Golden Handshake Legislation for CalPERS Members on Governor’s Desk

Legislation, AB 457 (Negrete McLeod, D-Chino), that would authorize state, local, and school employees to receive credit for up to two additional years of service, two additional years of age, or both was approved by the legislature during the final hours of the 2003 legislative session and sent to the Governor for his consideration.

There was considerable uncertainty as to whether AB 457 was going to be approved by the legislature, as the bill was held in the Senate Appropriations Committee in early August. However, behind the scenes negotiations took place, and the urgency clause was removed from the bill. Thus, if the bill is signed by the Governor, it will become effective January 1, 2004.

The provisions (Section 20904.5) of the bill specify that when the county superintendent of schools or chancellor of a community college district determines that the best interests of the district would be served by encouraging the retirement of school members, the superintendent or chancellor may adopt a resolution to grant all school members employed by the district additional service credit, or credit for additional age, or both (2+2), if the following conditions exist:

1. The member is eligible to retire and retires within the period designated in and subsequent to the effective date of the contract amendment. The designated period may not be less than 30 days or no more than 120 days in length (prior to January 1, 2005).

2. The superintendent or chancellor agrees to transmit to the retirement fund an amount determined by the board that is equal to the actuarial equivalent of the difference between the allowance the member receives after the receipt of credit for additional service or age, or both, and the amount he or she would have received without that credit. The transfer to the retirement fund shall be made in a manner and time period acceptable to the employer and the board.

3. The member is employed in a job classification, or other organizational units designated by the county superintendent of schools or chancellor of a community college district.

Further, the county superintendent of schools or chancellor shall demonstrate and certify that implementation of these provisions will result in a net savings to the county or community college district. The demonstration and certification shall take into account the expected rate of retirement absent the retirement incentive and the fiscal impact of providing the additional benefits to those employees. Keep in mind that if any member who qualifies under Section 20904.5 reenters the system, that member shall forfeit the age and service credit acquired under this Section.

Questions have been raised as to whether or not AB 457 applies to all K-14 school employees who are members of CalPERS because of the references to county superintendent of schools and chancellors of a community college district. The answer is yes—a county superintendent of schools or chancellor of a community college district has the responsibility of certifying retirement benefits to CalPERS. Therefore all K-14 school employees who are members of CalPERS are eligible.

The provisions of AB 457 that apply to schools shall remain in effect only until January 1, 2005, and as of that date are repealed, unless a later enacted statute that is enacted before January 1, 2005, deletes or extends that date.

Governor Davis is expected to sign AB 457, and has until October 12, 2003 to do so.