This bill would amend current law to allow a member to redeposit contributions and interest which has been refunded by a former spouse who was awarded a portion of that member's retirement account in a dissolution or marriage or legal separation.

SB 1190 (Chapter 542, Statutes of 1988) required the State Teachers' Retirement System (STRS), pursuant to a court order, to establish a separate account for service credit and contributions and interest awarded a nonmember spouse in a division of community property. The nonmember spouse is eligible to elect an unmodified allowance or a refund of contributions and interest.

Once a member's account has been divided between the member and a former spouse, the member loses all rights to the associated service credit even if the non-member spouse refunds the portion of the account allocated to them. Also, current law does not allow the non-member spouse to redeposit these funds in order to restore rights to a future benefit.

SB 1027 would allow the member to redeposit the contributions withdrawn by a non-member spouse who received a portion of that member's account in a dissolution of marriage or legal separation. The Public Employees' Retirement System (PERS) amended their law in 1991 to allow for PERS members to redeposit contributions withdrawn by a non-member spouse in the same situation as that proposed in SB 1027.

In 1993-94, 114 members had their accounts segregated pursuant to a court order. The number of cases increased to 120 in 1994-95 and to 218 in 1995-96. It is expected that the number of segregation cases will continue to increase as it is becoming a popular option for community property cases processed by STRS. The majority of the non-member spouses in these cases have requested a refund of the contributions and interest and; therefore, terminated rights to benefits from STRS. Without this bill, this service credit can never be restored to the member's account.

There would be no additional program cost since the member would be required to repay all costs, including interest, to restore the service credit in the same manner as all other redeposits of withdrawn contributions. There would be an increase in the workload associated with the number of members requesting to redeposit withdrawn contributions. A Budget Change Proposal would be prepared according to normal operating procedures for additional staff if the increased workload justifies the need.

 
Senate Bill 1027 posted: June 26, 1997