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SB-1413 Public employees’ retirement: pension prefunding.(2017-2018)

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Date Published: 09/21/2018 09:00 PM
SB1413:v93#DOCUMENT

Senate Bill No. 1413
CHAPTER 665

An act 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, and making an appropriation therefor.

[ Approved by Governor  September 21, 2018. Filed with Secretary of State  September 21, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST


SB 1413, Nielsen. Public employees’ retirement: pension prefunding.
Existing law creates the Public Employees’ Retirement System, which provides defined retirement benefits to employees of the state and to employees of other public agencies contracting with the Board of Administration of the Public Employees’ Retirement System for this purpose. The benefits provided by the system are funded by employer and employee contributions and investment returns.
This bill would enact the California Employers’ Pension Prefunding Trust Program and establish the California Employers’ Pension Prefunding Trust Fund to allow state and local public agency employers that provide a defined benefit pension plan to their employees to prefund their required pension contributions.
The bill would authorize an employer, upon terms and conditions set by the board, to elect to participate in the prefunding plan, and would require the governing body of that employer to enter into a contract with the board relative to the prefunding plan. The bill would require the board to offer participating employers, as defined, specified cost-effective, diversified investment portfolios. The bill would require each participating employer to pay an amount, determined by the board, for administrative and asset management costs of the prefunding plan to the fund and would grant the board the sole and exclusive control of the administration and investment of the fund. The bill would also set the terms under which a prefunding plan contract could be terminated or transferred. The bill would specify that all moneys in the fund would be continuously appropriated to the board for the purposes of these provisions.
The bill would also authorize the board to adopt emergency regulations for the purposes of these provisions and would appropriate the sum of $695,140 from the General Fund to the Board of Administration of the Public Employees’ Retirement System for expenditure in the 2019–20 fiscal year to develop the program.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 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. California Employers’ Pension Prefunding Trust Program

21710.
 For purposes of this chapter, the following definitions shall apply:
(a) “Participating employer” means an employer that is authorized and has elected to participate in the prefunding plan.
(b) “Prefunding plan” means the California Employers’ Pension Prefunding Trust Fund, a trust fund administered by the board, for the purpose of investing employer payments toward their required pension contributions to a defined benefit pension plan and that is intended to meet the requirements of Section 115 of the Internal Revenue Code.
(c) “Required pension contributions” means future required contributions to a defined benefit pension as defined in Statement 68 of the Governmental Accounting Standards Board, as it may be amended from time to time.

21711.
 (a) The California Employers’ Pension Prefunding Trust Fund is hereby established as a special trust fund in the State Treasury for the purpose of allowing state and local public agency employers that provide a defined benefit pension plan to their employees to prefund their required pension contributions. Notwithstanding Section 13340, all moneys in the California Employers’ Pension Prefunding Trust Fund are continuously appropriated to the board without regard to fiscal years to carry out the purpose of this chapter, consistent with the board’s fiduciary duty.
(b) The board shall have the sole and exclusive control of the administration and investment of the California Employers’ Pension Prefunding Trust Fund and shall have the authority to make investments pursuant to Part 3 (commencing with Section 20000).
(c) Income, of whatever nature, earned on the California Employers’ Pension Prefunding Trust Fund, shall be credited to the fund.
(d) Notwithstanding subdivision (b), the board shall offer participating employers investment options for funds in the California Employers’ Pension Prefunding Trust Fund consisting of cost-effective, diversified investment portfolios that do not exceed the risk and return profiles of the investment options available for the investment of funds in the Annuitants’ Health Care Coverage Fund, administratively referred to as the California Employers’ Retiree Benefit Trust Fund, established pursuant to Section 22940.

21712.
 Each participating employer shall pay an amount, not to exceed the reasonable administrative costs, as determined by the board, for administrative and asset management of the prefunding plan established by this chapter. The board shall deposit to the credit of the California Employers’ Pension Prefunding Trust Fund all amounts received by the board for those administrative and asset management costs.

21713.
 An employer authorized by the board may elect to participate in the prefunding plan established by this chapter.

21714.
 The board may, in its discretion and upon terms and conditions set by the board, authorize an employer to participate in the prefunding plan established by this chapter. The governing body of a participating employer shall enter into a contract with the board, setting forth the terms and conditions of that employer’s participation in the prefunding plan, including, but not limited to, funding, expenditures, and actuarial, accounting, reporting, and investment considerations.

21715.
 (a) The board may terminate the participation of an employer in the prefunding plan if any of the following apply:
(1) An employer elects to cease to participate in the prefunding plan.
(2) The board finds that the participating employer has failed to satisfy the terms and conditions required by this chapter, by board rules or regulations, or by the contract between the governing body of that participating employer and the board.
(3) The board terminates the prefunding plan.
(b) The board may, in its discretion, authorize an employer to transfer assets into or out of the prefunding plan. That transfer of assets shall comply with all of the following:
(1) The transfer shall satisfy the terms of the contract between the governing body of that participating employer and the board.
(2) The transfer shall satisfy the requirements under the applicable rules of the Governmental Accounting Standards Board.
(3) The transfer shall satisfy the requirements of a trust established under Section 115 of the Internal Revenue Code.
(c) If the board terminates the participation of an employer in the prefunding plan as described in paragraph (1) or (2) of subdivision (a), the assets attributable to the contributions by that employer shall remain in the prefunding plan, for the continued payment of required pension contributions and the costs of administration, pursuant to the terms and conditions of participation established by the board and as agreed to by the employer.

21716.
 The board may adopt regulations, including emergency regulations pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), to implement this chapter. For purposes of Sections 11346.1 and 11349.6, the adoption of any emergency regulations that are filed with the Office of Administrative Law shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.

SEC. 2.

 The sum of six hundred ninety-five thousand one hundred forty dollars ($695,140) is hereby appropriated from the General Fund to the Board of Administration of the Public Employees’ Retirement System for expenditure in the 2019–20 fiscal year to develop the California Employers’ Pension Prefunding Trust Program established pursuant to Chapter 19 (commencing with Section 21710) of Part 3 of Division 5 of Title 2 of the Government Code.