AB 2196: Public employees’ retirement: service credit: payments.
- Session Year: 2017-2018
- House: Assembly
- Latest Version Date: 2018-08-20
(1)The Public Employees Retirement Law (PERL) creates the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration.
Under that law, members may make certain elections, including elections to purchase service credit for various types of public service, upon payment of additional contributions. Existing law permits a member who retires before paying off the entire amount for service credit to pay the balance due or total amount if no payroll deductions had been made prior to retirement by deductions from his or her retirement allowance equal to those authorized as payroll deductions, as specified.
The bill would permit the member, survivor, or beneficiary, as an alternative, on or after January 1, 2020, to elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
The bill would also provide that all elections taking effect on or after January 1, 2020, including elections for normal contributions, arrears contributions, absences, or public service, would become due and payable at the time of members retirement or preretirement death. The bill would additionally require the member, survivor, or beneficiary to have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member, except as specified.
(2)Existing law permits a member of PERL who has elected to receive credit for service and who retires for disability, including a safety member who retires due to industrial disability, to elect to cancel the installments prospectively, in accordance with certain provisions.
This bill would specify that, for an election taking place on or after January 1, 2020, the amount remaining for normal contributions, arrears, contributions, absences, or public service for the election would become due and payable at the time of the members retirement or preretirement death. The bill would provide that in these circumstances the member, survivor, or beneficiary would have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(3)Existing law specifies that an election by a member to receive credit for service under PERL is effective only if accompanied by a lump-sum payment or an authorization for payments, in accordance with regulations of the board. Existing law authorizes a member paying for credit for service in after-tax installments to suspend these payments for a period not to exceed 12 months, with payments automatically resuming at the end of the period, or earlier, if requested by the member. Under existing law, a member who retires during the suspension period may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel installment payments, as specified.
This bill would permit a member, on or after January 1, 2020, as an alternative to these 2 options, to reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(4)Under provisions of PERL governing the payment of additional service credit, a members failure to make the lump-sum payment or the election to cancel installment payments results in the resumption of installment payments as of the members retirement date.
This bill would instead provide that, for elections with an initial effective date on or after January 1, 2020, a members failure to elect to make a lump-sum payment or cancel his or her installment payments would result in the members allowance being reduced by the actuarial equivalent of the recalculated balance remaining unpaid.
(5)The PERL establishes retirement formulas, known as the Second Tier, modified First Tier, and First Tier, which are applicable to specified members of the retirement system. Under that law, a member who elects to be subject to Second Tier benefits is paid his or her accumulated contributions plus interest, subject to specified conditions. Effective January 1, 2000, a member who received service credit subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. That law requires a member who elects to become subject to First Tier benefits to deposit accumulated contributions the member withdrew while he or she was subject to Second Tier benefits, plus interest, as specified, and this deposit requirement may be satisfied by an actuarial equivalent reduction in the members retirement allowance.
This bill would instead specify that, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the number at the time of the members retirement or preretirement death. The bill would also specify that, for a member who elects to receive First Tier credit on or after January 1, 2020, any unpaid balance of that member would become due and payable at the time of the members retirement or preretirement death, with the member, survivor, or beneficiarys allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(1)The Public Employees Retirement Law (PERL) creates the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration.
Under that law, members may make certain elections, including elections to purchase service credit for various types of public service, upon payment of additional contributions. Existing law permits a member who retires before paying off the entire amount for service credit to pay the balance due or total amount if no payroll deductions had been made prior to retirement by deductions from his or her retirement allowance equal to those authorized as payroll deductions, as specified.
The bill would permit the member, survivor, or beneficiary, as an alternative, on or after January 1, 2020, to elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
The bill would also provide that all elections taking effect on or after January 1, 2020, including elections for normal contributions, arrears contributions, absences, or public service, would become due and payable at the time of members retirement or preretirement death. The bill would additionally require the member, survivor, or beneficiary to have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member, except as specified.
(2)Existing law permits a member of PERL who has elected to receive credit for service and who retires for disability, including a safety member who retires due to industrial disability, to elect to cancel the installments prospectively, in accordance with certain provisions.
This bill would specify that, for an election taking place on or after January 1, 2020, the amount remaining for normal contributions, arrears, contributions, absences, or public service for the election would become due and payable at the time of the members retirement or preretirement death. The bill would provide that in these circumstances the member, survivor, or beneficiary would have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(3)Existing law specifies that an election by a member to receive credit for service under PERL is effective only if accompanied by a lump-sum payment or an authorization for payments, in accordance with regulations of the board. Existing law authorizes a member paying for credit for service in after-tax installments to suspend these payments for a period not to exceed 12 months, with payments automatically resuming at the end of the period, or earlier, if requested by the member. Under existing law, a member who retires during the suspension period may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel installment payments, as specified.
This bill would permit a member, on or after January 1, 2020, as an alternative to these 2 options, to reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(4)Under provisions of PERL governing the payment of additional service credit, a members failure to make the lump-sum payment or the election to cancel installment payments results in the resumption of installment payments as of the members retirement date.
This bill would instead provide that, for elections with an initial effective date on or after January 1, 2020, a members failure to elect to make a lump-sum payment or cancel his or her installment payments would result in the members allowance being reduced by the actuarial equivalent of the recalculated balance remaining unpaid.
(5)The PERL establishes retirement formulas, known as the Second Tier, modified First Tier, and First Tier, which are applicable to specified members of the retirement system. Under that law, a member who elects to be subject to Second Tier benefits is paid his or her accumulated contributions plus interest, subject to specified conditions. Effective January 1, 2000, a member who received service credit subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. That law requires a member who elects to become subject to First Tier benefits to deposit accumulated contributions the member withdrew while he or she was subject to Second Tier benefits, plus interest, as specified, and this deposit requirement may be satisfied by an actuarial equivalent reduction in the members retirement allowance.
This bill would instead specify that, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the number at the time of the members retirement or preretirement death. The bill would also specify that, for a member who elects to receive First Tier credit on or after January 1, 2020, any unpaid balance of that member would become due and payable at the time of the members retirement or preretirement death, with the member, survivor, or beneficiarys allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(1)The Public Employees Retirement Law (PERL) creates the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system, system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration.
Under that law, members may make certain elections, including elections to purchase service credit for various types of public service, upon payment of additional contributions. Existing law permits a member who retires before paying off the entire amount for service credit to pay the balance due or total amount if no payroll deductions had been made prior to retirement by deductions from his or her retirement allowance equal to those authorized as payroll deductions, as specified.
The bill would permit the member, survivor, or beneficiary, as an alternative, on or after January 1, 2020, to elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
The bill would also provide that all elections taking effect on or after January 1, 2019, 2020, including elections for normal contributions, arrears contributions, absences, or public service, would become due and payable at the time of members retirement or preretirement death. The bill would additionally require the member, survivor, or beneficiary to have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member, except as specified.
(2)Existing law permits a member of PERL who has elected to receive credit for service and who retires for disability, including a safety member who retires due to industrial disability, to elect to cancel the installments prospectively, in accordance with certain provisions.
This bill would specify that that, for an election taking place on or after January 1, 2019, 2020, the amount of the election remaining for normal contributions, arrears, contributions, absences, or public service for the election would become due and payable at the time of the members retirement or preretirement death. The bill would provide that in these circumstances the member, survivor, or beneficiary would have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(3)Existing law specifies that an election by a member to receive credit for service under PERL is effective only if accompanied by a lump-sum payment or an authorization for payments, in accordance with regulations of the board. Existing law authorizes a member paying for credit for service in after-tax installments to suspend these payments for a period not to exceed 12 months, with payments automatically resuming at the end of the period, or earlier, if requested by the member. Under existing law, a member who retires during the suspension period may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel installment payments, as specified.
This bill would permit a member, on or after January 1, 2020, as an alternative to these 2 options, to reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(4)Under provisions of PERL governing the payment of additional service credit, a members failure to make the lump-sum payment or the election to cancel installment payments results in the resumption of installment payments as of the members retirement date.
This bill would revise that provision to instead provide that, for elections with an initial effective date on or after January 1, 2019, 2020, a members failure to elect to make a lump-sum payment or cancel his or her installment payments would result in the members allowance being reduced by the actuarial equivalent of the recalculated balance remaining unpaid.
(5)The PERL establishes retirement formulas, known as the Second Tier, modified First Tier, and First Tier, which are applicable to specified members of the retirement system. Under that law, a member who elects to be subject to Second Tier benefits is paid his or her accumulated contributions plus interest, subject to specified conditions. Effective January 1, 2000, a member who received service credit subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. That law requires a member who elects to become subject to First Tier benefits to deposit accumulated contributions the member withdrew while he or she was subject to Second Tier benefits, plus interest, as specified, and this deposit requirement may be satisfied by an actuarial equivalent reduction in the members retirement allowance.
This bill would instead specify that, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the number at the time of the members retirement or preretirement death. The bill would also specify that, for a member who elects to receive First Tier Credit credit on or after January 1, 2019, 2020, any unpaid balance of that member would become due and payable at the time of the members retirement or preretirement death, with the member, survivor, or beneficiarys allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(1)The Public Employees Retirement Law (PERL) creates the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system, based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration.
Under that law, members may make certain elections, including elections to purchase service credit for various types of public service, upon payment of additional contributions. Existing law permits a member who retires before paying off the entire amount for service credit to pay the balance due or total amount if no payroll deductions had been made prior to retirement by deductions from his or her retirement allowance equal to those authorized as payroll deductions, as specified.
The bill would permit the member, survivor, or beneficiary, as an alternative, to elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
The bill would also provide that all elections taking effect on or after January 1, 2019, including elections for normal contributions, arrears contributions, absences, or public service, would become due and payable at the time of members retirement or preretirement death. The bill would additionally require the member, survivor, or beneficiary to have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member, except as specified.
(2)Existing law permits a member of PERL who has elected to receive credit for service and who retires for disability, including a safety member who retires due to industrial disability, to elect to cancel the installments prospectively, in accordance with certain provisions.
This bill would specify that for an election taking place on or after January 1, 2019, the amount of the election remaining for normal contributions, arrears, contributions, absences, or public service would become due and payable at the time of the members retirement or preretirement death. The bill would provide that in these circumstances the member, survivor, or beneficiary would have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(3)Existing law specifies that an election by a member to receive credit for service under PERL is effective only if accompanied by a lump-sum payment or an authorization for payments, in accordance with regulations of the board. Existing law authorizes a member paying for credit for service in after-tax installments to suspend these payments for a period not to exceed 12 months, with payments automatically resuming at the end of the period, or earlier, if requested by the member. Under existing law, a member who retires during the suspension period may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel installment payments, as specified.
This bill would permit a member, as an alternative to these 2 options, to reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(4)Under provisions of PERL governing the payment of additional service credit, a members failure to make the lump-sum payment or the election to cancel installment payments results in the resumption of installment payments as of the members retirement date.
This bill would revise that provision to instead provide that, effective on or after January 1, 2019, a members failure to elect to make a lump-sum payment or cancel his or her installment payments would result in the members allowance being reduced by the actuarial equivalent of the recalculated balance remaining unpaid.
(5)The PERL establishes retirement formulas, known as the Second Tier, modified First Tier, and First Tier, which are applicable to specified members of the retirement system. Under that law, a member who elects to be subject to Second Tier benefits is paid his or her accumulated contributions plus interest, subject to specified conditions. Effective January 1, 2000, a member who received service credit subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. That law requires a member who elects to become subject to First Tier benefits to deposit accumulated contributions the member withdrew while he or she was subject to Second Tier benefits, plus interest, as specified, and this deposit requirement may be satisfied by an actuarial equivalent reduction in the members retirement allowance.
This bill would instead specify that, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the number at the time of the members retirement or preretirement death. The bill would also specify that, for a member who elects to receive First Tier Credit on or after January 1, 2019, any unpaid balance of that member would become due and payable at the time of the members retirement or preretirement death, with the member, survivor, or beneficiarys allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(a)If a basic death benefit becomes payable before the payment of the total amount the member elected to pay under any election with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, the members entire compensation, or the service upon which that total amount was based, as the case may be, shall be included in the computation of the portion of the death benefit that is provided in subdivision (b) of Section 21532, and the unpaid balance of the total amount may not be paid to this system, nor may it be included in the members accumulated contributions that constitute a part of the basic death benefit.
(b)Any balance of any total amount remaining unpaid at the death of the member on account of whom a special death benefit is payable or at the retirement of a member for industrial disability may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a special death benefit is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of the lump-sum payment otherwise required. If the balance is not paid, the portion of the unpaid amount representing contributions on compensation earned in the membership applicable to the member at the time of injury resulting in death or disability shall be deducted from the benefit otherwise payable and this system shall be discharged from any liability for any annuity or benefit with respect to any remainder of the unpaid contribution.
(c)Any balance of the total amount remaining unpaid at the time of retirement for service or ordinary disability, or at death, with respect to which a benefit is payable under Section 21546, may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a benefit under Section 21546 is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of a lump-sum payment of the balance due. If the balance is not paid, the service credit included in the election shall be reduced proportionately and any service credit dependent on completion of payments eliminated for purposes of computing the allowance but not for purposes of determining entitlement to an allowance.
(d)Notwithstanding any provision of subdivision (b) or (c), a member who retires before payment of the total amount which he or she elected to pay, may elect to pay the balance due, or the total amount if no payroll deductions had been made prior to retirement, by deductions from his or her retirement allowance equal to those which the member authorized as payroll deductions. In that case, service credit included in the election may not be reduced, nor may any prior service dependent on completion of payments be eliminated for purposes of computing the allowance. Any balance of the total amount remaining unpaid upon the death of the member shall be treated in the same manner as unpaid balances are treated if a special death benefit is payable, except that the survivor of a retired member who had authorized deductions from his or her retirement allowance in accordance with this subdivision, and who is eligible for a monthly allowance, may elect to continue those deductions from the survivors allowance in lieu of the lump-sum payment otherwise required. Alternatively, on or after January 1, 2020, the member, survivor, or beneficiary may elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(e)Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2020, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(f)Interest paid with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, prior to date of retirement or death of the member, shall be credited to the members individual account. Interest paid after the date of retirement or death of the member shall be credited to the retirement fund pursuant to Section 20174.
SEC. 2.Section 21037 of the Government Code is amended to read:21037.Notwithstanding any other provision of law, the following shall apply:
(a)A member who has elected to receive credit for service by contributing in installments and who retires for disability on or after January 1, 2004, when the election for service credit does not increase the members allowance payable, may elect to cancel the installments prospectively. The members election may be received by the system no more than 30 days after the date on which the members retirement for disability is approved. The effective date of the members election shall be the effective date of the members retirement for disability. No refund of contributions paid in installments prior to the effective date of the members election may be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and installment payments shall resume, upon a members reinstatement from retirement for disability. The remaining balance due shall be recalculated to include interest during the disability retirement period.
(c)On or after January 1, 2004, the survivor of a member who elected to receive credit for service by contributing in installments, when the survivor is eligible to receive an allowance subject to Section 21541, may elect to cancel the installments prospectively when the election for service credit does not increase the survivors allowance payable. The survivors election shall be received by the system no more than 30 days after the members date of death. The effective date of the survivors election shall be the members date of death. No refund of contributions paid in installments prior to the members date of death may be payable as a result of an election made by a survivor pursuant to this section.
(d)A survivors election pursuant to this section shall be void, and installment payments shall resume, upon a determination that the death was not industrial, following payment of a temporary special death benefit allowance, provided that the survivor is then entitled to a monthly allowance under Section 21546, 21547, 21547.7, or 21548. The remaining balance due shall be recalculated to include interest during the temporary special death benefit period.
(e)A member who retired for disability prior to January 1, 2004, or the survivor of a deceased disability retiree who began receiving a postretirement death benefit allowance prior to January 1, 2004, or the survivor of a member who began receiving an allowance subject to Section 21541 prior to January 1, 2004, may elect to cancel installments prospectively when the election for service credit does not increase the allowance payable. The effective date of the election shall be the date that the election is received by this system. No refund of contributions paid in installments prior to the effective date of the election may be payable pursuant to this section.
(f)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 3.Section 21039 of the Government Code is amended to read:21039.(a)Notwithstanding any other provision of law, a safety member, as defined in subdivision (b) of Section 20371, who has elected to receive credit for service by making contributions in installment payments and who retires or has retired due to industrial disability while making those payments, may elect to cancel the payments prospectively if the election to receive credit for service does not increase the members allowance payable. The effective date of the members election to cancel payments shall be the first day of the month following receipt of the election by the system. No refund of contributions paid in installments prior to the effective date of the members election to cancel the payments shall be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and the installment payments shall resume, upon a members reinstatement from retirement for industrial disability. The remaining balance due shall be recalculated to include interest during the industrial disability retirement period.
(c)Except as set forth in subdivision (d), nothing in this section shall be construed to limit any right or benefit granted pursuant to Section 20776 or 21037, as amended by Senate Bill 268 of the 200304 Regular Session.
(d)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 4.Section 21050 of the Government Code is amended to read:21050.(a)An election by a member to receive credit for service under this part, in addition to his or her current and prior service credit, shall be effective only if accompanied by a lump-sum payment or an authorization for payments, other than a lump-sum payment, in accordance with regulations of the board.
(b)If a member electing to receive credit for service under this part is authorized to pay for that service in installment payments beginning on or after January 1, 2004, the amount of the installment payments shall include an actuarial adjustment, as determined by the chief actuary, as necessary to take into account the provisions of Section 21037. The amount of the actuarial adjustment may not exceed one-half of 1 percent of the total installment payment.
(c)(1)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to suspend after-tax installment payments for a period not to exceed 12 months. Installment payments shall automatically resume at the end of the suspension period, or earlier if requested by the member. A member may not elect an additional suspension of those installment payments for the same service for three years following the resumption of installment payments.
(2)The balance due at the end of a suspension period shall be recalculated to include interest accrued during the suspension.
(3)(A)A member who retires during the suspension period may, prior to retirement, elect to do one of the following:
(i)Make a lump-sum payment for the recalculated balance due.
(ii)Cancel installment payments in the manner specified in subdivision (d).
(iii)On or after January 1, 2020, reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(B)Failure by a member to make an election under subparagraph (A) shall result in the resumption of installment payments as of his or her date of retirement, or for elections with an initial effective date on or after January 1, 2020, the member shall have his or her allowance reduced by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(d)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to prospectively cancel payment of the remaining unpaid balance for those installment payments.
(1)An election shall be effective upon the earlier of the members retirement date, or the first day of the month following approval by the system of the election.
(2)Service credited to the members account shall be reduced in proportion to the balance of the total amount remaining unpaid on the effective date of the cancellation. If the member elects to cancel during or at the end of a suspension period, the balance shall include any interest accrued and unpaid during the suspension period.
(3)Installment payments shall not be canceled for any of the following:
(A)Contribution or service credit adjustments required by law or agreement.
(B)A tier election pursuant to Article 2 (commencing with Section 21070) of Chapter 12 of Part 3 of Division 5 of Title 2.
(C)The purchase of service credit subject to a community property division by way of court judgment, domestic relations, or other court order or settlement agreement.
(e)If a member who has not elected to suspend installment payments pursuant to subdivision (c) fails to make after-tax installment payments when due for a period of 12 months, the board may cancel the remaining unpaid balance in the same manner and with the same effect as if the member had elected to cancel his or her installment payments pursuant to subdivision (d).
(f)Prior to retirement, a member may elect to purchase that portion of the service credit not credited to his or her account as a result of a cancellation executed pursuant to subdivision (d) or (e). A member shall not make an election for three years following the effective date of the cancellation unless the member retires before the conclusion of that period.
(1)A member who elects to purchase that service credit shall contribute an amount equal to the sum of the following:
(A)The remaining unpaid balance of the canceled installment payments.
(B)Interest from the effective date of the cancellation until the date of completion of payment.
(C)If the member elects to contribute in installment payments, interest on the unpaid balance of the amount payable, beginning on the date of the election to receive credit through completion of payments.
(2)Notwithstanding Section 575.1 of Title 2 of the California Code of Regulations, the interest rate applicable to the amount due for this election shall be the interest rate applicable to the canceled installment payments.
SEC. 5.Section 21073.1 of the Government Code is amended to read:21073.1.(a)Effective January 1, 2000, a member who elects to receive service credit under Section 21354.1, as authorized by Section 21073.7, for time during which the member received service credit subject to Section 21076 or 21077, shall deposit an amount equal to any accumulated contributions the member withdrew pursuant to Section 20737, plus the interest that would have been credited to the members account had the contributions not been withdrawn, and any contributions the member would have made, plus an amount equal to the interest that would have been credited to those contributions, had the member not been subject to Section 21076 or 21077. This deposit shall be made in a lump sum or by installments, with interest through the completion of payments, over that period and subject to minimum payment amounts as may be prescribed by regulations of the board. Alternatively, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of retirement or preretirement death.
(b)Any unpaid balance with respect to an election with an effective date on or after January 1, 2020, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(c)The board, in addition to its general rulemaking authority under Section 20121, may adopt regulations that implement this section. Those regulations shall be exempt from review by the Office of Administrative Law. However, the board shall transmit those regulations to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations.
(d)The amendments to this section enacted during the first year of the 19992000 Regular Session are subject to the limitations set forth in Section 21251.13.
(a)If a basic death benefit becomes payable before the payment of the total amount the member elected to pay under any election with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, the members entire compensation, or the service upon which that total amount was based, as the case may be, shall be included in the computation of the portion of the death benefit that is provided in subdivision (b) of Section 21532, and the unpaid balance of the total amount may not be paid to this system, nor may it be included in the members accumulated contributions that constitute a part of the basic death benefit.
(b)Any balance of any total amount remaining unpaid at the death of the member on account of whom a special death benefit is payable or at the retirement of a member for industrial disability may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a special death benefit is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of the lump-sum payment otherwise required. If the balance is not paid, the portion of the unpaid amount representing contributions on compensation earned in the membership applicable to the member at the time of injury resulting in death or disability shall be deducted from the benefit otherwise payable and this system shall be discharged from any liability for any annuity or benefit with respect to any remainder of the unpaid contribution.
(c)Any balance of the total amount remaining unpaid at the time of retirement for service or ordinary disability, or at death, with respect to which a benefit is payable under Section 21546, may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a benefit under Section 21546 is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of a lump-sum payment of the balance due. If the balance is not paid, the service credit included in the election shall be reduced proportionately and any service credit dependent on completion of payments eliminated for purposes of computing the allowance but not for purposes of determining entitlement to an allowance.
(d)Notwithstanding any provision of subdivision (b) or (c), a member who retires before payment of the total amount which he or she elected to pay, may elect to pay the balance due, or the total amount if no payroll deductions had been made prior to retirement, by deductions from his or her retirement allowance equal to those which the member authorized as payroll deductions. In that case, service credit included in the election may not be reduced, nor may any prior service dependent on completion of payments be eliminated for purposes of computing the allowance. Any balance of the total amount remaining unpaid upon the death of the member shall be treated in the same manner as unpaid balances are treated if a special death benefit is payable, except that the survivor of a retired member who had authorized deductions from his or her retirement allowance in accordance with this subdivision, and who is eligible for a monthly allowance, may elect to continue those deductions from the survivors allowance in lieu of the lump-sum payment otherwise required. Alternatively, on or after January 1, 2020, the member, survivor, or beneficiary may elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(e)Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2020, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(f)Interest paid with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, prior to date of retirement or death of the member, shall be credited to the members individual account. Interest paid after the date of retirement or death of the member shall be credited to the retirement fund pursuant to Section 20174.
SEC. 2.Section 21037 of the Government Code is amended to read:21037.Notwithstanding any other provision of law, the following shall apply:
(a)A member who has elected to receive credit for service by contributing in installments and who retires for disability on or after January 1, 2004, when the election for service credit does not increase the members allowance payable, may elect to cancel the installments prospectively. The members election may be received by the system no more than 30 days after the date on which the members retirement for disability is approved. The effective date of the members election shall be the effective date of the members retirement for disability. No refund of contributions paid in installments prior to the effective date of the members election may be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and installment payments shall resume, upon a members reinstatement from retirement for disability. The remaining balance due shall be recalculated to include interest during the disability retirement period.
(c)On or after January 1, 2004, the survivor of a member who elected to receive credit for service by contributing in installments, when the survivor is eligible to receive an allowance subject to Section 21541, may elect to cancel the installments prospectively when the election for service credit does not increase the survivors allowance payable. The survivors election shall be received by the system no more than 30 days after the members date of death. The effective date of the survivors election shall be the members date of death. No refund of contributions paid in installments prior to the members date of death may be payable as a result of an election made by a survivor pursuant to this section.
(d)A survivors election pursuant to this section shall be void, and installment payments shall resume, upon a determination that the death was not industrial, following payment of a temporary special death benefit allowance, provided that the survivor is then entitled to a monthly allowance under Section 21546, 21547, 21547.7, or 21548. The remaining balance due shall be recalculated to include interest during the temporary special death benefit period.
(e)A member who retired for disability prior to January 1, 2004, or the survivor of a deceased disability retiree who began receiving a postretirement death benefit allowance prior to January 1, 2004, or the survivor of a member who began receiving an allowance subject to Section 21541 prior to January 1, 2004, may elect to cancel installments prospectively when the election for service credit does not increase the allowance payable. The effective date of the election shall be the date that the election is received by this system. No refund of contributions paid in installments prior to the effective date of the election may be payable pursuant to this section.
(f)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 3.Section 21039 of the Government Code is amended to read:21039.(a)Notwithstanding any other provision of law, a safety member, as defined in subdivision (b) of Section 20371, who has elected to receive credit for service by making contributions in installment payments and who retires or has retired due to industrial disability while making those payments, may elect to cancel the payments prospectively if the election to receive credit for service does not increase the members allowance payable. The effective date of the members election to cancel payments shall be the first day of the month following receipt of the election by the system. No refund of contributions paid in installments prior to the effective date of the members election to cancel the payments shall be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and the installment payments shall resume, upon a members reinstatement from retirement for industrial disability. The remaining balance due shall be recalculated to include interest during the industrial disability retirement period.
(c)Except as set forth in subdivision (d), nothing in this section shall be construed to limit any right or benefit granted pursuant to Section 20776 or 21037, as amended by Senate Bill 268 of the 200304 Regular Session.
(d)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 4.Section 21050 of the Government Code is amended to read:21050.(a)An election by a member to receive credit for service under this part, in addition to his or her current and prior service credit, shall be effective only if accompanied by a lump-sum payment or an authorization for payments, other than a lump-sum payment, in accordance with regulations of the board.
(b)If a member electing to receive credit for service under this part is authorized to pay for that service in installment payments beginning on or after January 1, 2004, the amount of the installment payments shall include an actuarial adjustment, as determined by the chief actuary, as necessary to take into account the provisions of Section 21037. The amount of the actuarial adjustment may not exceed one-half of 1 percent of the total installment payment.
(c)(1)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to suspend after-tax installment payments for a period not to exceed 12 months. Installment payments shall automatically resume at the end of the suspension period, or earlier if requested by the member. A member may not elect an additional suspension of those installment payments for the same service for three years following the resumption of installment payments.
(2)The balance due at the end of a suspension period shall be recalculated to include interest accrued during the suspension.
(3)(A)A member who retires during the suspension period may, prior to retirement, elect to do one of the following:
(i)Make a lump-sum payment for the recalculated balance due.
(ii)Cancel installment payments in the manner specified in subdivision (d).
(iii)On or after January 1, 2020, reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(B)Failure by a member to make an election under subparagraph (A) shall result in the resumption of installment payments as of his or her date of retirement, or for elections with an initial effective date on or after January 1, 2020, the member shall have his or her allowance reduced by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(d)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to prospectively cancel payment of the remaining unpaid balance for those installment payments.
(1)An election shall be effective upon the earlier of the members retirement date, or the first day of the month following approval by the system of the election.
(2)Service credited to the members account shall be reduced in proportion to the balance of the total amount remaining unpaid on the effective date of the cancellation. If the member elects to cancel during or at the end of a suspension period, the balance shall include any interest accrued and unpaid during the suspension period.
(3)Installment payments shall not be canceled for any of the following:
(A)Contribution or service credit adjustments required by law or agreement.
(B)A tier election pursuant to Article 2 (commencing with Section 21070) of Chapter 12 of Part 3 of Division 5 of Title 2.
(C)The purchase of service credit subject to a community property division by way of court judgment, domestic relations, or other court order or settlement agreement.
(e)If a member who has not elected to suspend installment payments pursuant to subdivision (c) fails to make after-tax installment payments when due for a period of 12 months, the board may cancel the remaining unpaid balance in the same manner and with the same effect as if the member had elected to cancel his or her installment payments pursuant to subdivision (d).
(f)Prior to retirement, a member may elect to purchase that portion of the service credit not credited to his or her account as a result of a cancellation executed pursuant to subdivision (d) or (e). A member shall not make an election for three years following the effective date of the cancellation unless the member retires before the conclusion of that period.
(1)A member who elects to purchase that service credit shall contribute an amount equal to the sum of the following:
(A)The remaining unpaid balance of the canceled installment payments.
(B)Interest from the effective date of the cancellation until the date of completion of payment.
(C)If the member elects to contribute in installment payments, interest on the unpaid balance of the amount payable, beginning on the date of the election to receive credit through completion of payments.
(2)Notwithstanding Section 575.1 of Title 2 of the California Code of Regulations, the interest rate applicable to the amount due for this election shall be the interest rate applicable to the canceled installment payments.
SEC. 5.Section 21073.1 of the Government Code is amended to read:21073.1.(a)Effective January 1, 2000, a member who elects to receive service credit under Section 21354.1, as authorized by Section 21073.7, for time during which the member received service credit subject to Section 21076 or 21077, shall deposit an amount equal to any accumulated contributions the member withdrew pursuant to Section 20737, plus the interest that would have been credited to the members account had the contributions not been withdrawn, and any contributions the member would have made, plus an amount equal to the interest that would have been credited to those contributions, had the member not been subject to Section 21076 or 21077. This deposit shall be made in a lump sum or by installments, with interest through the completion of payments, over that period and subject to minimum payment amounts as may be prescribed by regulations of the board. Alternatively, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of retirement or preretirement death.
(b)Any unpaid balance with respect to an election with an effective date on or after January 1, 2020, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(c)The board, in addition to its general rulemaking authority under Section 20121, may adopt regulations that implement this section. Those regulations shall be exempt from review by the Office of Administrative Law. However, the board shall transmit those regulations to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations.
(d)The amendments to this section enacted during the first year of the 19992000 Regular Session are subject to the limitations set forth in Section 21251.13.
(a)If a basic death benefit becomes payable before the payment of the total amount the member elected to pay under any election with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, the members entire compensation, or the service upon which that total amount was based, as the case may be, shall be included in the computation of the portion of the death benefit that is provided in subdivision (b) of Section 21532, and the unpaid balance of the total amount may not be paid to this system, nor may it be included in the members accumulated contributions that constitute a part of the basic death benefit.
(b)Any balance of any total amount remaining unpaid at the death of the member on account of whom a special death benefit is payable or at the retirement of a member for industrial disability may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a special death benefit is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of the lump-sum payment otherwise required. If the balance is not paid, the portion of the unpaid amount representing contributions on compensation earned in the membership applicable to the member at the time of injury resulting in death or disability shall be deducted from the benefit otherwise payable and this system shall be discharged from any liability for any annuity or benefit with respect to any remainder of the unpaid contribution.
(c)Any balance of the total amount remaining unpaid at the time of retirement for service or ordinary disability, or at death, with respect to which a benefit is payable under Section 21546, may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a benefit under Section 21546 is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of a lump-sum payment of the balance due. If the balance is not paid, the service credit included in the election shall be reduced proportionately and any service credit dependent on completion of payments eliminated for purposes of computing the allowance but not for purposes of determining entitlement to an allowance.
(d)Notwithstanding any provision of subdivision (b) or (c), a member who retires before payment of the total amount which he or she elected to pay, may elect to pay the balance due, or the total amount if no payroll deductions had been made prior to retirement, by deductions from his or her retirement allowance equal to those which the member authorized as payroll deductions. In that case, service credit included in the election may not be reduced, nor may any prior service dependent on completion of payments be eliminated for purposes of computing the allowance. Any balance of the total amount remaining unpaid upon the death of the member shall be treated in the same manner as unpaid balances are treated if a special death benefit is payable, except that the survivor of a retired member who had authorized deductions from his or her retirement allowance in accordance with this subdivision, and who is eligible for a monthly allowance, may elect to continue those deductions from the survivors allowance in lieu of the lump-sum payment otherwise required. Alternatively, on or after January 1, 2020, the member, survivor, or beneficiary may elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(e)Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2019, 2020, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(f)Interest paid with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, prior to date of retirement or death of the member, shall be credited to the members individual account. Interest paid after the date of retirement or death of the member shall be credited to the retirement fund pursuant to Section 20174.
SEC. 2.Section 21037 of the Government Code is amended to read:21037.Notwithstanding any other provision of law, the following shall apply:
(a)A member who has elected to receive credit for service by contributing in installments and who retires for disability on or after January 1, 2004, when the election for service credit does not increase the members allowance payable, may elect to cancel the installments prospectively. The members election may be received by the system no more than 30 days after the date on which the members retirement for disability is approved. The effective date of the members election shall be the effective date of the members retirement for disability. No refund of contributions paid in installments prior to the effective date of the members election may be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and installment payments shall resume, upon a members reinstatement from retirement for disability. The remaining balance due shall be recalculated to include interest during the disability retirement period.
(c)On or after January 1, 2004, the survivor of a member who elected to receive credit for service by contributing in installments, when the survivor is eligible to receive an allowance subject to Section 21541, may elect to cancel the installments prospectively when the election for service credit does not increase the survivors allowance payable. The survivors election shall be received by the system no more than 30 days after the members date of death. The effective date of the survivors election shall be the members date of death. No refund of contributions paid in installments prior to the members date of death may be payable as a result of an election made by a survivor pursuant to this section.
(d)A survivors election pursuant to this section shall be void, and installment payments shall resume, upon a determination that the death was not industrial, following payment of a temporary special death benefit allowance, provided that the survivor is then entitled to a monthly allowance under Section 21546, 21547, 21547.7, or 21548. The remaining balance due shall be recalculated to include interest during the temporary special death benefit period.
(e)A member who retired for disability prior to January 1, 2004, or the survivor of a deceased disability retiree who began receiving a postretirement death benefit allowance prior to January 1, 2004, or the survivor of a member who began receiving an allowance subject to Section 21541 prior to January 1, 2004, may elect to cancel installments prospectively when the election for service credit does not increase the allowance payable. The effective date of the election shall be the date that the election is received by this system. No refund of contributions paid in installments prior to the effective date of the election may be payable pursuant to this section.
(f)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2019, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 3.Section 21039 of the Government Code is amended to read:21039.(a)Notwithstanding any other provision of law, a safety member, as defined in subdivision (b) of Section 20371, who has elected to receive credit for service by making contributions in installment payments and who retires or has retired due to industrial disability while making those payments, may elect to cancel the payments prospectively if the election to receive credit for service does not increase the members allowance payable. The effective date of the members election to cancel payments shall be the first day of the month following receipt of the election by the system. No refund of contributions paid in installments prior to the effective date of the members election to cancel the payments shall be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and the installment payments shall resume, upon a members reinstatement from retirement for industrial disability. The remaining balance due shall be recalculated to include interest during the industrial disability retirement period.
(c)Except as set forth in subdivision (d), nothing in this section shall be construed to limit any right or benefit granted pursuant to Section 20776 or 21037, as amended by Senate Bill 268 of the 200304 Regular Session.
(d)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2019, 2020, shall be subject to subdivision (e) of Section 20776.
SEC. 4.Section 21050 of the Government Code is amended to read:21050.(a)An election by a member to receive credit for service under this part, in addition to his or her current and prior service credit, shall be effective only if accompanied by a lump-sum payment or an authorization for payments, other than a lump-sum payment, in accordance with regulations of the board.
(b)If a member electing to receive credit for service under this part is authorized to pay for that service in installment payments beginning on or after January 1, 2004, the amount of the installment payments shall include an actuarial adjustment, as determined by the chief actuary, as necessary to take into account the provisions of Section 21037. The amount of the actuarial adjustment may not exceed one-half of 1 percent of the total installment payment.
(c)(1)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to suspend after-tax installment payments for a period not to exceed 12 months. Installment payments shall automatically resume at the end of the suspension period, or earlier if requested by the member. A member may not elect an additional suspension of those installment payments for the same service for three years following the resumption of installment payments.
(2)The balance due at the end of a suspension period shall be recalculated to include interest accrued during the suspension.
(3)(A)A member who retires during the suspension period may, prior to retirement, elect to do one of the following:
(i)Make a lump-sum payment for the recalculated balance due.
(ii)Cancel installment payments in the manner specified in subdivision (d).
(iii)Reduce On or after January 1, 2020, reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(B)Failure by a member to make an election under subparagraph (A) shall result in the resumption of installment payments as of his or her date of retirement, or for elections with an initial effective date on or after January 1, 2019, 2020, the member shall have his or her allowance reduced by the actuarial equivalent of the recalculated balance remaining unpaid by the member.. member.
(d)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to prospectively cancel payment of the remaining unpaid balance for those installment payments.
(1)An election shall be effective upon the earlier of the members retirement date, or the first day of the month following approval by the system of the election.
(2)Service credited to the members account shall be reduced in proportion to the balance of the total amount remaining unpaid on the effective date of the cancellation. If the member elects to cancel during or at the end of a suspension period, the balance shall include any interest accrued and unpaid during the suspension period.
(3)Installment payments shall not be canceled for any of the following:
(A)Contribution or service credit adjustments required by law or agreement.
(B)A tier election pursuant to Article 2 (commencing with Section 21070) of Chapter 12 of Part 3 of Division 5 of Title 2.
(C)The purchase of service credit subject to a community property division by way of court judgment, domestic relations, or other court order or settlement agreement.
(e)If a member who has not elected to suspend installment payments pursuant to subdivision (c) fails to make after-tax installment payments when due for a period of 12 months, the board may cancel the remaining unpaid balance in the same manner and with the same effect as if the member had elected to cancel his or her installment payments pursuant to subdivision (d).
(f)Prior to retirement, a member may elect to purchase that portion of the service credit not credited to his or her account as a result of a cancellation executed pursuant to subdivision (d) or (e). A member shall not make an election for three years following the effective date of the cancellation unless the member retires before the conclusion of that period.
(1)A member who elects to purchase that service credit shall contribute an amount equal to the sum of the following:
(A)The remaining unpaid balance of the canceled installment payments.
(B)Interest from the effective date of the cancellation until the date of completion of payment.
(C)If the member elects to contribute in installment payments, interest on the unpaid balance of the amount payable, beginning on the date of the election to receive credit through completion of payments.
(2)Notwithstanding Section 575.1 of Title 2 of the California Code of Regulations, the interest rate applicable to the amount due for this election shall be the interest rate applicable to the canceled installment payments.
SEC. 5.Section 21073.1 of the Government Code is amended to read:21073.1.(a)Effective January 1, 2000, a member who elects to receive service credit under Section 21354.1, as authorized by Section 21073.7, for time during which the member received service credit subject to Section 21076 or 21077, shall deposit an amount equal to any accumulated contributions the member withdrew pursuant to Section 20737, plus the interest that would have been credited to the members account had the contributions not been withdrawn, and any contributions the member would have made, plus an amount equal to the interest that would have been credited to those contributions, had the member not been subject to Section 21076 or 21077. This deposit shall be made in a lump sum or by installments, with interest through the completion of payments, over that period and subject to minimum payment amounts as may be prescribed by regulations of the board. Alternatively, this deposit requirement may be satisfied by an election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of retirement or preretirement death.
(b)Any unpaid balance with respect to an election with an effective date on or after January 1, 2019, 2020, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(c)The board, in addition to its general rulemaking authority under Section 20121, may adopt regulations that implement this section. Those regulations shall be exempt from review by the Office of Administrative Law. However, the board shall transmit those regulations to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations.
(d)The amendments to this section enacted during the first year of the 1999-2000 Regular Session are subject to the limitations set forth in Section 21251.13.
(a)If a basic death benefit becomes payable before the payment of the total amount the member elected to pay under any election with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, the members entire compensation, or the service upon which that total amount was based, as the case may be, shall be included in the computation of the portion of the death benefit that is provided in subdivision (b) of Section 21532, and the unpaid balance of the total amount may not be paid to this system, nor may it be included in the members accumulated contributions that constitute a part of the basic death benefit.
(b)Any balance of any total amount remaining unpaid at the death of the member on account of whom a special death benefit is payable or at the retirement of a member for industrial disability may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a special death benefit is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of the lump-sum payment otherwise required. If the balance is not paid, the portion of the unpaid amount representing contributions on compensation earned in the membership applicable to the member at the time of injury resulting in death or disability shall be deducted from the benefit otherwise payable and this system shall be discharged from any liability for any annuity or benefit with respect to any remainder of the unpaid contribution.
(c)Any balance of the total amount remaining unpaid at the time of retirement for service or ordinary disability, or at death, with respect to which a benefit is payable under Section 21546, may be subject to Section 21037 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a benefit under Section 21546 is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of a lump-sum payment of the balance due. If the balance is not paid, the service credit included in the election shall be reduced proportionately and any service credit dependent on completion of payments eliminated for purposes of computing the allowance but not for purposes of determining entitlement to an allowance.
(d)Notwithstanding any provision of subdivision (b) or (c), a member who retires before payment of the total amount which he or she elected to pay, may elect to pay the balance due, or the total amount if no payroll deductions had been made prior to retirement, by deductions from his or her retirement allowance equal to those which the member authorized as payroll deductions. In that case, service credit included in the election may not be reduced, nor may any prior service dependent on completion of payments be eliminated for purposes of computing the allowance. Any balance of the total amount remaining unpaid upon the death of the member shall be treated in the same manner as unpaid balances are treated if a special death benefit is payable, except that the survivor of a retired member who had authorized deductions from his or her retirement allowance in accordance with this subdivision, and who is eligible for a monthly allowance, may elect to continue those deductions from the survivors allowance in lieu of the lump-sum payment otherwise required. Alternatively, the member, survivor, or beneficiary may elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(e)Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2019, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(e)(f)Interest paid with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, prior to date of retirement or death of the member, shall be credited to the members individual account. Interest paid after the date of retirement or death of the member shall be credited to the retirement fund pursuant to Section 20174.
SEC. 2.Section 21037 of the Government Code is amended to read:21037.Notwithstanding any other provision of law, the following shall apply:
(a)A member who has elected to receive credit for service by contributing in installments and who retires for disability on or after January 1, 2004, when the election for service credit does not increase the members allowance payable, may elect to cancel the installments prospectively. The members election may be received by the system no more than 30 days after the date on which the members retirement for disability is approved. The effective date of the members election shall be the effective date of the members retirement for disability. No refund of contributions paid in installments prior to the effective date of the members election may be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and installment payments shall resume, upon a members reinstatement from retirement for disability. The remaining balance due shall be recalculated to include interest during the disability retirement period.
(c)On or after January 1, 2004, the survivor of a member who elected to receive credit for service by contributing in installments, when the survivor is eligible to receive an allowance subject to Section 21541, may elect to cancel the installments prospectively when the election for service credit does not increase the survivors allowance payable. The survivors election shall be received by the system no more than 30 days after the members date of death. The effective date of the survivors election shall be the members date of death. No refund of contributions paid in installments prior to the members date of death may be payable as a result of an election made by a survivor pursuant to this section.
(d)A survivors election pursuant to this section shall be void, and installment payments shall resume, upon a determination that the death was not industrial, following payment of a temporary special death benefit allowance, provided that the survivor is then entitled to a monthly allowance under Section 21546, 21547, 21547.7, or 21548. The remaining balance due shall be recalculated to include interest during the temporary special death benefit period.
(e)A member who retired for disability prior to January 1, 2004, or the survivor of a deceased disability retiree who began receiving a postretirement death benefit allowance prior to January 1, 2004, or the survivor of a member who began receiving an allowance subject to Section 21541 prior to January 1, 2004, may elect to cancel installments prospectively when the election for service credit does not increase the allowance payable. The effective date of the election shall be the date that the election is received by this system. No refund of contributions paid in installments prior to the effective date of the election may be payable pursuant to this section.
(f)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2019, shall be subject to subdivision (e) of Section 20776.
SEC. 3.Section 21039 of the Government Code is amended to read:21039.(a)Notwithstanding any other provision of law, a safety member, as defined in subdivision (b) of Section 20371, who has elected to receive credit for service by making contributions in installment payments and who retires or has retired due to industrial disability while making those payments, may elect to cancel the payments prospectively if the election to receive credit for service does not increase the members allowance payable. The effective date of the members election to cancel payments shall be the first day of the month following receipt of the election by the system. No refund of contributions paid in installments prior to the effective date of the members election to cancel the payments shall be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b)A members election pursuant to this section shall be void, and the installment payments shall resume, upon a members reinstatement from retirement for industrial disability. The remaining balance due shall be recalculated to include interest during the industrial disability retirement period.
(c)Nothing Except as set forth in subdivision (d), nothing in this section shall be construed to limit any right or benefit granted pursuant to Section 20776 or 21037, as amended by Senate Bill 268 of the 200304 Regular Session.
(d)Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2019, shall be subject to subdivision (e) of Section 20776.
SEC. 4.Section 21050 of the Government Code is amended to read:21050.(a)An election by a member to receive credit for service under this part, in addition to his or her current and prior service credit, shall be effective only if accompanied by a lump-sum payment or an authorization for payments, other than a lump-sum payment, in accordance with regulations of the board.
(b)If a member electing to receive credit for service under this part is authorized to pay for that service in installment payments beginning on or after January 1, 2004, the amount of the installment payments shall include an actuarial adjustment, as determined by the chief actuary, as necessary to take into account the provisions of Section 21037. The amount of the actuarial adjustment may not exceed one-half of 1 percent of the total installment payment.
(c)(1)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to suspend after-tax installment payments for a period not to exceed 12 months. Installment payments shall automatically resume at the end of the suspension period, or earlier if requested by the member. A member may not elect an additional suspension of those installment payments for the same service for three years following the resumption of installment payments.
(2)The balance due at the end of a suspension period shall be recalculated to include interest accrued during the suspension.
(3)(A)A member who retires during the suspension period may, prior to retirement, do either elect to do one of the following:
(i)Make a lump-sum payment for the recalculated balance due.
(ii)Cancel installment payments in the manner specified in subdivision (d).
(iii)Reduce his or her allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(B)Failure by a member to make the lump-sum payment or the election to cancel installment payments, will result in the resumption of installment payments as of his or her date of retirement an election under subparagraph (A) shall result in the resumption of installment payments as of his or her date of retirement, or for elections with an initial effective date on or after January 1, 2019, the member shall have his or her allowance reduced by the actuarial equivalent of the recalculated balance remaining unpaid by the member..
(d)A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to prospectively cancel payment of the remaining unpaid balance for those installment payments.
(1)An election shall be effective upon the earlier of the members retirement date, or the first day of the month following approval by the system of the election.
(2)Service credited to the members account will shall be reduced in proportion to the balance of the total amount remaining unpaid on the effective date of the cancellation. If the member elects to cancel during or at the end of a suspension period, the balance shall include any interest accrued and unpaid during the suspension period.
(3)Installment payments shall not be canceled for any of the following:
(A)Contribution or service credit adjustments required by law or agreement.
(B)A tier election pursuant to Article 2 (commencing with Section 21070) of Chapter 12 of Part 3 of Division 5 of Title 2.
(C)The purchase of service credit subject to a community property division by way of court judgment, domestic relations, or other court order or settlement agreement.
(e)If a member who has not elected to suspend installment payments pursuant to subdivision (c) fails to make after-tax installment payments when due for a period of 12 months, the board may cancel the remaining unpaid balance in the same manner and with the same effect as if the member had elected to cancel his or her installment payments pursuant to subdivision (d).
(f)Prior to retirement, a member may elect to purchase that portion of the service credit not credited to his or her account as a result of a cancellation executed pursuant to subdivision (d) or (e). A member shall not make an election for three years following the effective date of the cancellation unless the member retires before the conclusion of that period.
(1)A member who elects to purchase that service credit shall contribute an amount equal to the sum of the following:
(A)The remaining unpaid balance of the canceled installment payments.
(B)Interest from the effective date of the cancellation until the date of completion of payment.
(C)If the member elects to contribute in installment payments, interest on the unpaid balance of the amount payable, beginning on the date of the election to receive credit through completion of payments.
(2)Notwithstanding Section 575.1 of Title 2 of the California Code of Regulations, the interest rate applicable to the amount due for this election shall be the interest rate applicable to the canceled installment payments.
SEC. 5.Section 21073.1 of the Government Code is amended to read:21073.1.(a)Effective January 1, 2000, a member who elects to receive service credit under Section 21354.1, as authorized by Section 21073.7, for time during which the member received service credit subject to Section 21076 or 21077, shall deposit an amount equal to any accumulated contributions the member withdrew pursuant to Section 20737, plus the interest that would have been credited to the members account had the contributions not been withdrawn, and any contributions the member would have made, plus an amount equal to the interest that would have been credited to those contributions, had the member not been subject to Section 21076 or 21077. This deposit shall be made in a lump sum or by installments, with interest through the completion of payments, over that period and subject to minimum payment amounts as may be prescribed by regulations of the board. Alternatively, this deposit requirement may be satisfied by an actuarial equivalent reduction in the members retirement allowance. election to reduce the members allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of retirement or preretirement death.
(b)Any unpaid balance with respect to an election with an effective date on or after January 1, 2019, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have his or her allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(b)(c)The board, in addition to its general rulemaking authority under Section 20121, may adopt regulations that implement this section. Those regulations shall be exempt from review by the Office of Administrative Law. However, the board shall transmit those regulations to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations.
(c)(d)The amendments to this section enacted during the first year of the 1999-2000 Regular Session are subject to the limitations set forth in Section 21251.13.
|
Date
|
Status
|
|---|---|
| Aug 20, 2018 | Chaptered by Secretary of State - Chapter 168, Statutes of 2018. |
| Aug 20, 2018 | Approved by the Governor. |
| Aug 9, 2018 | Enrolled and presented to the Governor at 11:30 a.m. |
| Aug 6, 2018 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Jul 3, 2018 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after July 5 pursuant to Assembly Rule 77. |
| Jul 2, 2018 | Read third time. Passed. Ordered to the Assembly. |
| Jun 26, 2018 | Read second time. Ordered to Consent Calendar. |
| Jun 25, 2018 | From committee: Be ordered to second reading file pursuant to Senate Rule 28.8 and ordered to Consent Calendar. |
| Jun 13, 2018 | Read second time and amended. Re-referred to Com. on APPR. |
| Jun 12, 2018 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 5. Noes 0.) (June 11). |
| May 24, 2018 | Referred to Com. on P.E. & R. |
| May 10, 2018 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 10, 2018 | Read third time. Passed. Ordered to the Senate. |
| May 3, 2018 | Read second time. Ordered to Consent Calendar. |
| May 2, 2018 | From committee: Do pass. To Consent Calendar. (Ayes 17. Noes 0.) (May 2). |
| Apr 18, 2018 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 6. Noes 0.) (April 18). Re-referred to Com. on APPR. |
| Feb 26, 2018 | Referred to Com. on P.E., R., & S.S. |
| Feb 13, 2018 | From printer. May be heard in committee March 15. |
| Feb 12, 2018 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 6, 2018 | AB 2196 COOPER Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Jul 2, 2018 | Consent Calendar AB2196 | Senate Floor |
Passed |
|
| Jun 11, 2018 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Public Employment and Retirement |
Passed |
|
| May 10, 2018 | AB 2196 COOPER Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| May 2, 2018 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 18, 2018 | Do pass and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Public Employees, Retirement, and Social Security |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| California Public Employees' Retirement System | ** Support | Jun 27, 2018 |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2196
Author:(Cooper)
As Amended Ver:June 13, 2018
Majority vote
ASSEMBLY: | 73-0 | (May 10, 2018) | SENATE: | 37-0 | (July 2, 2018) |
Original Committee Reference: P.E.,R., & S.S.
SUMMARY: Requires a an election for certain service credit made by a member of the California Public Employees' Retirement System (CalPERS) on or after January 1, 2020, to be due and payable by the member's retirement date or pre-retirement death. The member, or his or her survivor or beneficiary, must pay the remaining balance or elect an actuarial equivalent reduction (AER) of the balance.
The Senate amendments make technical changes for purposes of effective administration by CalPERS.
EXISTING LAW:
- Permits a member to purchase or convert service credit by making installment payments and retire prior to paying the full amount of their service credit election, but are required to either pay the remaining balance in full, or have the monthly installment payment deducted from their retirement allowance until the balance in paid in full.
- Permits a member who elects to receive credit for service, but who retires for disability, including a safety member who retires for industrial disability, to elect to prospectively cancel installments.
- Specifies that an election by a member to receive credit for service is effective only if accompanied by a lump-sum payment, or authorization for payments in accordance with CalPERS regulations.
- Authorizes a member who pays for credit for service in after-tax installments to suspend these payments for up to 12 months, with the payments automatically resuming at the end of that period, or earlier, if requested by the member.
A member who retires during the period of suspension of the payments may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel the installment payments.
- Provides that a member who fails to make a lump-sum payment, or fails to elect to cancel installment payments results in the resumption of installment payments as of the retirement date of the member.
- Establishes First Tier, Modified Tier, and Second Tier retirement formulas that are applicable to specified members of the system. A member who elects to be subject to Second Tier benefits is paid accumulated contributions plus interest, subject to certain conditions.
- Specifies that as of January 1, 2000, a member who received service credit and who was subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. A member who makes this election must deposit the accumulated contributions withdrawn, plus interest, while subject to Second Tier benefits. However, the deposit requirement may be satisfied by an actuarial equivalent reduction in the member's retirement allowance.
FISCAL EFFECT: According to the Senate Appropriations Committee, this bill would result in possible administrative savings to CalPERS through reduced workload.
COMMENTS: According to CalPERS, "[u]nder existing law, when a retired member passes away while still making installment payments on a service credit purchase or tier conversion, CalPERS continues to deduct the required monthly payment from his or her survivor or beneficiary's monthly allowance, or deducts the unpaid balance from any lump sum death benefit payments.
"If a member does not provide for an ongoing monthly survivor allowance or a lump sum death benefit payment, there is an unpaid balance that the system cannot collect. As part of [our] ongoing efforts to strengthen the financial policies of the pension fund…, this statutory change [is needed to] eliminate the need to maintain receivables for future retirees; thereby, reducing the associated workload, costs and complexity to the system."
Analysis Prepared by: Michael Bolden / P.E.,R., & S.S. / (916) 319-3957 FN: 0003601
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
CONSENT
Bill No: AB 2196
:
SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 6/11/18
AYES: Pan, Morrell, Leyva, Moorlach, Portantino
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 73-0, 5/10/18 (Consent) - See last page for vote
SOURCE: California Public Employees’ Retirement System
DIGEST:
This bill makes changes to the Public Employees’ Retirement Law regarding payments to purchase or convert service credit.
ANALYSIS:
Existing law:
- Permits a member to purchase or convert service credit by making installment payments, and to retire prior to paying the full balance of their service credit election.
- Requires a retired member with an outstanding service credit payment balance to either pay the remaining balance in full, or have the monthly installment payment deducted from their retirement allowance until the balance is paid in full.
- Permits a member who elects to receive credit for service, but who retires for disability reasons, including a safety member who retires for industrial disability, to elect to prospectively cancel installments, as specified.
- Specifies that an election by a member to receive credit for service is effective only if accompanied by a lump-sum payment, or authorization for payments in accordance with California Public Employees’ Retirement System (CalPERS) regulations.
- Authorizes a member who pays for credit for service in after-tax installments to suspend these payments for up to 12 months, with the payments automatically resuming at the end of that period, or earlier, at the request of the member.
- Specifies that a member who retires during the period of payment suspension may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel the installment payments, as specified.
- Provides that a member who fails to make a lump-sum payment, or fails to elect to cancel installment payments will have their installment payments resumed as of the date of their retirement.
- Establishes First Tier, Modified Tier, and Second Tier retirement formulas that are applicable to specified members of the system. A member who elects to be subject to Second Tier benefits is paid accumulated contributions plus interest, subject to specified conditions.
- Specifies that as of January 1, 2000, a member subject to Second Tier benefits who received service credit may elect to become subject to First Tier benefits and contribution rates. A member making this election must deposit the accumulated contributions withdrawn, plus interest, while subject to Second Tier benefits. The deposit requirement may be satisfied by an actuarial equivalent reduction in the member’s retirement allowance.
This bill:
- Requires members who elect to purchase or convert service credit, or to redeposit contributions for prior service on or after January 1, 2020, including elections for normal and overdue contributions, absences, or public service to pay any remaining balance due by their retirement date or pre-retirement death, or elect an actuarial equivalent reduction (AER) to their retirement allowance.
- Provides the member, survivor, or beneficiary must have their allowance reduced by the AER on any balance remaining unpaid by the member.
- Exempts elections made by retired local, state, or school members who served active duty in the United States Armed Forces or the United States Merchant Marines prior to membership in CalPERS, as specified, and allows these members to make installment payments by deductions from their retirement allowance for that service.
- Requires the survivor or beneficiary of a member who elects to purchase or convert service credit on or after January 1, 2020, to pay any remaining balances at the time of the member’s pre-retirement death, or to elect an AER for the ongoing benefit.
- Provides members who retire on or after January 1, 2020, and who elected to purchase or convert service credit on or prior to January 1, 2020, the option to elect an AER on their retirement date. The same additional payment option would also be provided to survivors or beneficiaries upon notification from CalPERS following the member’s pre-retirement death.
- Makes technical and clarifying changes for purposes of implementation.
Background
According to the author,
The practice of allowing members to make installment payments into retirement is not consistent with the practices of several other large public retirement systems recently surveyed by CalPERS team members, and negatively impacts the administration of the system.
AB 2196 requires a member that elects to purchase or convert service credit on or after January 1, 2020, to pay any remaining balance by his or her retirement date, or elect to have his or her monthly allowance reduced by the actuarial equivalent of the unpaid balance. This change ensures that a member will continue to benefit from his or her service credit purchase, through a small adjustment to the retirement allowance he or she will receive for the remainder of his or her lifetime. These same payment choices will also apply to the survivor or beneficiary of a member who makes a service credit purchase in the future, and passes away prior to retirement.
In addition, this proposal will allow a member that retires on or after January 1, 2020 and elected to purchase or convert service credit before that date, the ability to elect to have his or her monthly allowance reduced by the actuarial equivalent of any remaining unpaid balance, in lieu of making installment payments into retirement.
AB 2196 strengthens the financial policies of CalPERS by discontinuing service credit purchase installment payments into retirement resulting in reduced associated workload, costs, and complexity to the system.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
California Public Employees’ Retirement System (source)
OPPOSITION: (Verified 6/27/18)
None received
ARGUMENTS IN SUPPORT: CalPERS states:
Under existing law, when a retired member passes away while still making installment payments on a service credit purchase or tier conversion, CalPERS continues to deduct the required monthly payment from his or her survivor or beneficiary’s monthly allowance, or deducts the unpaid balance from any lump sum death benefit payments.
If a member does not provide for an ongoing monthly survivor allowance or a lump sum death benefit payment, there is an unpaid balance that the System cannot collect. As part of its ongoing efforts to strengthen the financial policies of the pension fund, CalPERS requests this statutory change because it will eliminate the need to maintain receivables for future retirees, thereby reducing the associated workload, costs, and complexity to the System.
ASSEMBLY FLOOR: 73-0, 5/10/18
AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon
NO VOTE RECORDED: Travis Allen, Cooley, Friedman, Cristina Garcia, Obernolte
6/27/18 15:09:30
**** END ****
SENATE COMMITTEE ON
PUBLIC EMPLOYMENT AND RETIREMENT
Dr. Richard Pan, Chair
2017 - 2018 Regular
Bill No: AB 2196 Hearing Date: 6/11/18
Author: | Cooper | ||
Version: | 2/12/18 As introduced | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Korinne Sugasawara | ||
Subject: Public employees’ retirement: service credit: payments.
SOURCE: California Public Employees’ Retirement System
ASSEMBLY VOTES:
Assembly Floor: | 73 - 0 |
Assembly Appropriations Committee: | 17 - 0 |
Assembly Public Employees, Retirement, and Social Security Committee: | 6 - 0 |
DIGEST: This bill makes changes to the Public Employees’ Retirement Law regarding payments to purchase or convert service credit.
ANALYSIS:
Existing law:
- Permits a member to purchase or convert service credit by making installment payments, and to retire prior to paying the full balance of their service credit election.
- Requires a retired member with an outstanding service credit payment balance to either pay the remaining balance in full, or have the monthly installment payment deducted from their retirement allowance until the balance is paid in full.
- Permits a member who elects to receive credit for service, but who retires for disability reasons, including a safety member who retires for industrial disability, to elect to prospectively cancel installments, as specified.
- Specifies that an election by a member to receive credit for service is effective only if accompanied by a lump-sum payment, or authorization for payments in accordance with CalPERS regulations.
- Authorizes a member who pays for credit for service in after-tax installments to suspend these payments for up to 12 months, with the payments automatically resuming at the end of that period, or earlier, at the request of the member.
- Specifies that a member who retires during the period of payment suspension may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel the installment payments, as specified.
- Provides that a member who fails to make a lump-sum payment, or fails to elect to cancel installment payments results in the resumption of installment payments as of the retired date of the member.
- Establishes First Tier, Modified Tier, and Second Tier retirement formulas that are applicable to specified members of the system. A member who elects to be subject to Second Tier benefits is paid accumulated contributions plus interest, subject to specified conditions.
- Specifies that as of January 1, 2000, a member subject to Second Tier benefits who received service credit may elect to become subject to First Tier benefits and contribution rates. A member making this election must deposit the accumulated contributions withdrawn, plus interest, while subject to Second Tier benefits. The deposit requirement may be satisfied by an actuarial equivalent reduction in the member’s retirement allowance.
This bill:
- Requires members who elect to purchase or convert service credit, or to redeposit contributions for prior service on or after January 1, 2019, including elections for normal and overdue contributions, absences, or public service to pay any remaining balance due by their retirement date or pre-retirement death, or elect an actuarial equivalent reduction (AER) to their retirement allowance.
- Provides the member, survivor, or beneficiary must have their allowance reduced by the AER on any balance remaining unpaid by the member.
- Exempts elections made by retired local, state, or school members who served active duty in the United State Armed Forces or the United States Merchant Marines prior to membership in CalPERS, as specified, and to make installment payments by deductions from their retirement allowance for that service.
- Requires the survivor or beneficiary of a member who elects to purchase or convert service credit on or after January 1, 2019, to pay any remaining balances at the time of the member’s pre-retirement death, or to elect an AER for the ongoing benefit.
- Provides members who retire on or after January 1, 2019, and who elected to purchase or convert service credit on or prior to January 1, 2019, the option to elect an AER on their retirement date. The same additional payment option would also be provided to survivors or beneficiaries upon notification from CalPERS following the member’s pre-retirement death.
- Makes technical and clarifying changes for purposes of implementation.
Background
According to the author,
“The practice of allowing members to make installment payments into retirement is not consistent with the practices of several other large public retirement systems recently surveyed by CalPERS team members, and negatively impacts the administration of the system.
AB 2196 requires a member that elects to purchase or convert service credit on or after January 1, 2019, to pay any remaining balance by his or her retirement date, or elect to have his or her monthly allowance reduced by the actuarial equivalent of the unpaid balance. This change ensures that a member will continue to benefit from his or her service credit purchase, through a small adjustment to the retirement allowance he or she will receive for the remainder of his or her lifetime. These same payment choices will also apply to the survivor or beneficiary of a member who makes a service credit purchase in the future, and passes away prior to retirement.
In addition, this proposal will allow a member that retires on or after January 1, 2019 and elected to purchase or convert service credit before that date, the ability to elect to have his or her monthly allowance reduced by the actuarial equivalent of any remaining unpaid balance, in lieu of making installment payments into retirement.
AB 2196 strengthens the financial policies of CalPERS by discontinuing service credit purchase installment payments into retirement resulting in reduced associated workload, costs, and complexity to the system.”
Committee amendments will provide additional time for employee organizations to inform members of this bill’s provisions by changing the implementation date from January 1, 2019 to January 1, 2020.
Related/Prior Legislation
None found.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Assembly Appropriations Committee, this bill could result in administrative savings to CalPERS through reduced workload.
SUPPORT:
California Public Employees’ Retirement System (source)
OPPOSITION:
None received.
ARGUMENTS IN SUPPORT:
CalPERS states,
“Under existing law, when a retired member passes away while still making installment payments on a service credit purchase or tier conversion, CalPERS continues to deduct the required monthly payment from his or her survivor or beneficiary’s monthly allowance, or deducts the unpaid balance from any lump sum death benefit payments.
If a member does not provide for an ongoing monthly survivor allowance or a lump sum death benefit payment, there is an unpaid balance that the System cannot collect. As part of its ongoing efforts to strengthen the financial policies of the pension fund, CalPERS requests this statutory change because it will eliminate the need to maintain receivables for future retirees, thereby reducing the associated workload, costs, and complexity to the System.”
Date of Hearing: May 2, 2018
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez Fletcher, Chair
ABPCA Bill Id:AB 2196
Author:(Cooper) – As Introduced Ver:February 12, 2018
Policy Committee: | Public Employees, Retirement, and Social Security | Vote: | 6 - 0 |
|
| ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill requires a specified service-credit-related election made by a California Public Employees Retirement System (CalPERS) member or after January 1, 2019, to be due and payable by a member’s retirement date or pre-retirement death. The member, or his or her survivor or beneficiary, must pay the remaining balance or elect an actuarial equivalent reduction (AER) of the balance.
FISCAL EFFECT:
Possible administrative savings to CalPERS through reduced workload.
COMMENTS:
Background and purpose. When a CalPERS member purchases or converts service credit through installment payments and then retires prior to paying off the service credit election, the member must pay the balance in full or have the monthly installment amount deducted from his or her retirement allowance. If that retiree passes away and there is no benefit for a survivor or beneficiary, the remaining balance cannot be collected.
According to the author, AB 2196 will reduce workload and complexity for CalPERS by requiring members to pay the balance in full upon retirement. If that member is unable to pay the balance in full, he or she will be able to elect an AER. This bill is sponsored by CalPERS.
Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081
Date of Hearing: April 18, 2018
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY
Freddie Rodriguez, Chair
ABPCA Bill Id:AB 2196 (
Author:Cooper) – As Introduced Ver:February 12, 2018
SUBJECT: Public employees’ retirement: service credit: payments
SUMMARY: Makes changes in the Public Employees’ Retirement Law administered by the California Public Employees Retirement System (CalPERS) regarding payments to purchase or convert service credit. Specifically, this bill:
- Requires members who elect to purchase or convert service credit, or to redeposit for prior service on or after January 1, 2019, including elections for normal and arrears contributions, absences, or public service to pay any remaining balance due by their retirement date or preretirement death, or elect an actuarial equivalent reduction (AER) to their retirement allowance; and, provides the member, survivor, or beneficiary must have his or her allowance reduced by the AER of any balance remaining unpaid by the member.
- Exempts elections made by retired local, state or school members who served active duty in the United States (U.S.) Armed Forces or U.S. Merchant Marines prior to membership in CalPERS, as specified, and to make installment payments by deductions from their retirement allowance for that service.
- Requires the survivor or beneficiary of a member who elects to purchase or convert service credit on or after January 1, 2019, to pay any remaining balances at the time of the member’s pre-retirement death, or to elect an AER to the ongoing benefit.
- Provides members who retire on or after January 1, 2019, and who elected to purchase or convert service credit on or prior to January 1, 2019, the option to elect an AER on their retirement date. The same additional payment option would also be provided to survivors or beneficiaries upon notification from CalPERS following the member’s pre-retirement death.
- Makes technical and clarifying changes for purposes of implementation.
EXISTING LAW:
1) Permits a member to purchase or convert service credit by making installment payments and retire prior to paying the full amount of their service credit election, but are required to either pay the remaining balance in full, or have the monthly installment payment deducted from their retirement allowance until the balance in paid in full.
2) Permits a member who elects to receive credit for service, but who retires for disability, including a safety member who retires for industrial disability, to elect to prospectively cancel installments, as specified.
3) Specifies that an election by a member to receive credit for service is effective only if accompanied by a lump-sum payment, or authorization for payments in accordance with CalPERS regulations.
4) Authorizes a member who pays for credit for service in after-tax installments to suspend these payments for up to 12 months, with the payments automatically resuming at the end of that period, or earlier, if requested by the member.
A member who retires during the period of suspension of the payments may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel the installment payments, as specified.
5) Provides that a member who fails to make a lump-sum payment, or fails to elect to cancel installment payments results in the resumption of installment payments as of the retirement date of the member.
6) Establishes First Tier, Modified Tier, and Second Tier retirement formulas that are applicable to specified members of the system. A member who elects to be subject to Second Tier benefits is paid accumulated contributions plus interest, subject to specified conditions.
Also specifies that as January 1, 2000, a member who received service credit and who was subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. A member who makes this election must deposit the accumulated contributions withdrawn, plus interest, while subject to Second Tier benefits. However, the deposit requirement may be satisfied by an actuarial equivalent reduction in the member’s retirement allowance.
FISCAL EFFECT: Unknown. This bill has been flagged fiscal by Legislative Counsel.
COMMENTS: According to the author, “Assembly Bill 2196 strengthens the financial policies of CalPERS by discontinuing service credit purchase installments payments into retirement resulting in reduced associated workload, costs and complexity to the system.”
According to CalPERS, “CalPERS provides 50 different types of service credit eligible that active members may purchase before their retirement date. If the member retires while still making installment payments on a service credit election, the member may choose to pay the remaining balance in full; otherwise, the payments will be deducted from their retirement allowance. If a member continues to make installment payments into retirement and then subsequently passes away with an outstanding balance, CalPERS continues to deduct the required monthly payment from his or her beneficiary’s monthly allowance, or deducts the unpaid balance from any lump-sum death benefit payments. If the member does not provide for an ongoing monthly survivor allowance or a lump-sum death benefit payment, there is an unpaid balance that cannot be collected.
‘By requiring members to pay the balance in full at the time of retirement, as this measure would do, the need to maintain member accounts into retirement would be eliminated, which will reduce workload and complexity. If a member is unable to pay the balance in full at the time of retirement, he or she will be able to elect an AER – a permanent reduction – in the member’s retirement allowance that ensures the remaining service credit purchase balance and the lifetime monthly payments are equivalent in value.”
CalPERS recently surveyed 11 other retirement systems and found that none of the systems allowed their members to continue installment payments into retirement for any reason. This measure would align CalPERS’ practice with other public employee retirement systems, and would mitigate future financial losses.
REGISTERED SUPPORT / OPPOSITION:
Support
California Public Employees Retirement System (Sponsor)
Opposition
None on file.
Analysis Prepared by: Michael Bolden / P.E.,R., & S.S. / (916) 319-3957
Bill Author
Bill Co-Author(s):