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AB-348 PERS: administration.(1993-1994)

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Assembly Bill No. 348
CHAPTER 1168

An act to amend Sections 20006, 20006.1, 20026, 20026.1, 20026.2, 20034, 20130, 20132.6, 20137, 20654, and 21235.5 of, to add Section 21361.2, to repeal and add Section 20334 of, and to repeal Sections 20336 and 20652.5 of, the Government Code, relating to the Public Employees’ Retirement System.

[ Filed with Secretary of State  October 11, 1993. Approved by Governor  October 11, 1993. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 348, Cannella. PERS: administration.
(1)  The existing Public Employees’ Retirement Law requires contributions of members and retired members to be credited with interest at the current annual interest rate (which is defined as the interest rate fixed for purposes of crediting interest), except that that rate may be reduced in any fiscal year in which the net earnings rate does not exceed the current actuarial interest rate by 110 basis points, by an amount that is not more than 110 basis points less than the net earnings rate in order to provide purchasing power protection allowances from the supplemental account. However, for any member who withdraws his or her member contributions after June 30, 1991, the member contributions made after that date would be credited at the rate of 6% compounded annually and the interest amount that would have been otherwise credited on or after that date to the member’s account is required to be transferred to the supplemental account to fund purchasing power protection allowances. The law requires that if the current net earnings rate exceeds the annual interest rate used to credit member and retired member accounts, in addition to the amount transferred to the supplemental account, the remaining amount shall be credited to employer accounts.
This bill would, instead, define “annual interest rate” as the net earnings rate reduced by 110 basis points for purposes of crediting interest, require the contributions of members to be credited with an interest crediting rate of 6% compounded annually, and require the retired member reserves to be credited at the lesser of the current actuarial interest rate or the current annual interest rate compounded at each June 30. This bill would require that, in the calculation of the refund of accumulated contributions of a member who dies on or after January 1, 1994, as part of the basic death benefit, the accumulated contributions be increased by a factor determined by the board that is based on the difference, at each June 30 subsequent to January 1, 1994, between the lesser of the current actuarial interest rate or the current annual interest rate and the 6% interest crediting rate on member contributions.
(2)  The existing Public Employees’ Retirement Law provides for the Governor to contract with a consulting actuary to serve as the actuary for PERS, subject to legislative confirmation, and confers various powers and duties upon the Governor’s actuary.
This bill would specify that certain powers and duties of the Governor’s actuary shall be performed by the Board of Administration.
(3)  The Public Employees’ Retirement Law includes and excludes from membership in the system, certain part-time, seasonal, limited-term, on-call, emergency, intermittent, substitute, and other irregularly employed employees.
This bill would revise, recast, reorganize, and clarify those provisions.
(4)  This bill would also make technical and related changes.

The people of the State of California do enact as follows:


SECTION 1.

 Section 20006 of the Government Code is amended to read:

20006.
 “Actuary” means an actuary regularly employed on a full-time or part-time basis by the board.

SEC. 2.

 Section 20006.1 of the Government Code is amended to read:

20006.1.
 As of June 30, 1991, and thereafter at the end of periods not to exceed four years, the actuary shall make an actuarial investigation into the mortality, service, and compensation experience of members and persons receiving benefits and an actuarial valuation of the assets and liabilities of this system. From time to time, the actuary shall determine the rate of interest being earned on the Retirement Fund after deducting from earnings amounts applied to costs of administration of the system.

SEC. 3.

 Section 20026 of the Government Code is amended to read:

20026.
 “Regular interest” means interest at the annual interest rate for purposes of crediting of interest, compounded annually.

SEC. 4.

 Section 20026.1 of the Government Code is amended to read:

20026.1.
 “Annual interest rate” means the net earnings rate reduced by 110 basis points for purposes of crediting interest.

SEC. 5.

 Section 20026.2 of the Government Code is amended to read:

20026.2.
 “Actuarial interest rate” means the interest rate fixed by the board for purposes of actuarial valuation of the assets and liabilities of this system.

SEC. 6.

 Section 20034 of the Government Code is amended to read:

20034.
 “Actuarial equivalent” means a benefit of equal value when computed upon the basis of the mortality tables adopted and the actuarial interest rate fixed by the board.

SEC. 7.

 Section 20130 of the Government Code is amended to read:

20130.
 (a)  Upon the basis of any investigation, valuation, or determination, or all of these, the board shall adopt such mortality, service and other tables and annual and actuarial interest rates as it deems necessary.
(b)  A change in interest rate adopted by the board shall not apply to any election of a member to deposit or redeposit contributions, including interest, filed prior to the date the change was placed into effect.

SEC. 8.

 Section 20132.6 of the Government Code is amended to read:

20132.6.
 (a)  The board shall credit all contributions of members in the retirement fund with interest at an interest crediting rate of 6 percent compounded at each June 30. The retired member reserves in the retirement fund shall be credited with the lesser of the current actuarial interest rate or the current annual interest rate compounded at each June 30. The interest amount that would have been credited to the member’s account on and after the effective date of this section, had the account been credited with the lesser of the current actuarial interest rate or the current annual interest rate, rather than at the 6 percent interest crediting rate, shall be credited to retirement member reserves.
(b)  Notwithstanding subdivision (a), the difference between the interest amount that was credited to the account of any member of this system who was paid his or her accumulated contributions on or after the effective date of this section, and the lesser of the current actuarial interest rate or the current annual interest rate, shall be transferred to the account established by the board under Section 21235.5 to fund the purchasing power protection allowance.
(c)  If the current net earnings rate exceeds the interest rate used to credit the retired member accounts, in addition to the amount transferred to the fund established under Section 21235.5, the remaining amount shall be credited to employer accounts.
(d)  The current annual interest rate may be lower than the current actuarial interest rate.

SEC. 9.

 Section 20137 of the Government Code is amended to read:

20137.
 The board shall report to the Governor and the Legislature, not later than December 1 of each year, on the extent to which the purpose of Section 21220 is being achieved under the provisions of this article and the amount of supplementary increases in retirement allowances required to meet the objective of preserving the purchasing power of benefits provided by the system. The board shall also determine and report on the increase in the state contribution rate required to provide the supplementary increases for state members, other than school members.

SEC. 10.

 Section 20334 of the Government Code is repealed.

SEC. 11.

 Section 20334 is added to the Government Code, to read:

20334.
 (a)  An employee serving on a less than full-time basis is excluded from this system unless:
(1)  He or she is a member at the time he or she renders less than full-time service and is not otherwise excluded pursuant to this article or by a provision of a contract.
(2)  His or her position requires regular, part-time service for one year or longer for at least an average of 20 hours a week, or requires service that is equivalent to at least an average of 20 hours a week, unless he or she elects membership pursuant to Section 20365.
(3)  His or her employment is, in the opinion of the board, on a seasonal, limited-term, on-call, emergency, intermittent, substitute, or other irregular basis, and is compensated and meets one of the following conditions:
(A)  The appointment or employment contract fixes a term of full-time, continuous employment in excess of six months or, if a term is not fixed, full-time employment continues for longer than six months, in which case membership shall be effective not later than the first day of the first pay period of the seventh month of employment.
(B)  The person works more than 125 days, if employed on a per diem basis or, if employed on other than a per diem basis, 1,000 hours within the fiscal year, in which case, membership shall be effective not later than the first day of the first pay period of the month following the month in which 125 days or 1,000 hours of service were completed. For purposes of this subdivision, “day” means each eight-hour period of employment worked by an employee paid on a per diem basis so that membership is effective after he or she has completed 1,000 hours of compensated service in a fiscal year.
(C)  The person is employed by the Department of Forestry and Fire Protection in one of the positions that provide state safety membership pursuant to Section 20017.6 or state peace officer/firefighter membership pursuant to Section 20017.96.
(4)  He or she is a temporary faculty member of the California State University who works two consecutive semesters or three consecutive quarters at half-time or more and is not otherwise excluded pursuant to this article, in which case, membership shall be effective with the start of the next consecutive semester or quarter if the appointment requires service of half-time or more.
(5)  He or she is a member of the Board of Prison Terms, the State Personnel Board, or the State Air Resources Board and elects to become a member pursuant to Section 20360.
(6)  He or she is participating in partial service retirement, pursuant to Article 1.7 (commencing with Section 19996.30) of Chapter 7 of Part 2.6.
(7)  He or she is included by specific provision of the board relating to the exclusion of less than full-time employees.
(b)  This section shall supersede any contract provision excluding persons in any temporary or seasonal employment basis and shall apply only to persons entering employment on and after January 1, 1975. Except as provided in Section 20492, no contract or contract amendment entered into after January 1, 1981, shall contain any provision excluding persons on an irregular employment basis.

SEC. 12.

 Section 20336 of the Government Code is repealed.

SEC. 13.

 Section 20652.5 of the Government Code is repealed.

SEC. 14.

 Section 20654 of the Government Code is amended to read:

20654.
 Subject to regulations adopted by the board, a member may file an election with the board to redeposit in the retirement fund, in a lump sum or by installment payments, (1) an amount equal to the accumulated contributions that he or she has withdrawn at one or more terminations of service, or for one withdrawal at a time, but in reverse chronological order in which they occurred, and (2) an amount equal to the interest that would have been credited to his or her account to the date of completion of payments had the contributions not been withdrawn, and (3) if he or she elects to redeposit in other than one sum, interest on the unpaid balance of the amount payable to the retirement fund, beginning on the date of the election to redeposit, as if the member interest crediting rate in effect on the date of the election to redeposit had been and continued to be in effect through the completion of the payments.

SEC. 15.

 Section 21235.5 of the Government Code is amended to read:

21235.5.
 (a)  On an annual basis, the board shall transfer the lesser of either of the following:
(1)  The amount necessary to increase all monthly allowances paid by the system to 75 percent of the purchasing power of the initial monthly allowances.
(2)  Up to 1.1 percent of the net earnings on member contributions, as determined by Section 20132.6, to a supplemental account to fund the purchasing power protection allowance.
(b)  The funds so transferred to the supplemental account shall be utilized to increase all monthly allowances paid by the system up to a maximum of 75 percent of the purchasing power, as determined by the board, of the initial monthly allowances that were received by every retired person or survivor or beneficiary of a state, school, or local member or retired person who was eligible to receive any allowance at the end of each fiscal year. Funds remaining in the account after the payment of benefits under this section shall be transferred to the employer accounts.

SEC. 16.

 Section 21361.2 is added to the Government Code, to read:

21361.2.
 Notwithstanding Section 20132.6, for member deaths occurring on or after January 1, 1994, the accumulated contributions of a member payable pursuant to subdivision (a) of Section 21361 shall be increased by a factor determined by the board that is based on the difference, at each June 30 subsequent to January 1, 1994, between the lesser of the current interest rate or the current annual interest rate and the 6 percent interest crediting rate on member contributions.