions of an approved charter for a charter
school eligible to receive state apportionment.
2)Defines creditable compensation as money paid by an employer
to a member for creditable service. Current law also
specifically excludes several types of payments from being
considered as creditable compensation such as:
a)Money paid for creditable service in excess of the
full-time equivalent for the position;
b)Money paid for overtime, overload, summer school and
intersession;
c)Stipends paid to department chairs when release time is not
granted by the employer; and,
d)Bonus payments, such as pay-for-performance.
AS PASSED BY THE ASSEMBLY , this bill made all compensation
received by a member of CalSTRS creditable and required the
Teachers' Retirement Board to establish and administer a
supplemental benefit program in which contributions for service
performed by a member in excess of one year of service credit
per school year would be placed.
FISCAL EFFECT : CalSTRS indicates that by making additional work
eligible for retirement service credit, this bill would:
1)Increase state GF contributions to the CalSTRS defined benefit
program and supplemental benefit account by $5-$15 million
annually, beginning in 2002-03.
2)Increase school employer contributions to CalSTRS by $185
million annually.
3)Decrease the GF contribution to CalSTRS by approximately $200
million annually and appropriates $600,000 from the Teachers'
Retirement Fund to CalSTRS to fund administrative costs
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associated with the bill.
COMMENTS : According to CalSTRS, "In the early 1970's when the
current retirement plan was designed, K-12 education generally
was provided for nine months a year, and community college
instruction used full-time faculty to a greater degree. The
current method of determining what compensation is creditable
reflects the means by which education was provided at that time.
As a result, summer school and intersession service is not
creditable, and the plan assumes that members largely work only
one job, and on a full-time basis.
Since then, a number of changes have occurred in the provision
of education, including more year-around schools, summer school
and the shift in community colleges to more part-time based
instruction. In addition, administrators are increasingly being
compensated based in part on their performance. This bill would
make all compensation for creditable service creditable for
purposes of determining a CalSTRS retirement benefit in order to
reflect the changes in education. By changing the current
definition of creditable compensation, it would allow activities
that currently are not creditable to be counted towards
determining a member's retirement."
CalSTRS also points out that the current process of excluding
certain types of service and compensation from what is
creditable for retirement increases the complexity of
administering the defined benefit program. CalSTRS indicates
that they spend considerable resources to monitor employer
compliance with creditable service and compensation
requirements. This bill would substantially reduce this
administrative workload.
Supporters contend that this bill will increase equity among
CalSTRS members by crediting all service performed and will
simplify reporting for employers as well as streamline CalSTRS'
administration of the defined benefit program.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN:
0007272
AB 2700
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