SB 227 (Solis) – Community Colleges: Officers and Employees

Senate Bill

This bill would permit members of the State Teachers’ Retirement System (STRS) who are employed by a community college district, school district or county superintendent’s office, who subsequently become employed by specified state agencies involved with educational policy to perform duties that require membership in a different public retirement system (e.g., PERS), and meet certain age and service qualifications, to elect in writing within 60 days after the individual’s entry into the new position to remain in STRS.

This bill would similarly allow a member of the Public Employees’ Retirement System (PERS) who is employed by the Board of Governors of the California Community Colleges who subsequently is employed by a community college district to perform duties that require membership in a different public retirement system (e.g. STRS) and meet certain age and service qualifications, to elect in writing within 60 days after the individual’s entry into the new position to remain in PERS.

The bill would also permit the Board of Governors of the California Community Colleges and a community college district or publicly funded community college organization to enter into an agreement for the loan or assignment of an employee to or from the Chancellor’s Office, in accordance with specified conditions.

  • Location:    Chapter 838, Statutes of 1997
  • CalSTRS Position:    Support (Staff Recommendation)
  • Proponents:    Board of Governors of the California Community Colleges (Sponsor)
  • Opponents:    None Known
  • Analysis:    As Amended 06/03/1997

BACKGROUND

Chapter 954, Statutes of 1975 (AB-1105, Deddeh), allowed state employee STRS members a one-time election of PERS membership in lieu of STRS. This election was deemed necessary due to the Total Equivalent Compensation (TEC) Act of 1974, which established additional benefits for state employees covered by PERS. This one-time election was the alternative provided to those members who requested benefit parity after the passage of the TEC.

AB-2916 introduced by Assemblyman O’Connell would have provided certain STRS members who are subsequently employed to perform service with specified state agencies to elect to remain in STRS. This bill passed the Legislature but was vetoed by the Governor. The Governor’s veto message stated that this would have provided a more costly benefit to a select group of employees and therefore was inequitable. The veto message also stated that retirement benefits should be discussed and agreed upon through collective bargaining.

Chapter 383, Statutes of 1996 (AB-3221, Gallegos) combined the existing retirement election provisions for school employment subject to membership in STRS, PERS and other retirement plans into Education Code Section 22508. This amendment resulted in significant administrative efficiencies in implementing the applicable election provisions.

CURRENT PRACTICE

Current law does not allow a member of STRS who performs creditable service in a community college or school district and who later accepts a position with any state agency to continue membership in STRS for service performed with the state agency.

AB-3221 amended the Teachers’ Retirement Law (TRL) to provide that a school employee who is a member of the STRS Defined Benefit (DB) Plan and who becomes employed by the same or a different school district, community college district or county superintendent of schools to perform service that requires membership in another public retirement system (e.g. PERS) is excluded from coverage under the STRS DB Plan for service in the new position unless the member elects within 60 days following the date of hire into the new position to continue coverage under the STRS DB Plan.

If the employee elects coverage under the STRS DB Plan, the employee’s service in the new position would be treated as creditable service under the STRS DB Plan. The service in the new position would be covered by the other public retirement system if the employee does not elect to retain coverage by the STRS DB Plan within the 60-day election period.

AB-3221 made similar changes with regard to a change of school employment covered by PERS to school employment covered by STRS.

The STRS/PERS Retirement System Election is a “reciprocal” provision available to employees who change employment in positions covered by STRS or PERS within the California public school system.

DISCUSSION

Section 1: This bill would add a new section to the Education Code, effective January 1, 1998, to provide that any person who is a member of STRS and employed by a community college district, school district or county superintendent’s office who subsequently is employed by specified state agencies involved with educational policy to perform duties that require membership in a different retirement system, and meets certain age and service requirements, shall be excluded from membership in that system if he or she elects, in writing, and files that election in the office of STRS within 60 days after the person’s entry into the new position, to continue as a member of STRS.

The specified state agencies are: the State Department of Education, the community college s Chancellor’s Office, the California Postsecondary Education Commission, the California Council on Private Postsecondary Vocational Education, the Commission of Teacher Credentialing, and the Student Aid Commission.

Following are the age and service requirements: the member must have the minimum number of years of credited service required for eligibility to retire for service, and the time that will elapse between when the member commences employment with the state agency and when the member reaches early retirement age for STRS must be less than the time that will elapse between when the member commences employment with the state agency and when the member will be eligible to retire under PERS.

Section 2: This section amends a section of the Education Code to require the employer, within 10 days, to notify a new employee of their right to elect to remain in STRS for positions covered by STRS within the California public school system as well as within the specified state agencies.

Section 3: This bill would also provide the Board of Governors of the California Community Colleges to enter into an agreement with any district or publicly funded organization with the California Community Colleges for the loan or temporary assignment to the Board of Governors of a person employed by any district or publicly funded community college organization within the system. The temporary assignment or loan of that employee shall not exceed two years, except that extension of the two years shall be authorized when the Board of Governors finds it necessary to meet a compelling program or management need. Any temporary loan or assignment shall be made only with the consent of the employee, under the terms and conditions agreeable to the employee.

The Board of Governors may also enter into an agreement with any community college district for the loan or temporary assignment of an employee of the chancellor’s office to any community college district within the system.

Current law allows for the temporary loan of employees under an interjurisdictional exchange. This program, however, has specific limitations that do not allow sufficient flexibility required by the Board of Governors in retaining qualified and experienced individuals.

These provisions do not directly impact STRS. An employee of a community college district who accepts a loaned or temporary assignment with the Board of Governors remains an employee of the community college district; therefore, the employee remains a member of STRS. The Board of Governors reimburses the community college district to cover the person’s salary and benefits. This treatment is consistent with current law on the interjurisdictional exchange of employees.

Section 4: Conversely, this bill would also allow any person who is a member of PERS employed by the Board of Governors of the Community Colleges who subsequently is employed by a community college district to perform duties that require membership in STRS and has met the age and service requirements, shall be excluded from membership in STRS, if he or she elects, in writing, and files that election in the office of PERS within 60 days after the person’s entry into the new position, to continue as a member of PERS. Following are the age and service requirements: the member must have the minimum number of years of credited service required for eligibility to retire, and the time that will elapse between when the member commences employment with the community college district and when the member reaches early retirement age for PERS must be less than the time that will elapse between when the member commences employment with the community college district and when the member will be eligible to retire under STRS.

This bill has been introduced because of the difficulty experienced by the Chancellor’s Office in recruiting individuals with direct experience in the community colleges to advise the Chancellor on matters of policy in the community colleges. Generally, these individuals are nearing retirement age and to accept employment with the Chancellor’s Office would subject the individual to membership in the PERS Tier 2 retirement plan. PERS Tier 2 provides a retirement formula which is significantly lower than the formula provided for service credit under STRS.

FISCAL IMPACT

Program: There would not be any increase in program costs to STRS, however, there could be a savings in state costs to provide retirement benefits to the potential population of individuals accepting positions with the Chancellor’s Office.

  PERS TIER 2 STRS
Employer Rate 9.345% 8.25%
Social Security/Medicare 7.65% *1.45
Other STRS Costs n/a **3.8%
Total costs 16.995% 13.50%

* Medicare tax withholding is required for employers hired after March 31, 1986.

** The Elder Full Funding Act provides for a state contribution of 4.3% of prior year payroll. This converts to 3.8% when assessed against current year payroll.

Administrative: There would be a minor increase in workload to manually process the election documents.

Employers would be required to determine the retirement system to which the person should belong, notify the person of his/her rights of election, and monitor the election and election period.

RECOMMENDED POSITION

Staff recommends the Board adopt a position of support. SB-227 would allow STRS members who are subsequently employed in an eligible state agency to elect to remain in STRS. The eligible state agencies could then better recruit qualified candidates for positions that require a background in education.

Senate Bill 227 posted: July 7, 1997


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