Existing law requires the Teachers Retirement Board to establish a vendor registration process through which information about tax-deferred retirement investment products shall be made available for consideration by public employees of all local school districts, community college districts, and county offices of education, among others. Existing law requires the board to maintain an impartial investment information bank, via an Internet Web site, with specified information about the retirement investment products offered and objective comparisons of vendors. Existing law also prohibits specified personnel from receiving consideration for promoting a particular vendors products.

The bill would require the investment information bank to include a side-by-side comparison of each registered vendor. The bill would also require all local school districts, community college districts, and county offices of education to adopt a policy addressing the solicitation of 403(b) products, as defined, by vendors on school campuses. Because the bill would require local agencies to perform additional duties it would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 996

Author:(Medina) – As Introduced Ver:February 26, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill requires (i) the California State Teachers' Retirement System (CalSTRS) to include in its 403(b) investment information website "side-by-side comparison" information on registered 403(b) vendors, and (ii) all school districts, community college districts, and county offices of education to adopt a policy regarding campus access by 403(b) vendors.

FISCAL EFFECT:

1) Minor, and likely absorbable, IT costs to CalSTRS to update its 403(b) website with the side-by-side vendor comparison.

2) Potentially significant, reimbursable costs to school districts, community college districts, and county offices of education to adopt policies with respect to 403(b) vendors. For example, if half of the state's districts submitted the minimum $1,000 state mandate claim, total reimbursable costs would exceed $500,000.

COMMENTS:

1) Purpose. CalSTRS members need access to transparent and impartial information on 403(b) plans in order to make responsible investment choices. According to the author, educators are often lured into less secure products by unsavory sales tactics, including on-campus sales pitches. Current practice regarding 403(b) vendor access to campuses varies considerably by school district. The author believes requiring school districts to enact formal policies for vendor campus access, district officials will be able to control coercive vendor practices. Furthermore, by updating the CalSTRS 403(b) comparison website, educators will have better access to investment information and resources.

2) Further Clarifications. Opponents, led by several large insurance and investment advisors, have requested the CalSTRS website be further clarified to distinguish different product categories, such as mutual funds, variable annuities, and fixed annuities. Those opponents have also requested clarifications to the school policy requirement to make clear it is not intended to change or alter policies already in place, but only to require school entities to officially maintain such policies and ensure they comply with Internal Revenue Service, California Insurance Code, and any applicable insurance committee or collective bargaining committee rules.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081