BILL NUMBER: AB 3252	AMENDED
	BILL TEXT

	AMENDED IN SENATE   JUNE 5, 1996
	AMENDED IN ASSEMBLY   MAY 28, 1996
	AMENDED IN ASSEMBLY   APRIL 22, 1996

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 amended, Kaloogian.  Public employees:  retirement.
   Existing law establishes various public retirement systems for
state and local public agency employees.
   This bill would authorize state and local agency employers to
provide defined contribution retirement plans for state and other
local public agency employees who elect to participate in the system.
  The plans would be administered by the state and local employers
and on and after January 1, 1997, bargaining units representing state
employees would be authorized to reach agreement with the employer
to have their members participate in the defined contribution
retirement plan in lieu of continued membership in their existing
system and the existing retirement system would be required to
transfer the actuarial present value, as defined, to the plan
administrator.  The bill would establish the Public Employees'
Defined Contribution Retirement Fund in the State Treasury for the
state defined contribution plan and provide that all moneys would be
continuously appropriated for payments of the plan.
   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  PLANS

   7522.  This chapter shall be known and may be cited as the Public
Employees' Defined Contribution Retirement Plan Law.
   7522.1.  As used in this chapter, unless the context clearly
requires a different meaning:
   (a) "Accrued service benefit" means the amount, determined by the
actuary of the existing retirement system, that represents the
present value of an employee's accrued retirement benefit earned
through the date on which a payment is made to a defined contribution
retirement plan by an existing retirement system for the benefit of
an individual account.  In order to determine the present value of
the accrued benefit, the discount rate for investment earnings and
the assumptions for current final average compensation shall be
approved by the employer.  At the employer's written election, the
accrued services benefit shall also include an employee's pro rata
share of any actuarially determined excess of plan assets compared to
accrued liabilities in the existing retirement system on the
reporting date prior to the employer's election to make a defined
contribution retirement plan available to a specific group of
employees.
   (b) "Defined contribution plan" or "plan" means the defined
contribution plans authorized by this chapter as those plans may be
established by the state or individual local public agencies.
   (c) "Existing retirement system" means any state or local public
retirement system.
   (d) "Existing employer" means any public employer of a member of
the existing retirement system.
   (e) "Member" or "employee" means any person, other than a safety
employee, employed by the state or any local public agency that
elects to be included in a plan.
   (f) "Employer" means the state or local public agency, including,
but not limited to, school districts, that employs a member.
"Employer" does not include the California State University.
   (g) "Compensation" means the remuneration paid by the employer in
payment for the employee's services during normal working hours, but
does not include the monetary value of any other advantages furnished
to the employee.
   (h) "Member contribution" means an amount reduced from the
employee's regular pay periods, and deposited into the member's
individual account within a defined contribution plan.
   (i) "Employer contribution" means an amount deposited into the
member's individual account on a periodic basis coinciding with the
employee's regular pay period by an employer from its own funds.
   (j) "Individual account" or "account" means an account in a
defined contribution plan established for each member to record the
deposit of member and employer contributions and earnings there on on
behalf of the member.
   (k) "Retirement" means a member's withdrawal from the active
employment of a participating employer and completion of all
conditions precedent to retirement.
   (l) "Fund" means the Public Employees' Defined Contribution
Retirement Plan Fund.
   7522.2.  Public employees' defined contribution plans may provide
a framework under which the state and each local public agency are
authorized to create defined contribution plans for their respective
employees that are tailored to each employer's individual needs and
that provide the opportunity for retirement savings and for the
orderly administration of the plans.
   7522.3.  (a) This chapter shall be liberally construed to
authorize alternative retirement plans for state and local public
agency employees.  The purpose of this chapter is to authorize the
state and local public agencies to provide defined contribution
retirement plans that are fully funded on a current basis from
employer or employee contributions, or both.
   (b) In no event may the state or any local public agency fail to
continue to offer membership in any retirement system in existence on
January 1, 1997, to current employees, new employees, or retirees.
   (c) Defined contribution plans shall be established and
administered in accordance with the requirements for qualified
retirement or eligible deferred compensation plans respectively under
the Internal Revenue Code of 1986, as amended.  
   7522.4.  (a) The Public Employees' Defined Contribution Retirement
Plan Board is hereby established to administer the plan.
   (b) It consists of:
   (1) Two local government officials appointed by the Governor.
   (2) The Director of the Department of Personnel Administration.
   (3) The Controller.
   (4) The Treasurer.
   (5) One person from the active or retired membership of the
defined contribution retirement plan appointed by the Speaker of the
Assembly.
   (6) One person from the active or retired membership of the
defined contribution retirement plan appointed by the Senate
Committee on Rules.
   (c) The board may sue and be sued, contract and be contracted
with, and conduct all the business of the plan. 
   7522.5.  (a) The employer has all powers necessary to effectuate
the purposes of this chapter.  The employer shall determine and
charge reasonable costs of administering the system.  The employer
may contract with existing public retirement systems or may contract
with a private pension, insurance, annuity, mutual fund, or other
qualified company or companies to administer the day-to-day
operations of the plan.
   (b) The Public Employees' Defined Contribution Retirement Plan
Fund is hereby created for the state defined contribution plan and is
a trust fund in the State Treasury administered by the 
board   employer  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
  employer  .
   7522.6.  Any state or other public agency employee who is a member
of any existing retirement system on the effective date specified in
an agreement between the employees' bargaining unit and the employer
may, in lieu of continued or exclusive participation in an existing
retirement system and upon written election, voluntarily elect
membership in a defined contribution retirement plan offered by the
employer.  The administrator of the defined contribution retirement
plan shall notify the existing retirement system of the employee's
election and of the employee's service record and compensation
history within 45 days of that election, and the existing retirement
system, within 45 days, shall transfer to the plan administrator a
payment equal to the actuarial present value of the employee's
accrued service benefit on the date of the transfer.  The amount so
transferred shall be credited to the employee's individual account.
   7522.7.  (a) On or after January 1, 1997, any bargaining unit
representing new state employees upon reaching an agreement with the
employer may elect to offer participation in the defined contribution
plan to those employees.
   (b) The governing body of any local public agency and the Regents
of the University of California may elect at any time to permit some
or all of their employees to participate in a defined contribution
retirement plan either as an alternative or as a supplement to an
existing retirement system.  Those employers may contract with an
existing retirement system for elective partial defined benefit
options in order to facilitate retirement or benefit plans through
which employees may elect to receive a reduced defined benefit option
and a supplemental complementary defined contribution retirement
plan.  Any plan provided by a local agency shall include more than
one employee-directed investment fund appropriate for investment by
public employees, and an educational program, approved by the
employer or the employer, that explains to employees considering
their elections the probable and possible benefits and risks of
defined benefit and defined contribution retirement plans, and
alternative investment strategies suitable for public employees.
   (c) The Department of Personnel Administration shall provide for
the participation in the defined contribution retirement plan by
state employees who are excluded from, or otherwise not subject to,
collective bargaining.  Those employees shall be given the right to
voluntarily elect membership in a defined contribution plan.
   (d) Any employee whose employment terminates after January 1,
1997, and is later reemployed by an employer shall be eligible for
membership in either the existing retirement system or the defined
contribution plan, unless the latter participation would be in
contravention of a bargaining agreement.
   (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
  employer  , is eligible for readmission to the
plan in which he or she was a member at the time the break in service
began.
   (f) In all cases where a question exists as to the readmission to
membership in a plan, the employer shall decide the question.
   7522.8.  The employer or its agent in conjunction with this plan,
may purchase group annuity contracts, individual retirement
annuities, disability insurance investment contracts, securities,
interest in trusts and other financial instruments, health care
benefit plans, and group insurance as necessary or appropriate for
the plan to provide retirement and related benefits comparable to
those provided under an existing retirement system. Selections of
plan administrators, annuities, and insurance products shall be
conducted through a competitive selection process.  If requested by a
participating employer, an existing retirement system shall provide
an actuarially determined optional disability benefit option and
employer contribution rate for employees who elect to participate in
a defined contribution retirement plan.
   7522.9.  The plan administrator shall prepare, or cause to be
prepared, at least quarterly a statement for each member's individual
account.  The statement shall include the current market value of
the account, including self-directed investment options, an
itemization of changes in the account, the amount vested, and other
information as may be required by the  board  
plan administrator  or the participating employer.  The 
board   plan administrator  or the employer shall
arrange for an independent audit of the plan's assets unless the
audit is provided for by a third party organization.