AB 1997

Bill Subjects

Abstract

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, creditable service, and age at retirement, subject to certain variations. STRS is administered by the Teachers' Retirement Board. Existing law requires employers and employees to make contributions to the system based on the member's creditable compensation. Existing law defines terms for the purposes of STRS. Existing law defines "annualized pay rate" to mean the salary or wages, as described, a person could earn during a school term for an assignment if creditable service were performed for that assignment on a full-time basis. Existing law establishes a pay rate when creditable service is not performed on a full-time basis because a member is performing activities pursuant to specified law. This bill would redefine "annualized pay rate" to mean the salary, as described, a person could earn during a school term in a position subject to membership if creditable service were performed for that position on a full-time basis, to be determined pursuant to a publicly available pay schedule by a prescribed method. The bill, if no annualized pay rate exists for a position subject to membership, would deem all compensation earned in that position "supplemental pay," as prescribed. Existing law defines "compensation earnable" for these calculations to be the sum of the average annualized pay rate, determined as the quotient obtained when salary or wages, as described, paid in a school year is divided by the service credited for that school year and remuneration that is paid in addition to salary or wages for the school year, as prescribed. This bill would revise the definition of "compensation earnable" to be the sum of the average annualized pay rate, determined as the quotient obtained when salary earned in a school year is divided by the service credited for that salary and special pay, as prescribed. Existing law defines "creditable compensation" to mean cash payments from an employer to all persons in the same class of employees for performing creditable service in that position of salary or wages pursuant to contract and remuneration that is paid in addition to salary or wages, as prescribed. Existing law alternatively defines "creditable compensation" for members who are subject to the California Public Employees' Pension Reform Act of 2013, as prescribed. This bill would repeal both of those provisions and redefine "creditable compensation" to mean cash remuneration that includes base pay and supplemental pay, as prescribed. Existing law defines "creditable service" to mean specified activities relating to education performed for employers, including specified K–12 employers, community college employers, and charter school employers. This bill would redefine "creditable service" to mean service in a position subject to membership. The bill would for this purpose define "position subject to membership" to mean prescribed positions at various educational institutions. The bill would also include in that definition certain positions in which a member performed creditable service before the operative date of the added definition of "position subject to membership," provided that the same member remains continuously employed to perform service in that position on and after that date. Existing law establishes alternate definitions for "credited service" for members based on whether they are subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA) . This bill would instead define "credited service" to mean service for which the required contributions have been paid and service for which required contributions would have been paid in absence of prescribed limits. Existing law defines "service" to means work performed for compensation in a position subject to coverage under the defined benefit program, except as otherwise specifically provided in existing law, providing the contributions on compensation for that work are not credited to a defined benefit supplement program. This bill would redefine "service" to mean work performed for compensation, except as otherwise specifically provided in existing law. Existing law establishes a cap on the amount of compensation that is taken into account in computing benefits payable for a member who first joins the program on or after July 1, 1996. This bill would additionally specify a cap for a member subject to PEPRA. Existing law provides for the computation of service to be credited for service performed before July 1, 1972, or on or after July 1, 1972. This bill would provide for the computation of service to be credited for service performed on or after a date determined by the board as described below. This bill would require the board to determine a date when STRS has the capacity to implement the above-described changes and to post the date on the STRS internet website no later than July 1, 2027. The bill would make those provisions with the changes operative on the date determined by the board, would make the existing provisions inoperative on that same date, and would repeal those existing provisions on July 1, 2027. The bill would provide that the changes are consistent with prescribed principles that support the integrity of the retirement fund. The bill would require the board to adopt regulations to the extent required in order to continue to administer the bill accordingly. Existing law creates the Teachers' Retirement Fund, which is continuously appropriated for specified purposes, into which certain moneys are deposited, including employee contributions. By making the changes to creditable compensation that affect contributions to the fund, the bill would make an appropriation.