BILL NUMBER: AB 3252 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Kaloogian
FEBRUARY 23, 1996
An act to add Chapter 21.6 (commencing with Section 7522) to
Division 7 of Title 1 of the Government Code, relating to public
employees, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 3252, as introduced, Kaloogian. Public employees: retirement.
Existing law establishes various public retirement systems for
state and local public agency employees.
This bill would establish the Public Employees' Defined
Contribution Retirement System for state and other local public
agency employees whose employees elect to participate in the system.
The system would be administered by the Public Employees'
Consolidated Retirement Board and on and after July 1, 1997, the
system shall be the single retirement program for new state public
agency employees whose employment commences on or after that date and
who would have been state miscellaneous members of the Public
Employees' Retirement System. Present state employees would be
authorized to elect membership in the defined contribution system in
lieu of continued membership in their existing system. The bill
would establish the Public Employees' Defined Contribution Retirement
Fund in the State Treasury and provide that all moneys would be
continuously appropriated for payments of the system.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 21.6 (commencing with Section 7522) is added to
Division 7 of Title 1 of the Government Code, to read:
CHAPTER 21.6. PUBLIC EMPLOYEES' DEFINED CONTRIBUTION
RETIREMENT SYSTEM
7522. This chapter shall be known and may be cited as the Public
Employees' Defined Contribution Retirement System Law.
7522.1. As used in this chapter, unless the context clearly
requires a different meaning:
(a) "Defined contribution system" or "system" means the defined
contribution retirement system created and established by this
chapter.
(b) "Existing retirement system" means any state or local public
retirement system in existence on January 1, 1997.
(c) "Existing employer" means any public employer of a member of
the existing retirement system.
(d) "Board" means the Public Employees' Consolidated Retirement
Board created and established to administer the provisions of this
chapter.
(e) "Member" or "employee" means any person employed full-time by
the state or any local public agency that elects to be included in
the system.
(f) "Year of employment service" means full-time employment for at
least 10 months, a month being defined as 20 employment days. No
more than one year of service may be accumulated in any 12-month
period.
(g) "Employer" means the state or local public agency that employs
a member.
(h) "Compensation" means the full compensation actually received
by members for service provided by the state or local public agency.
(i) "Member contribution" means an amount reduced from the
employee's regular pay periods, and deposited into the member's
individual annuity account within the defined contribution system.
(j) "Employer contribution" means an amount deposited into the
member's individual annuity account on a periodic basis coinciding
with the employee's regular pay period by an employer from its own
funds.
(k) "Annuity account" or "annuity" means an account established
for each member to record the deposit of member and employer
contributions and interest, dividends, or other accumulations
credited on behalf of the member.
(l) "Retirement" means a member's withdrawal from the active
employment of a participating employer and completion of all
conditions precedent to retirement.
(m) "Permanent, total disability" means a mental or physical
incapacity requiring the absence from employment service for at least
six months.
(n) "Fund" means the Public Employees' Defined Contribution
Retirement System Fund.
7522.2. The Public Employees' Defined Contribution Retirement
System is hereby created and established to provide for the secure,
fair, and orderly retirement of the state and local public agency
employees in this state.
7522.3. The provisions of this chapter shall be liberally
construed to provide a general annuity based retirement system for
state and local public agency employees. The purpose of this chapter
is to provide a defined contribution retirement program that is
fully funded on a current basis from employer and employee
contributions.
7522.4. (a) The Public Employees' Consolidated Retirement Board
is hereby established to administer the system.
(b) It consists of:
______________________
(c) The board may sue and be sued, contract and be contracted
with, and conduct all the business of the system.
7522.5. (a) The board has all powers necessary to effectuate the
purposes of this chapter. The board shall determine and charge
reasonable costs of administering the system. The board shall
contract with a private pension, insurance, annuity, mutual fund, or
other qualified company or companies to administer the day-to-day
operations of the system.
(b) The Public Employees' Defined Contribution Retirement System
Fund is hereby created and is a trust fund in the State Treasury
administered by the board in accordance with this chapter and Section
17 of Article XVI of the California Constitution. Notwithstanding
Section 13340, all moneys in the fund are continuously appropriated,
without regard to fiscal years, for administrative costs and payments
which shall be made upon warrants drawn by the Controller upon
demands made by the board.
7522.6. Any state employee who is a member of any existing
retirement system may, upon written election, voluntarily elect
membership in the defined contribution system, on a prospective
basis, on or after July 1, 1997, in lieu of continued membership in
the retirement system. All benefits earned by any employee making
that voluntary election under the existing retirement system prior to
a voluntary election shall be made available to that employee upon
retirement as provided by the existing retirement system. A member
of the existing retirement system who has less than five years of
service in an existing retirement system may irrevocably elect to
withdraw his or her contributions plus interest thereon as if the
member is terminating employment and upon withdrawal transfer the
funds to the defined contribution system. The member's years of
contributing service in the existing system shall be applied for the
years of employment service required under this chapter. After having
made an election, the employee may not change that election or again
become a member of the existing retirement system.
7522.7. (a) On and after July 1, 1997, the Public Employees'
Defined Contribution Retirement System, rather than the Public
Employees' Retirement System, shall be the retirement program for new
state employees whose employment commences on or after that date and
who would have become state miscellaneous members of the Public
Employees' Retirement System. No additional new state employees
except as may be provided in this chapter may be admitted as state
miscellaneous members of the Public Employees' Retirement System.
Members of the Public Employees' Retirement System whose employment
continues beyond July 1, 1997, shall not be affected by this chapter
and may continue to contribute and participate in the existing
system.
(b) The governing body of any local public agency and the Board of
Regents of the University of California may elect at any time to
have all or part of their employees participate in this system.
(c) Any state member of the Public Employees' Retirement System
who is not a state miscellaneous member may elect to participate in
this system rather than the Public Employees' Retirement System.
(d) Notwithstanding any other provision of law, any employee whose
employment terminates after June 30, 1997, and is later reemployed
by an employer shall be eligible for membership only this system.
(e) An employee whose employment with a former employer or an
existing employer is suspended as a result of an approved leave of
absence, approved maternity or paternity break in service, or any
other approved break in service authorized by the board, is eligible
for readmission to the existing retirement system in which he or she
was a member.
(f) In all cases where a question exists as to readmission to
membership in the existing retirement system, the board shall decide
the question.
7522.8. (a) Each employee who is a member of the defined
contribution system shall contribute 41/2 percent of his or her
monthly gross compensation by salary reduction. Those salary
reductions shall be made by the employer at the normal payroll
intervals and shall be remitted within five working days to the
private pension, insurance, annuity, mutual fund, or other qualified
company or companies designated by the board to administer the
day-to-day operations of the system.
(b) All member contributions shall be immediately deposited in the
fund to an account or accounts established in the name of the member
and held in trust for the benefit of the member. An account
agreement shall be issued to each member setting forth the terms and
conditions under which contributions are received, and the investment
and retirement options available to the member. The board, on or
before June 30, 1997, shall adopt rules defining the minimum
requirements for the investment and retirement options to be provided
to the members. The adoption, repeal, amendment, or modification of
the rules shall not be subject to the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2).
(c) The rules, to the extent not inconsistent with the applicable
provisions of the Internal Revenue Code of the United States, shall
provide for varied retirement options including, but not limited to:
(1) Lump sum distributions.
(2) Joint and survivor annuities.
(3) Other annuity forms in the discretion of the board.
(4) Variable annuities that gradually increase monthly retirement
payments. Those increased payments shall be funded solely by the
existing current value of the member's account at the time of the
member's retirement payments commence and not, to any extent, in a
manner that would require additional employer or employee
contributions to any member's account after retirement or after the
cessation of employment.
(5) The instances in which, if any, distributions or loans may be
made to members from their annuity account balances prior to having
attained the age of 55 years.
(d) The board shall study the feasibility of employees making
personal contributions to the defined contribution system in addition
to those required by this section and the impact of the United
States Internal Revenue Code upon those contributions. The results
of the study and recommendations for legislation to authorize
additional payments shall be presented to the committee on retirement
of each house of the Legislature on or before January 1, 1998.
7522.9. Each participating employer shall make a monthly
contribution equal to 71/2 percent of each member's gross
compensation. The pro rata share of this amount shall be paid into
the fund upon each date that a member contribution is made and shall
be remitted for credit to the member's annuity account. Each
participating employer has a fiduciary duty to its employees to
ensure that the employer contributions are timely made.
In the event that any payment is not timely made, the
participating employer shall immediately give to the employee and the
Controller notice in writing of nonpayment, in the form and
accompanied by the documentation as may be required by the Controller
and shall be subject to an interest penalty determined by the board.
7522.10. Any member whose employment with a participating
employer terminates shall be eligible to terminate his or her annuity
account and receive a distribution of all funds contributed and
earnings accumulated in his or her annuity account. However, on the
death or permanent, total disability of any member, that member shall
be eligible to terminate his or her annuity account and receive all
funds contributed and earnings accumulated in his or her annuity
account.
7522.11. At any time after an employee reaches the age of 55
years, he or she may elect to take retirement by notifying the board
or its designee in writing of that intention not less than 60 days
prior to the effective date of retirement. Retirement payments shall
commence within 30 days of the retirement date under the payment
option or options as may be provided by the board and elected by the
employee.
7522.12. (a) The amount of annuity payments a retired member
shall receive shall be based solely upon the balance in the member's
annuity account at the date of retirement, the retirement option
selected, or in the event of an annuity option being selected, the
actuarial life expectancy of the member, and the other factors as
normally govern annuity payments.
(b) The board, or its designee, is authorized upon retirement of a
member, with the approval of that member, to purchase an annuity
with the balance of the member's account. Upon delivery of the
annuity to the member upon his or her retirement, the member shall
execute a release surrendering any claim the member may have against
the retirement trust.
7522.13. The board shall authorize the private pension,
insurance, annuity, mutual fund, or other qualified company or
companies with whom it contracts to make available to members those
supplemental annuity options, disability, and other insurance or
benefits as the board deems appropriate. Those supplemental
annuities, insurance, and benefits shall be funded solely from
employee contributions.
7522.14. The board shall prepare or cause to be prepared, on an
annual basis, an account statement for each member's annuity account.
The statement shall include, but not be limited to, a statement of
the current market value of the member's account. The board shall
prescribe the form and content of the account statement not
inconsistent with this section.
7522.15. The right of any person to a benefit under this chapter
and the money in any account and the fund are not be subject to
execution or any process whatsoever, except to the extent permitted
by Section 704.110 of the Code of Civil Procedure, and are
unassignable, except as specifically provided in this chapter.