SB 432: Teachers’ retirement.

Existing law, the Teachers Retirement Law, establishes the State Teachers Retirement System (STRS) and creates the Defined Benefit Program of the State Teachers Retirement Plan, which provides a defined benefit to members of the program, based on final compensation, credited service, and age at retirement, subject to certain variations. Existing law creates the Cash Balance Benefit Program to provide a retirement plan for the benefit of participating employees who perform creditable service for less than 50% of full time.

Existing law commits the administration of STRS and its defined benefit program and the Cash Balance Benefit Program to the Teachers Retirement Board (board). Existing law generally prohibits adjustments in new rates of contribution adopted by the board on the basis of an investigation, valuation, and determination or because of an amendment to the Teachers Retirement Law with respect to the Defined Benefit Program, for time prior to the effective date of the adoption or amendment. Existing law prohibits an action of the board, other than for correction of errors in calculating the allowance or annuity at the time of retirement, disability, or death of a member, from changing the allowance or annuity payable to a retired member or beneficiary prior to the date the action is taken.

Existing law prescribes various duties for STRS, as well as for employers participating in the system and members and their beneficiaries, in connection with law relating to the applicability of creditable compensation and creditable service. Existing law, for purposes of audits or other system actions, requires that employers be responsible for the rules in effect at the time the compensation is reported, except when expressly superseded by state or federal law or an executive order of the Governor. Existing law also requires STRS to annually provide resources that interpret and clarify the applicability of creditable compensation and service pursuant to its laws and regulations.

This bill would require STRS to identify and provide those resources on its website. The bill would require those identified resources to be relied upon and used for purposes of audits and other actions related to compliance by employers, unless the resource is revoked or superseded.

Under existing law, new or different interpretations related to creditable compensation and service do not take effect until after notice is issued to employers and exclusive representatives. Existing law prohibits a new or different interpretation from being applied retroactively to compensation reported prior to that notice, unless a retroactive interpretation is expressly required by state or federal law or an executive order of the Governor.

This bill would revise the above provision to specify that it applies to new or different interpretations of law, including those that differ from the resources identified by STRS. The bill, with respect to retroactivity, would instead allow for a retroactive interpretation if it is the result of a state or federal law, executive order of the Governor, or final court order.

Existing law requires that, if compensation is reported in accordance with STRS rules and is later determined by STRS to have been reported in error, the resulting overpayment be deemed to be an error by STRS. Existing law requires that overpayments made due to an error by STRS be recovered pursuant to a specified process, and a portion of this recovery is funded by a continuous appropriation from the General Fund.

This bill would revise those provisions to instead provide that if STRS later determines that compensation reported in accordance with the systems identified resources has been reported in error as a result of an error in those resources, the resulting overpayment to the individual member, former member, or beneficiary shall be deemed an error of STRS and subject to that specified recovery process. The bill would require a determination of an amount that has been overpaid be provided in writing by STRS to the party responsible for the overpayment. The bill would further require STRS to identify the error, document its source, and specify the total amount overpaid due to the error. By broadening the circumstances that may lead to recovery pursuant to the above-described continuous appropriation, this bill would make an appropriation.

Existing law also prohibits those changes in interpretations from applying before the next July 1, unless changes to state or federal law, an executive order of the Governor, an advisory letter, or programs require application or revision of the creditability of compensation on an earlier basis.

This bill would delete the prohibition against changes in interpretations applying before the next July 1.

Existing law authorizes an employer or an exclusive labor representative to submit a request to STRS for an advisory letter, which is a written determination issued by STRS for purposes of providing formal written guidance to that employer or representative relating to the proper reporting of compensation in a publicly available agreement, consistent with laws governing creditable compensation. Existing law provides that an advisory letter may be superseded by a state or federal law, executive order of the Governor, or rule, as prescribed. These provisions require, if compensation that is reported in accordance with the advisory letter is later determined by STRS to have been reported in error, that a resulting overpayment be deemed an error by the system.

This bill would delete the above-described reference to an advisory letter being superseded by rule, and would instead provide that it may be superseded by an identified resource, and also by a final court order. The bill would also revise the related reporting provisions to instead provide that if STRS later determines that specific compensation reported in accordance with its advisory letter has been reported in error by the employer identified in the advisory letter as a result of an error in the advisory letter, the resulting overpayment to the individual member, former member, or beneficiary would be deemed an error by STRS. The bill would make other conforming changes to these provisions, including specifying that the advisory letter relates to specific compensation language and only to the employer identified in the advisory letter.

Existing law requires STRS, to recover an amount overpaid under the Teachers Retirement Law or the State Teachers Retirement System Cash Balance Benefit Program, to correct the benefit, annuity, or refund, and the corrected allowance or annuity benefit payable, by no more than 15% if the amount overpaid was due to inaccurate information or nonsubmission thereof by or on behalf of a recipient of the allowance or annuity benefit, not including an error by STRS, a county superintendent of schools, or an employer.

This bill would revise that provision to expressly apply to recovery of an overpayment from a member, participant, former member, former participant, or beneficiary. The bill would instead provide for recovery under these circumstances due to inaccurate information, untimely submission, or nonsubmission of information by or on behalf of a recipient of the allowance or annuity benefit. The bill would also provide that amendments to this provision enacted during the 2nd year of the 202122 Regular Session shall apply when the system notifies a member, participant, former member, former participant, or beneficiary of a benefit adjustment on and after January 1, 2023.

The bill would also make clarifying and conforming changes.