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AB-1824 Public employees’ retirement.(2021-2022)

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Date Published: 09/02/2022 09:00 PM
AB1824:v92#DOCUMENT

Assembly Bill No. 1824
CHAPTER 231

An act to amend Sections 24602, 26113, 26803, 27100, and 27201 of, and to add Section 27100.5 to, the Education Code, and to amend Sections 20164.5, 31452.7, 31641.4, 31663.25, 31663.26, 31726, 31726.5, 31761, 31762, 31763, 31764, and 31781 of the Government Code, relating to public employees’ retirement.

[ Approved by Governor  September 02, 2022. Filed with Secretary of State  September 02, 2022. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 1824, Committee on Public Employment and Retirement. Public employees’ retirement.
Existing law, the Teachers’ Retirement Law (TRL), establishes the State Teachers’ Retirement System (STRS) and creates the Defined Benefit Program of the State Teachers’ Retirement Plan, which provides a defined benefit to members of the program, based on final compensation, creditable service, and age at retirement, subject to certain variations. STRS is administered by the Teachers’ Retirement Board. Existing law creates the Cash Balance Benefit Program, which is administered by the board, to provide a retirement plan for the benefit of participating employees who provide creditable service for less than 50% of full time.
The TRL defines “creditable service” in connection with the Cash Balance Benefit Program with reference to specified activities performed for certain employers, including for a prekindergarten through grade 12 employer, as specified, and for a community college employer, as specified. STRS prescribes the activities that earn creditable service in this regard to include trustee service, as specified.
This bill would revise the description of trustee service to link it to the definition of this service, which means duties performed by a member of the governing body of an employer.
Existing law requires that creditable service subject to coverage by the Cash Balance Benefit Program and service with the last employer or employers of the participant that is creditable under the Defined Benefit Program be terminated prior to the member’s retirement date.
This bill would revise this requirement to instead specify that this termination of services does not include retired member activities, as defined, or retired participant activities, as defined. The bill would also make these changes in provisions relating to termination benefits under the Cash Balance Benefit Program.
Existing law authorizes a participant in the Cash Balance Benefit Program to designate or change the designation of one or more primary beneficiaries and one or more contingent beneficiaries to receive a lump-sum death benefit that may be payable. Existing law authorizes a person, trust, or the estate of the participant to be a beneficiary for the lump-sum death benefit.
This bill would delete the authorization for a person, trust, or the estate of the participant to be a beneficiary of the lump-sum death benefit and would add a provision generally authorizing a corporation, trust, charitable organization, parochial institution, or public entity to be designated as a beneficiary, while prohibiting these entities from being designated as an annuity beneficiary, except as specified.
The Public Employees’ Retirement Law (PERL) creates the Public Employees’ Retirement System (PERS), which is administered by the Board of Administration of the Public Employees’ Retirement System. PERL generally authorizes the board of administration to adjust retirement payments due to errors or omissions. PERL specifically prescribes a process for adjusting benefits if final compensation at the time of retirement was predicated on compensation that is subsequently disallowed based on the California Public Employees’ Pension Reform Act of 2013 or PERS regulations. In this regard, under certain circumstances, the state, a school employer, or a contracting agency that reported contributions on disallowed compensation is required to pay a specified penalty. PERL requires that 90% of this penalty be paid to the affected retired member, survivor, or beneficiary who was impacted by disallowed compensation and that 10% be paid to PERS.
This bill would require that the entire amount of the above-described penalty be paid to the affected retired member, survivor, or beneficiary and would eliminate the payment to PERS.
The County Employees Retirement Law of 1937 (CERL) authorizes counties to establish retirement systems pursuant to its provisions for the purpose of providing pension, disability, and death benefits to county and district employees. CERL vests management of the retirement systems created pursuant to its provisions in a board of retirement.
CERL requires, upon the death of a member, the payment of a retirement allowance earned but not yet paid to a member to be paid to the member’s designated beneficiary. CERL requires, upon the death of a person receiving a survivor’s allowance, the payment of any allowance earned but not yet paid to the survivor to be paid to the survivor’s designated beneficiary.
This bill would include a corporation, a trust, or an estate in the definition of “beneficiary” for purposes of these provisions.
CERL restricts the types of employment for which members may receive credit for service and restricts credit for other employment in public service based upon whether the member is entitled to receive a pension or retirement allowance from another public agency. If a member elects to contribute to obtain credit for other employment in another public agency, CERL requires certification, as specified, of the fact that the pension or retirement allowance will not accrue to the member by virtue of the member’s employment.
This bill would specify that the provisions described above do not prohibit a member from receiving credit for a period of federal public service if federal law expressly permits the credit even though the member is already entitled to receive a pension or retirement allowance from that service.
CERL prescribes a process for purposes of establishing a date of retirement with reference to safety members. CERL authorizes a safety member to be retired upon the occurrence of certain events and the filing, with the retirement board, of a written application setting forth the date upon which the member desires their retirement to become effective. CERL prohibits this date from being more than 60 days after the date of filing the application.
This bill would revise the restrictions on the above-described effective retirement date to prohibit the retirement date from being earlier than the date the application is filed with the board or more than 60 days after the date of filing the application or more than a number of days that has been approved by the board.
CERL authorizes the payment of a death benefit upon the death of a member while in service. CERL prescribes the components of the death benefit, which are a member’s accumulated contributions and an amount, provided from contributions by a county or district, calculated pursuant to a specified method, not to exceed 50% of annual compensation earnable or pensionable compensation of the deceased.
This bill would require, in connection with the calculation of the death benefit, that the computation for any absence be based on the compensation of the position held by the member at the beginning of the absence.
This bill would also make nonsubstantive style and technical changes.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 24602 of the Education Code is amended to read:

24602.
 The board may establish a special account and procedures to pay, on an emergency basis, allowances, death payments, and up to 75 percent of the return of the balance of the accumulated retirement contributions as a result of termination of employment or death. Disbursements under the special account shall be by checks issued by the system and subject to the auditing requirements of the Controller. Payments under the special account shall be deducted from allowances, death benefits, and payment of accumulated retirement contributions, otherwise due.

SEC. 2.

 Section 26113 of the Education Code is amended to read:

26113.
 (a) “Creditable service” means any of the activities described in subdivision (b) performed for any of the following employers:
(1) A prekindergarten through grade 12 employer in a position with certification qualifications authorized by the Commission on Teacher Credentialing pursuant to Section 44001.
(2) A community college employer by a faculty member, as defined in Section 87003, in an academic position, as defined in subdivision (b) of Section 87001, or by an educational administrator, as defined in subdivision (b) of Section 87002, subject to the appropriate minimum standards adopted by the Board of Governors of the California Community Colleges pursuant to Section 87356, or pursuant to a contract between a community college district and the United States Department of Defense to provide vocational training.
(3) A charter school employer under the provisions of an approved charter for the operation of a charter school for which the charter school is eligible to receive state apportionment.
(b) The types of activities are any of the following:
(1) The work of teachers, instructors, district interns, and academic employees employed in the instructional program for pupils, including special programs such as adult education, regional occupational programs, childcare centers, and prekindergarten programs pursuant to Section 22161.
(2) Education or vocational counseling, guidance, and placement services.
(3) The work of employees who plan courses of study to be used in California public schools, or research connected with the evaluation or efficiency of the instructional program.
(4) The selection, collection, preparation, classification, demonstration, or evaluation of instructional materials of any course of study for use in the development of the instructional program in California public schools, or other services related to California public school curriculum.
(5) The examination, selection, in-service training, mentoring, or assignment of teachers, principals, or other similar personnel involved in the instructional program.
(6) The work of nurses, physicians, speech therapists, psychologists, audiologists, and other California public school health professionals.
(7) Services as a California public school librarian.
(8) Activities connected with the enforcement of the laws relating to compulsory education, coordination of child welfare activities involving the school and the home, and the school adjustment of pupils.
(9) The work of employees who are responsible for the supervision of persons or administration of the duties described in this subdivision.
(c) “Creditable service” also means any of the activities described in subdivision (b) when they are performed for an employer by:
(1) Superintendents of California public schools, and presidents and chancellors of community college employers.
(2) Consulting teachers employed by an employer to participate in the California Peer Assistance and Review Program for Teachers pursuant to Article 4.5 (commencing with Section 44500) of Chapter 3 of Part 25 of Division 3 of Title 2.
(3) Audiometrists who hold a certificate of registration issued by the State Department of Health Care Services.
(d) “Creditable service” also means the performance of California public school activities related to, and an outgrowth of, the instructional and guidance program of the California public school when performed for the same employer for which the member is performing any of the activities described in subdivision (b) or (c).
(e) “Creditable service” also means trustee service as defined in Section 26144.5, if eligible pursuant to Section 26403.
(f) The board shall have final authority for determining creditable service to cover activities not already specified.

SEC. 3.

 Section 26803 of the Education Code is amended to read:

26803.
 (a) All creditable service subject to coverage by the Cash Balance Benefit Program and the Defined Benefit Program, which does not include retired member activities as defined in Section 22164.5 or retired participant activities as defined in Section 26135.7, shall be terminated prior to the retirement date.
(b) All employers with which the participant is employed to perform creditable service subject to coverage by the plan shall certify in a format prescribed by the system that the participant’s employment has been terminated unless the employment was terminated 12 months or more prior to the participant’s retirement date.

SEC. 4.

 Section 27100 of the Education Code is amended to read:

27100.
 A participant may at any time designate or change the designation of one or more primary beneficiaries and one or more contingent beneficiaries to receive any lump-sum death benefit that may be payable under the plan. The beneficiary shall be designated on a form prescribed by the system that is received by the system before the participant’s death.

SEC. 5.

 Section 27100.5 is added to the Education Code, to read:

27100.5.
 A corporation, trust, charitable organization, parochial institution, or public entity may be designated as a beneficiary under this part, but shall not be designated as an annuity beneficiary, except a trust as defined in Section 26106.5.

SEC. 6.

 Section 27201 of the Education Code is amended to read:

27201.
 (a) All creditable service subject to coverage by the Cash Balance Benefit Program and the Defined Benefit Program, which does not include retired member activities as defined in Section 22164.5 or retired participant activities as defined in Section 26135.7, shall terminate prior to application for a termination benefit under this part.
(b) All employers with which the participant is employed to perform creditable service subject to coverage by the plan shall certify in a format prescribed by the system that the participant’s employment has been terminated unless the employment was terminated 12 months or more prior to the date the termination benefit application is received by the system.

SEC. 7.

 Section 20164.5 of the Government Code is amended to read:

20164.5.
 (a) For purposes of this section, “disallowed compensation” means compensation reported for a member by the state, school employer, or a contracting agency that the system subsequently determines is not in compliance with the California Public Employees’ Pension Reform Act of 2013 (Article 4 (commencing with Section 7522) of Chapter 21 of Division 7 of Title 1), Section 20636 or 20636.1, or the administrative regulations of the system.
(b) If the system determines that the compensation reported for a member by the state, school employer, or a contracting agency is disallowed compensation, the system shall require the state, school employer, or contracting agency to discontinue reporting the disallowed compensation. This section shall also apply to determinations made on or after January 1, 2017, if an appeal has been filed and the member, the retired member, survivor, or beneficiary has not exhausted their administrative or legal remedies.
(1) In the case of an active member, all contributions made on the disallowed compensation shall be credited against future contributions to the benefit of the state, school employer, or contracting agency that reported the disallowed compensation, and any contribution paid by, or on behalf of, the member, including contributions under Section 20691, shall be returned to the member by the state, school employer, or contracting agency that reported the disallowed compensation.
(2) In the case of a retired member, survivor, or beneficiary whose final compensation at the time of retirement was predicated upon the disallowed compensation, the contributions made on the disallowed compensation shall be credited against future contributions, to the benefit of the state, school employer, or contracting agency that reported the disallowed compensation and the system shall permanently adjust the benefit of the affected retired member, survivor, or beneficiary to reflect the exclusion of the disallowed compensation.
(3) (A) In the case of a retired member, survivor, or beneficiary whose final compensation at the time of retirement was predicated upon the disallowed compensation as described in paragraph (2), the repayment and notice requirements described in this paragraph and paragraph (4) shall apply only if all of the following conditions are met:
(i) The compensation was reported to the system and contributions were made on that compensation while the member was actively employed.
(ii) The compensation was agreed to in a memorandum of understanding or collective bargaining agreement between the employer and the recognized employee organization as compensation for pension purposes and the employer and the recognized employee organization did not knowingly agree to compensation that was disallowed.
(iii) The determination by the system that compensation was disallowed was made after the date of retirement.
(iv) The member was not aware that the compensation was disallowed at the time it was reported.
(B) If the conditions of subparagraph (A) are met, the state, school employer, or contracting agency that reported contributions on the disallowed compensation shall do both of the following:
(i) Pay to the system, as a direct payment, the full cost of any overpayment of the prior paid benefit made to an affected retired member, survivor, or beneficiary resulting from the disallowed compensation.
(ii) Pay a penalty to an affected retired member, survivor, or beneficiary who was impacted by disallowed compensation equal to 20 percent of the amount calculated as a lump sum of the actuarial equivalent present value representing the difference between the monthly allowance that was based on the disallowed compensation and the adjusted monthly allowance calculated pursuant to paragraph (2) for the duration that allowance is projected to be paid by the system to the retired member, survivor, or beneficiary.
(4) The system shall provide a notice to the state, school employer, or contracting agency that reported contributions on the disallowed compensation and to the affected retired member, survivor, or beneficiary, including, at a minimum, all of the following:
(A) The amount of the overpayment to be paid by the state, school employer, or contracting agency to the system as described in subparagraph (B) of paragraph (3).
(B) The actuarial equivalent present value owed to the retired member, survivor, or beneficiary as described in clause (ii) of subparagraph (B) of paragraph (3), if applicable.
(C) Written disclosure of the state, school employer, or contracting agency’s obligations to the retired member, survivor, or beneficiary pursuant to this section.
(5) The system shall, upon request, provide the state, a school employer, or a contracting agency with contact information data in its possession of a relevant retired member, survivor, or beneficiary in order for the state, a school employer, or a contracting agency to fulfill their obligations to that retired member, survivor, or beneficiary pursuant to this section. The recipient of this contact information data shall keep it confidential.
(c) (1) The state, a school employer, including a county superintendent of schools, school district, community college district, charter school, regional occupational center, or other local educational agency, or a contracting agency, as applicable, may submit to the system for review an additional compensation item that is proposed to be included, or is contained, in a memorandum of understanding adopted, or a collective bargaining agreement entered into, on and after January 1, 2022, that is intended to form the basis of a pension benefit calculation, in order for the system to review consistency of the proposal with the California Public Employees’ Pension Reform Act of 2013 (Article 4 (commencing with Section 7522) of Chapter 21 of Division 7 of Title 1), Section 20636 or 20636.1, and the administrative regulations of the system.
(2) A submission to the system for review under paragraph (1) shall include only the compensation item language and a description of how it meets the criteria listed in subdivision (a) of Section 571 or subdivision (b) of Section 571.1 of Title 2 of the California Code of Regulations, along with any other supporting documents or requirements the system deems necessary to complete its review.
(3) The system shall provide guidance regarding the submission within 90 days of the receipt of all information required to make a review.
(d) The system shall periodically publish a notice of the proposed compensation language submitted to the system pursuant to paragraph (c) for review and the guidance provided by the system.
(e) This section does not alter or abrogate any responsibility of the state, a school employer, or a contracting agency to meet and confer in good faith with the employee organization regarding the impact of the disallowed compensation or the effect of any disallowed compensation on the rights of the employees and the obligations of the employer to its employees, including any employees who, due to the passage of time and promotion, may have become exempt from inclusion in a bargaining unit, but whose benefit was the product of collective bargaining.
(f)  For educational entities participating in the system, the final responsibility for funding payments under subparagraph (B) of paragraph (3) of subdivision (b) is that of the educational entity that is the actual employer of the employee. A county superintendent of schools shall have final responsibility for funding payments for its own employees and not for those employees of other educational entities that participate in the system under the auspices of a county superintendent of schools pursuant to contract.
(g) This section does not affect or otherwise alter a party’s right to appeal any determination regarding disallowed compensation made by the system.

SEC. 8.

 Section 31452.7 of the Government Code is amended to read:

31452.7.
 (a) Upon the death of any member after retirement, any retirement allowance earned but not yet paid to the member shall, notwithstanding any other provision of law, be paid to the member’s designated beneficiary.
(b) Upon the death of any person receiving a survivor’s allowance under this chapter, any allowance earned but not yet paid to the survivor shall, notwithstanding any other provision of law, be paid to the survivor’s designated beneficiary.
(c) For purposes of this section, “beneficiary” includes, but is not limited to, a corporation, a trust, or an estate.

SEC. 9.

 Section 31641.4 of the Government Code is amended to read:

31641.4.
 (a) (1) Except as provided in paragraph (2), a member shall receive credit for employment in public service only for such service as the member is not entitled to receive a pension or retirement allowance from such public agency. The service for which the member elects to contribute and the fact that no pension or retirement allowance will accrue to such member by virtue of the member’s employment in the public agency shall be certified to by an officer of the public agency where the member rendered such public service or shall be established to the satisfaction of the board.
(2) Nothing in this subdivision prohibits a member from receiving credit for a period of federal public service if federal law expressly permits the credit even though the member is already entitled to receive a pension or retirement allowance from that service. It is intended that this section be consistent with the holdings in Cantwell v. San Mateo County (1980) 631 F.2d 631.
(b) Notwithstanding any other provision of law, a safety member who receives credit for prior employment in public service, the principal duties of which consisted of active law enforcement or active fire suppression, or active service in the armed services of the United States during time of war or national emergency, shall have the member’s pension or retirement allowance for this service calculated on the same basis as the calculation of the retirement allowance the member would receive as a safety member under Section 31664.
(c) A safety member who entered the service as a peace officer prior to the establishment of the safety membership provisions in the member’s county shall be considered a safety member from the member’s initial hiring date, for the purposes of this section, notwithstanding any other provision of law.

SEC. 10.

 Section 31663.25 of the Government Code is amended to read:

31663.25.
 (a) Except as provided in Section 31663.26, a safety member who has reached the applicable compulsory age of retirement, if any, or a safety member who has completed 10 years of continuous service and who has reached the age of 50, or a safety member who has completed 20 years of service regardless of age, may be retired upon filing with the board a written application setting forth the date upon which the member desires the member’s retirement to become effective. The effective retirement date shall not be either of the following:
(1) Earlier than the date the application is filed with the board.
(2) More than 60 days after the date of filing the application or more than a number of days that has been approved by the board.
(b) This section shall not apply to a member who is subject to the provisions of the California Public Employees’ Pension Reform Act of 2013 (Article 4 (commencing with Section 7522) of Chapter 21 of Division 7 of Title 1) for all or any portion of that member’s membership in the county retirement system.

SEC. 11.

 Section 31663.26 of the Government Code is amended to read:

31663.26.
 (a) Notwithstanding Section 31663.25, a safety member who has reached the applicable compulsory age of retirement, if any, or a safety member who is a full-time employee, has completed 10 years of service, has reached the age of 50, and has no service break which exceeds 12 months, or a safety member who has completed 20 years of service regardless of age, may be retired upon filing with the board a written application setting forth the date upon which the member desires the member’s retirement to become effective. The effective retirement date shall not be either of the following:
(1) Earlier than the date the application is filed with the board.
(2) More than 60 days after the date of filing the application or more than a number of days that has been approved by the board.
(b) This section shall not be operative in any county until such time as the board of supervisors shall, by ordinance, make this section applicable in the county.
(c) This section shall not apply to a member who is subject to the provisions of the California Public Employees’ Pension Reform Act of 2013 for all or any portion of their membership in the county retirement system.

SEC. 12.

 Section 31726 of the Government Code is amended to read:

31726.
 (a) Upon retirement for nonservice-connected disability a member who has attained age 65 shall receive their service retirement allowance.
(b) Every member under age 65 who is retired for nonservice-connected disability and who is not simultaneously retired as a member on deferred retirement of the Public Employees’ Retirement System or a retirement system established under this chapter in another county shall receive a disability retirement allowance which shall be the greater of the following:
(1) The sum to which the member would be entitled as service retirement; or
(2) A sum which shall consist any of the following:
(A) An annuity which is the actuarial equivalent of the member’s accumulated contributions at the time of retirement.
(B) If, in the opinion of the board, the member’s disability is not due to intemperate use of alcoholic liquor or drugs, willful misconduct, or violation of law on the member’s part, a disability retirement pension purchased by contributions of the county or district.
(C) If, in the opinion of the board, the member’s disability is not due to conviction of a felony or criminal activity which caused or resulted in the member’s disability, a disability retirement pension purchased by contributions of the county or district. This subparagraph shall only apply to a person who becomes a member of the system on or after January 1, 1988.

SEC. 13.

 Section 31726.5 of the Government Code is amended to read:

31726.5.
 (a) Upon retirement for nonservice-connected disability a safety member who has attained age 55 shall receive their service retirement allowance.
(b) Every safety member under age 55 who is retired for nonservice-connected disability and who is not simultaneously retired as a member on deferred retirement of the Public Employees’ Retirement System or a retirement system established under this chapter in another county shall receive a disability retirement allowance which shall be the greater of:
(1) The sum to which the member would be entitled to as service retirement; or
(2) A sum which shall consist of:
(A) An annuity which is the actuarial equivalent of the member’s accumulated contributions at the time of retirement.
(B) If, in the opinion of the board, the member’s disability is not due to intemperate use of alcoholic liquor or drugs, willful misconduct, or violation of law on the member’s part, a disability retirement pension purchased by contributions of the county or district.
(C) If, in the opinion of the board, the member’s disability is not due to conviction of a felony or criminal activity which caused or resulted in the member’s disability, a disability retirement pension purchased by contributions of the county or district.
This subparagraph shall only apply to a person who becomes a member of the association on or after January 1, 1988.

SEC. 14.

 Section 31761 of the Government Code is amended to read:

31761.
 Optional settlement 1 consists of the right to elect in writing to have a retirement allowance paid to the member until the member’s death and, if the member dies before receiving in annuity payments the amount of the member’s accumulated contributions at retirement, to have the balance at death paid to the member’s estate or to the natural person, having an insurable interest in the member’s life, as the member nominates by written designation duly executed and filed with the board.

SEC. 15.

 Section 31762 of the Government Code is amended to read:

31762.
 Optional settlement 2 consists of the right to elect in writing to have a retirement allowance paid to the member until the member’s death, and thereafter to the natural person, having an insurable interest in the member’s life, as the member nominates by written designation duly executed and filed with the board at the time of the member’s retirement.

SEC. 16.

 Section 31763 of the Government Code is amended to read:

31763.
 Optional settlement 3 consists of the right to elect in writing to have a retirement allowance paid to the member until the member’s death, and thereafter to have one-half of the member’s retirement allowance paid to the natural person, having an insurable interest in the member’s life, as the member nominates by written designation duly executed and filed with the board at the time of the member’s retirement.

SEC. 17.

 Section 31764 of the Government Code is amended to read:

31764.
 Optional settlement 4 consists of the right to elect in writing to have a retirement allowance paid to the member until the member’s death and thereafter to have other benefits as are approved by the board, upon the advice of the actuary, continued throughout the life of and paid to the natural persons, having an insurable interest in the member’s life, as the member nominates by written designation duly executed and filed with the board at the time of retirement. The designation shall not, in the opinion of the board and the actuary, place any additional burden upon the retirement system.

SEC. 18.

 Section 31781 of the Government Code is amended to read:

31781.
 The death benefit shall consist of:
(a) The member’s accumulated contributions.
(b) An amount, provided from contributions by the county or district, equal to one-twelfth of the annual compensation earnable or pensionable compensation as defined in Section 7522.34, whichever is applicable, by the deceased during the 12 months immediately preceding the member’s death, multiplied by the number of completed years of service under the system, but not to exceed 50 percent of such annual compensation. The computation for any absence shall be based on the compensation of the position held by the member at the beginning of the absence.