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AB-1009 Public employees’ retirement: purchasing power protection.(1999-2000)

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AB1009:v94#DOCUMENT

Assembly Bill No. 1009
CHAPTER 483

An act to amend Sections 20178 and 21337 of, and to add Section 21337.1 to, the Government Code, relating to public employees’ retirement, and declaring the urgency thereof, to take effect immediately.

[ Filed with Secretary of State  September 19, 2000. Approved by Governor  September 16, 2000. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 1009, Correa. Public employees’ retirement: purchasing power protection.
Under existing law, the Board of Administration of the Public Employees’ Retirement System is required to annually transfer specified amounts to a supplemental account to fund purchasing power protection for monthly allowances paid to all retirees, survivors, and beneficiaries of the system.
This bill would instead (1) establish separate supplemental accounts for state and school employers for those purposes, (2) require all monthly allowances paid to retirees, survivors, and beneficiaries of contracting agencies to be increased, annually commencing January 1, 2001, to 80% of the purchasing power of their initial monthly allowances, as specified, (3) provide a one-time purchasing power protection payment for the year 2000, as specified, and (4) require the cost of those increases to be paid from employer assets in the system.
The bill would declare that it is to take effect immediately as an urgency statute and shall be operative on July 1, 2000.

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


SECTION 1.

 Section 20178 of the Government Code is amended to read:

20178.
 (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 June 30, 1991, 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 retired member reserves.
(b) Notwithstanding subdivision (a), the difference between the interest amount that was credited to the account of any state or school member of this system who was paid his or her accumulated contributions on or after June 30, 1991, and the lesser of the current actuarial interest rate or the current annual interest rate, shall be transferred to the state or school account, as appropriate, established by the board under Section 21337 to fund the purchasing power protection allowance for retirees, survivors, or beneficiaries of state or school employers.
(c) Notwithstanding subdivisions (a) and (b), if the current net earnings rate for state or school members exceeds the interest rate used to credit the retired member accounts of state or school employers, in addition to the amounts transferred to the separate accounts established for state and school employers under Section 21337, the remaining amounts shall be credited to employer accounts.
(d) The current annual interest rate may be lower than the current actuarial interest rate.

SEC. 2.

 Section 21337 of the Government Code is amended to read:

21337.
 (a) On an annual basis, the board shall transfer funds to separate supplemental state and school accounts, to fund the purchasing power protection allowance of retirees, survivors, and beneficiaries of state or school employers, respectively. The amounts transferred shall be the lesser of the following:
(1) The amount necessary to increase all monthly allowances paid by this system to retirees, survivors, and beneficiaries of state or school employers to 75 percent of the purchasing power of the initial monthly allowances.
(2) 1.1 percent of the net earnings on state or school member contributions, as determined by Section 20178.
(b) The funds transferred to the two separate supplemental accounts shall be utilized to increase all monthly allowances paid by this system to retirees, survivors, and beneficiaries of state and school employers, up to a maximum of 75 percent of the purchasing power, as determined by the board, of the initial monthly allowances, notwithstanding the benefit provided by Section 21328, that were received by every retired state or school member or survivor or beneficiary of a state or school member or retiree who was eligible to receive any allowance at the end of each fiscal year. Funds remaining in the state or school account after the payment of benefits under this section shall be transferred to the respective state or school employer accounts.

SEC. 3.

 Section 21337.1 is added to the Government Code, to read:

21337.1.
 (a) As of January 1, 2001, and annually thereafter, all monthly allowances paid by the system to retirees of contracting public agencies, and to survivors and beneficiaries of members and retirees of those agencies, shall be increased to 80 percent of the purchasing power of the initial monthly allowance as determined by the board.
(b) Notwithstanding subdivision (a), retirees of contracting public agencies, and survivors and beneficiaries of members and retirees of those agencies, who receive a monthly allowance payable by this system shall also receive, on or after January 1, 2001, a one-time lump-sum payment in an amount equal to the difference, if any, between the purchasing power protection allowance paid between January 1, 2000, and December 31, 2000, and the purchasing power protection allowance that would have been payable if this section had been operative during that period.
(c) The cost of the increase in allowances paid pursuant to subdivisions (a) and (b) shall be paid from the same assets of the employer used in the determination of each employer contribution rate for each membership classification under which service was credited that affects the allowance calculation of the retirees, survivors, or beneficiaries.

SEC. 4.

 This act shall be operative on July 1, 2000.

SEC. 5.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to limit the erosion of the purchasing power of monthly allowances paid to retirees, survivors, and beneficiaries of contracting agencies, it is necessary that this act take effect immediately.