Bill Text: CA AB704 | 2009-2010 | Regular Session | Amended
Bill Title: Public employees' retirement: Deferred Retirement Option
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-02-02 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB704 Detail]
Download: California-2009-AB704-Amended.html
BILL NUMBER: AB 704 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Charles Calderon
FEBRUARY 26, 2009
An act to amend Section 20822 of, to add Sections 19858.8 and
20281.7 to, and to add Chapter 19 (commencing with Section 21710) to
Part 3 of Division 5 of Title 2 of, the Government Code, relating to
public employees' retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 704, as amended, Charles Calderon. Public employees'
retirement: Deferred Retirement Option Program.
(1) Existing law authorizes the Department of Personnel
Administration to provide for annual leave benefits with respect to
each officer and employee excluded from the definition of state
employee for the purposes of the Ralph C. Dills Act, which regulates
state employer-employee relations. Existing law permits an employee
who is excluded from the definition of state employee for the
purposes of that act to make an irrevocable election, in lieu of
earning sick leave and vacation benefits, to participate in the
annual leave program.
This bill would provide that an excluded or exempt state employee
of State Bargaining Units Unit 5, 6, 7,
and or 8 who participates in the
Deferred Retirement Option Program shall also participate in the
annual leave program and accumulate 12 hours of annual leave credits
per month.
(2) The Public Employees' Retirement Law provides a comprehensive
set of rights and benefits for various employees of the state and
local agencies. That law also establishes the Public Employees'
Retirement System and sets forth the provisions for its
administration and the delivery of benefits to its members. Under
that law, the retirement benefits of a retirement system member are
based, in part, on the completed service credit and compensation
received by that member.
This bill would establish the Deferred Retirement Option Program
as a voluntary program in the Public Employees' Retirement System for
the excluded or exempt state employees of State Bargaining
Units Unit 5, 6, 7, and
or 8, as specified. The program would provide eligible members,
upon retirement, access to a lump sum in addition to a monthly
retirement allowance, as specified. The program would also permit a
specified beneficiary to receive any remaining balance upon the death
of the member.
The bill would require that the program result in a cost savings
or be cost neutral to the state, direct the Board of Administration
of the Public Employees' Retirement System to prepare a cost analysis
of the program, as specified, and direct the board to implement the
program on July 1, 2010, except as specified. The bill would also
require the actuary to conduct a biennial valuation of the program,
as specified, and authorize the Department of Personnel
Administration to terminate the program if it is not cost neutral,
subject to specified conditions.
(3) The Public Employees' Retirement Law provides that the state's
employer contribution from the General Fund to the Public Employees'
Retirement Fund shall be made quarterly. That law defines the term
"compensation" for purposes of determining required contributions and
benefits. That law generally requires a miscellaneous member to pay
5%, and a specified patrol and state peace officer and firefighter
member to pay 8% of compensation as his or her normal retirement
contribution to the Public Employees' Retirement System, subject to
specified exceptions.
This bill would provide that an excluded or exempt state employee
of State Bargaining Unit 5, 6, 7, or 8 who participates in the
Deferred Retirement Option Program, shall not pay contributions to or
receive service credit in the Public Employees' Retirement System.
The bill would also provide that the state shall not pay employer
contributions from the General Fund to the Public Employees'
Retirement Fund relating to these excluded or exempt state employees.
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. Section 19858.8 is added to the Government Code, to
read:
19858.8. (a) In lieu of sick leave and vacation provisions of
Sections 19858.1 and 19859, an employee, as defined in subdivision
(d), shall participate in an annual leave program. Each employee who
participates in the annual leave program and who is employed full
time shall receive 12 hours credit for annual leave with pay per
month, regardless of the length of service of that employee.
(b) A part-time or hourly employee shall accrue proportional
annual leave credits based on the schedule in this section. The time
when annual leave shall be taken shall be determined by the
appointing power of the officer or employee.
(c) The department shall provide by rule for the regulation and
accumulation of annual leave, the effect of an absence from the
payroll of 10 workdays or less in a calendar month upon credit for
annual leave, methods by which an employee leaving the employment of
the state may be compensated for, or otherwise receive proper credit
for, his or her accumulated annual leave, and other provisions
necessary for the administration of this section.
(d) This section shall apply to an excluded or exempt employee of
State Bargaining Unit 5, 6, 7, or 8, who participates in the Deferred
Retirement Option Program pursuant to Chapter 19 (commencing with
Section 21710) of Part 3.
SEC. 2. Section 20281.7 is added to the Government Code, to read:
20281.7. A member who is an excluded or exempt employee of State
Bargaining Unit 5, 6, 7, or 8, who participates in the Deferred
Retirement Option Program pursuant to Chapter 19 (commencing with
Section 21710) shall not accrue credit for service in the system and
shall not make employee contributions to the system for employment
with the state.
SEC. 3. Section 20822 of the Government Code is amended to read:
20822. (a) From the General Fund in the State Treasury there is
appropriated quarterly, to the retirement fund, the state's
contribution for all of the following:
(1) All state miscellaneous members and all other categories of
members whose compensation is paid from the General Fund.
(2) All university members whose compensation is paid from funds
of, or funds appropriated to, the university.
(3) All state miscellaneous members who are employed by the State
Department of Education or the Department of Rehabilitation and whose
compensation is paid from the Vocational Education Federal Fund, the
Vocational Rehabilitation Federal Fund, or any other fund received,
in whole or in part, as a donation to the state under restrictions
preventing its use for state contributions to the retirement system.
(4) All state miscellaneous members and all other categories of
members whose compensation is paid from the Senate Operating Fund or
the Assembly Operating Fund or the Operating Funds of the Assembly
and Senate.
(b) An appropriation shall not be required pursuant to this
section with respect to any state member who, pursuant to Section
20281.5, is not accruing service credit during the first 24 months of
service, unless and until that service credit is credited to the
member.
(c) An appropriation shall not be required pursuant to this
section with respect to a state employee who participates in the
Deferred Retirement Option Program pursuant to Chapter 19 (commencing
with Section 21720).
SEC. 4. Chapter 19 (commencing with Section 21710) is added to
Part 3 of Division 5 of Title 2 of the Government Code, to read:
CHAPTER 19. DEFERRED RETIREMENT OPTION PROGRAM
Article 1. General Provisions
21710. This chapter shall be known and may be cited as the
Deferred Retirement Option Program.
21710.1. The Deferred Retirement Option Program is hereby created
to add flexibility to the public employees' retirement system. This
program permits a member who elects to participate in the program to
accumulate and defer retirement funds. That member may access a
lump-sum payment for a specified period in addition to his or her
normal monthly retirement allowance. This program also permits a
member, subject to the Internal Revenue Code, to rollover his or her
lump sum into a 401(k) or individual retirement account.
21710.2. 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.
21710.3. If any provision of this chapter or the
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.
21710.4. The board shall implement the Deferred Retirement Option
Program pursuant to the provisions of this chapter on July 1, 2010,
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, 2011.
21710.5. The board may adopt regulations to implement the
program.
21710.6. The program shall result in a cost savings or be cost
neutral. The board shall, on or before June 1, 2009
2010 , issue a report providing an analysis of
the anticipated cost impact to the state during the 2010-11 fiscal
year of the program established by this chapter. The purpose of the
report is to assist in reaching the goal of a cost savings or cost
neutral program for the state employer.
21710.7. After the program is implemented, the actuary shall
conduct a valuation of the program every two years to determine its
fiscal impact on the state employer and shall report the findings to
the board and the Department of Personnel Administration no later
than July 1, 2011, and biennially each no
later than July 1 thereafter. The program may be terminated, by
written notice from the Department of Personnel Administration to
the board, if the annual valuation indicates that the program is not
cost neutral and has increased the liability of the state employer.
The terms of any termination of the program shall be subject to the
meet and confer process.
Article 2. Definitions
21712. Unless the context otherwise requires, the definitions set
forth in this article shall govern the interpretation of terms in
this chapter.
21712.1. "Actual retirement date" means the effective date of the
member's retirement following termination of all employment subject
to membership in the system.
21712.2. "Deferred retirement calculation date" means the date
subsequent to the member's actual retirement date as of which
benefits under the program shall be calculated as provided in Article
4 (commencing with Section 21714.1).
21712.3. "Deferred retirement period" means the period of time
between the member's actual date of retirement and the date the
member ends his or her participation in the program, which period
shall not be less than 12 months nor more than 60 months.
21712.4. "Program" means the Deferred Retirement Option Program
established by this chapter.
21712.5. "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 21714.1.
Article 3. Eligibility
21713. This program is established for excluded or exempt
employees of State Bargaining Unit 5, 6, 7, or 8.
21713.1. A member described in Section 21713 shall be eligible to
elect to participate in the program at any time the member has met
the minimum service requirements applicable for a service retirement
and attained at least 50 years of age.
21713.2. A member who is eligible to elect to participate in the
program shall voluntarily:
(a) Make this election prior to retirement on a form prescribed
and retained by the board.
(b) Designate his or her deferred retirement calculation date,
which date shall not be more than 60 months nor less than 12 months
subsequent to the member's actual retirement date and shall be
subsequent to the date that the member meets the minimum age and
service requirements for a service retirement. The deferred
retirement calculation date shall not be prior to January 1, 2011.
(c) Receive benefits from the system upon retirement at the time
and in the manner provided in this chapter.
(d) A member who participates in the program shall participate in
the annual leave program described in Section 19858.8.
(e) A member shall not be required to pay contributions to or
receive service credit in the system during his or her participation
in the program, as described in Section 20281.7, and no appropriation
shall be required by the state with respect to any employer
contributions, as described in subdivision (c) of Section 20822.
21713.3. (a) Except as described in subdivision (b), the election
to participate in the program shall be irrevocable.
(b) A member may be allowed to extend his or her participation in
the program if this extension does not exceed 60 cumulative months of
participation in the program.
21713.4. A member who participates in the Deferred Retirement
Option Program may not participate in reduced worktime for partial
service retirement pursuant to Article 4 (commencing with Section
21110) of Chapter 12 of this part.
21713.5. A member who participates in the program and reinstates
from retirement shall not be eligible to again participate in the
program upon subsequent retirement.
Article 4. Calculation of Distribution
21714.1. Upon the termination of employment and retirement of an
eligible member who has elected to participate in the program, the
system shall calculate the following amounts:
(a) The member's monthly service retirement allowance payable the
day prior to when the member begins to participate in the program.
(b) The member's program payment, which shall be the amount
calculated pursuant to subdivision (a), plus interest at an annual
rate of 5 percent minus the costs the system incurs to administer the
program.
21714.2. The retirement allowance pertaining to service of the
member other than as an exempt or excluded employee of State
Bargaining Unit 5, 6, 7, or 8 shall be based upon the member's actual
retirement date and not the deferred retirement calculation date.
Article 5. Distribution Methods
21715.1. Upon termination of employment and retirement from the
system, a member who has elected to participate in the program shall
receive the member's program payment as calculated pursuant to
Section 21714.1.
21715.2. The member shall elect one of the following as the form
of distribution of the member's program payment:
(a) A single lump-sum payment.
(b) A lump-sum rollover to a 401(k) or individual retirement
account.
21715.3. (a) Notwithstanding any other provision of this chapter,
a participant, nonparticipant 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.
(b) A lump-sum distribution to the participant that reflects the
entire program payment of the participant shall be made not later
than April 1 of the calendar year following the later of the calendar
year in which the participant attains 70 and one-half years of age
or the calendar year in which the participant terminates all
employment for the employer.
(c) In the case of a lump-sum distribution on account of the
participant's death, distributions shall be paid no later than
December 31 of the calendar year in which the second anniversary of
the participant's date of death occurs unless the beneficiary is the
participant's spouse in which case the benefit shall be paid on or
before December 31 of the calendar year immediately following the
calendar year in which the participant dies.
Article 6. Beneficiaries
21716. The beneficiary or beneficiaries entitled to receive any
remaining balance described in Section 21715.3 shall be the same
beneficiary or beneficiaries designated by the member to receive the
postretirement death benefit provided by Article 5 (commencing with
Section 21620) of Chapter 14 of this part.
