Bill Text: CA AB1875 | 2015-2016 | Regular Session | Chaptered
Bill Title: State teachers' retirement: option beneficiaries: trusts.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2016-09-24 - Chaptered by Secretary of State - Chapter 559, Statutes of 2016. [AB1875 Detail]
Download: California-2015-AB1875-Chaptered.html
BILL NUMBER: AB 1875 CHAPTERED
BILL TEXT
CHAPTER 559
FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2016
APPROVED BY GOVERNOR SEPTEMBER 24, 2016
PASSED THE SENATE AUGUST 19, 2016
PASSED THE ASSEMBLY MAY 5, 2016
AMENDED IN ASSEMBLY APRIL 11, 2016
INTRODUCED BY Assembly Member Chávez
FEBRUARY 10, 2016
An act to amend Sections 22105.5, 22149, 22450, 22451.5, 23301,
24300, 24300.1, 24307, 24309, 24331, 25015, 26306, 26811, 26910, and
27004 of, and to add Sections 24613.5 and 26106.5 to, the Education
Code, relating to state teachers' retirement.
LEGISLATIVE COUNSEL'S DIGEST
AB 1875, Chávez. State teachers' retirement: option beneficiaries:
trusts.
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. STRS is governed by the Teachers' Retirement
Board. Existing law establishes the Cash Balance Benefit Program,
administered by the Teachers' Retirement Board, as a separate benefit
program within the State Teachers' Retirement Plan in order to
provide a retirement plan for persons employed to perform creditable
service for less than 50% of full-time service. Existing law permits
members of STRS to select option beneficiaries and participants in
the Cash Balance Benefit Program to select annuity beneficiaries for
the purpose of receiving a retirement allowance or an annuity,
respectively, upon the member's or the participant's death. Existing
law specifically prohibits a trust from being an option beneficiary
under STRS.
This bill would permit irrevocable trusts, with specified
characteristics, that are established for individuals who are
disabled to be an option beneficiary or annuity beneficiary, as
described above, for the defined benefit program and the Cash Balance
Benefit Program. The bill would require the trust to be for the sole
benefit of a single beneficiary and that any other beneficiaries be
limited to successor beneficiaries. The bill would require, with
respect to the trust's interest in the member's or in the participant'
s benefits, that the beneficiary of the trust be considered the
designated beneficiary for the purpose of determining eligibility
for, and the amount and determination of, benefits.
The bill would require a member or participant to provide
specified documentation if a trust is to be designated an option
beneficiary, including a certification that the trust meets relevant
requirements, to be signed by the member or participant and acting
trustees. The bill would require trustees acting at the time of the
death of the member or participant to provide a similar, signed
certification and additionally certify that the trust has not been
revoked, modified, or amended, in a manner that would cause the
certification to be incorrect. The bill would allow a member or
participant to change a beneficiary designation without penalty for
the purpose of designating a trust as a beneficiary if certain
requirements are met. The bill would require, if the trust becomes
invalid or terminates, that the benefit or annuity be paid to the
beneficiary, if eligible, with associated rights and responsibilities
also accruing to that person. The bill would provide that the board
is not required to determine the powers of a trustee or the validity
of a trust in the context, that such a determination shall not be
inferred and, provided the board acts in good faith, as specified,
would immunize the board, system, and plan from liability. The bill
would make conforming changes and, with respect to the Cash Balance
Benefit Program, revise the circumstances under which a participant
may change an option beneficiary after retirement changes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22105.5 of the Education Code is amended to
read:
22105.5. "Annuity beneficiary" means the person or trust
designated by a member pursuant to Section 25011, 25011.1, 25018, or
25018.1 to receive an annuity under the Defined Benefit Supplement
Program upon the member's death.
SEC. 2. Section 22149 of the Education Code is amended to read:
22149. (a) "Option beneficiary" means the person or trust
designated by a member to receive a retirement allowance under the
Defined Benefit Program upon the member's death.
(b) For purposes of this section, "trust" means an irrevocable
trust with the following characteristics:
(1) The trust satisfies the requirements of subparagraph (A) or
(C) of paragraph (4) of subdivision (d) of Section 1396p of Title 42
of the United States Code.
(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
of Title 26 of the Code of Federal Regulations.
(3) The trust, or the account in a pooled trust, is for the sole
benefit of a single beneficiary and other beneficiaries to the trust,
if any, are successor beneficiaries.
(4) The beneficiary of the trust who is beneficiary with respect
to the trust's interest in the member's benefit shall be considered
the designated option beneficiary for the purpose of determining
eligibility for, and the amount and duration of, benefits under the
plan.
SEC. 3. Section 22450 of the Education Code is amended to read:
22450. (a) Each member and beneficiary shall furnish to the board
any information affecting his or her status as a member or
beneficiary of the Defined Benefit Program as the board requires,
which may include, but shall not be limited to, the following:
(1) Financial statements, certified copies of state and federal
income tax records, or evidence of financial status.
(2) Employment, legal, or medical documentation.
(b) A member who has not had any creditable service reported
during the prior school year shall provide the system with his or her
current mailing address and beneficiary information.
(c) For a trust that is designated as an option beneficiary, as
defined in Section 22149, the following documentation is required:
(1) The member shall provide an acknowledged certification that
includes each declaration prescribed by clause A-6 of Section 1.401
(a)(9)-4 of Title 26 of the Code of Federal Regulations and a
declaration that the trust meets the requirements and conditions as
defined in Section 22149. The certification shall be submitted to the
system at the time of election of the beneficiary and is required
for the election to be valid. The certification shall be in the form
of an acknowledged declaration signed by the member and by all
then-acting trustees of the trust.
(2) After the member's death, the then-acting trustee or trustees
of the trust shall provide an acknowledged certification that
includes each of the declarations prescribed by clause A-6 of Section
1.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and a
declaration that the trust meets the requirements and conditions
provided in Section 22149. The certification by the trustee or
trustees of the trust shall be submitted to the system upon the
member's death and shall additionally certify that the trust has not
been revoked, modified, or amended in any manner which would cause
the representations contained in the certification to be incorrect.
The certification shall contain a statement that it is being signed
by all of the then-acting trustees of the trust and shall be in the
form of an acknowledged declaration signed by all the then-acting
trustees.
(3) At any time, upon demand by the system, the member or trustee
of the trust shall provide a copy of the trust instrument.
SEC. 4. Section 22451.5 of the Education Code is amended to read:
22451.5. (a) Upon request by the system, a member shall provide
proof of his or her date of birth to resolve any discrepancy between
the member's date of birth as originally documented on the records of
the system and the member's date of birth as subsequently submitted.
(b) A member shall provide proof of the date of birth of a person
who is, or the beneficiary of a trust that is, designated by the
member as beneficiary under an option selected pursuant to Chapter 28
(commencing with Section 24300) if the beneficiary is not also a
member of the plan.
(c) Documentation substantiating the date of birth of a member's
dependent child shall be provided if an allowance payable under this
part will include an amount for that dependent child.
(d) At the time application is made for payment of a family
allowance or survivor benefit allowance to a surviving spouse or
dependent parent, a member's surviving spouse or dependent parent
shall provide proof of his or her date of birth.
(e) At the discretion of the board, an original document, a
certified copy of the original, or a photocopy shall be acceptable to
establish proof of the date of birth.
SEC. 5. Section 23301 of the Education Code is amended to read:
23301. A corporation, trust, eleemosynary, parochial institution,
or public entity may be designated as a beneficiary under this part,
but they shall not be designated as option beneficiaries, except a
trust as defined in Section 22149.
SEC. 6. Section 24300 of the Education Code is amended to read:
24300. (a) A member may, upon application for retirement, elect
an option pursuant to this part that would provide an actuarially
modified retirement allowance payable throughout the life of the
member and the member's option beneficiary or beneficiaries, as
follows:
(1) Option 2. The modified retirement allowance shall be paid to
the retired member. Upon the retired member's death, an allowance
equal to the modified amount that the retired member was receiving
shall be paid to the option beneficiary.
(2) Option 3. The modified retirement allowance shall be paid to
the retired member. Upon the retired member's death, an allowance
equal to one-half of the modified amount that the retired member was
receiving shall be paid to the option beneficiary.
(3) Option 4. The modified retirement allowance shall be paid to
the retired member as long as both the retired member and the option
beneficiary are living. Upon the death of either the retired member
or the option beneficiary, an allowance equal to two-thirds of the
modified amount that the retired member was receiving shall be paid
to the surviving retired member or the surviving option beneficiary.
(4) Option 5. The modified retirement allowance shall be paid to
the retired member as long as both the retired member and the option
beneficiary are living. Upon the death of either the retired member
or the option beneficiary, an allowance equal to one-half of the
modified amount that the retired member was receiving shall be paid
to the surviving retired member or surviving option beneficiary.
(5) Option 6. The modified retirement allowance shall be paid to
the retired member and upon the retired member's death, an allowance
equal to the modified amount that the retired member was receiving
shall be paid to the option beneficiary.
(6) Option 7. The modified retirement allowance shall be paid to
the retired member and upon the retired member's death, an allowance
equal to one-half of the modified amount the retired member was
receiving shall be paid to the option beneficiary.
(7) Option 8. (A) A member may designate multiple option
beneficiaries. The member who has designated more than one option
beneficiary shall elect an option that the member is authorized to
elect subject to subdivision (e) for each beneficiary designated that
would provide an actuarially modified retirement allowance payable
throughout the lives of the member and the member's option
beneficiaries upon the member's death.
(B) The modified retirement allowance shall be paid to the retired
member as long as the retired member and at least one of the option
beneficiaries are living. Upon the retired member's death, an
allowance shall be paid to each surviving option beneficiary in
accordance with the option elected respective to that beneficiary.
The member shall determine the percentage of the unmodified allowance
that will be modified by the election of Option 2, Option 3, Option
4, Option 5, Option 6, or Option 7 within this option, the aggregate
of which shall equal 100 percent of the member's unmodified
allowance. The election of this option is subject to approval by the
board.
(C) A member who is a party to an action for legal separation or
dissolution of marriage and who is required by court order to
designate a spouse or former spouse as an option beneficiary may
designate his or her spouse or former spouse as a sole option
beneficiary under subparagraphs (A) and (B). The member shall specify
the option elected for the spouse or former spouse and the
percentage of his or her unmodified allowance to be modified by the
option, consistent with the court order. The percentage of the member'
s unmodified allowance that is not modified by the option shall
remain an unmodified allowance payable to the member. The aggregate
of the percentages specified for the option beneficiary and the
member's remaining unmodified allowance, if any, shall equal 100
percent.
(b) For purposes of this section, the member shall designate an
option beneficiary on a properly executed retirement application.
Except as otherwise provided by this chapter, the option shall become
effective on the member's benefit effective date.
(c) A member may revoke or change an election of an option at any
time prior to the effective date of the member's retirement under
this part. A revocation or change of an option may not be made in
derogation of a spouse's or former spouse's community property rights
as specified in a court order.
(d) (1) A member may change the beneficiary designated pursuant to
this section without penalty by designating a trust as beneficiary
if all of the following requirements are met:
(A) The trust conforms to the definition of trust in Section
22149.
(B) The beneficiary of the trust is the same person as the
previously named option beneficiary.
(C) The member files an application and any required documents in
a form prescribed by the system.
(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit pursuant to this section.
(e) On or before July 1, 2004, the board shall evaluate the
existing options and annuities provided pursuant to this section,
Chapter 38 (commencing with Section 25000) of this part, and Part 14
(commencing with Section 26000) and adopt, as a plan amendment, any
appropriate changes to the options and annuities based on the needs
of members, participants, and their beneficiaries, including, but not
limited to, providing economic security for beneficiaries and
reducing complexity in the election of options and annuities by
members and participants. The changes to the options and annuities
may have no net actuarial impact on the retirement fund, and the
board may establish any eligibility criteria it deems necessary to
prevent an adverse actuarial impact to the fund. The board shall
designate the effective date of the plan amendment, which shall be at
least 18 months after the amendment is adopted by the board, and
notwithstanding any other provision of this section, the options and
annuities available to members and participants eligible to retire
pursuant to this part and Part 14 (commencing with Section 26000),
after the effective date of the plan amendment made pursuant to this
subdivision, shall reflect the changes adopted as a plan amendment
pursuant to this subdivision.
(f) Any member or participant who retired and elected an option or
a joint and survivor annuity, or who filed a preretirement election
of an option prior to the effective date of the plan amendment made
pursuant to subdivision (d), may elect to change to a different
option or joint and survivor annuity, as modified by the board as a
plan amendment pursuant to subdivision (d), if the member or
participant meets all the criteria established by the board to
prevent a change in an option or joint and survivor annuity from
having an adverse actuarial impact on the retirement fund, including,
but not limited to, the effective date of a new designation or
limitations on any changes if a member or participant, as the case
may be, or beneficiary, or both, is currently not living or afflicted
with a known terminal illness. The member or participant shall
designate the change during the six-month period that begins with the
effective date of the plan amendment, on a form prescribed by the
system. Any member changing an option election pursuant to this
subdivision is not subject to the allowance reduction prescribed in
Section 24309 or 24310 as a result of the election. If a member or
participant elects to change his or her option or joint and survivor
annuity under this subdivision, the member or participant shall
retain the same option beneficiary or beneficiaries as named in the
prior designation.
(g) The Legislature reserves the right to modify this section
prior to the effective date of the plan amendment made pursuant to
subdivision (d) to prevent any actuarial impact to the fund.
(h) Except as described in subdivision (e) of Section 24300.1, on
or after January 1, 2007, a member may not make a new election for an
option or joint and survivor annuity described in subdivision (a).
(i) Any member with a retirement effective on or after January 1,
2007, shall elect an option from the options described in Section
24300.1. Any member making a new option election under the provisions
of Section 24320, 24321, 24322, or 24323 shall elect an option from
the options described in Section 24300.1 if the effective date of the
new option election is on or after January 1, 2007.
SEC. 7. Section 24300.1 of the Education Code is amended to read:
24300.1. (a) A member may, upon application for retirement, elect
an option pursuant to this part that would provide an actuarially
modified retirement allowance payable throughout the life of the
member and the member's option beneficiary or beneficiaries, as
follows:
(1) One hundred percent beneficiary option. The modified
retirement allowance shall be paid to the retired member and upon the
member's death, 100 percent of the modified allowance shall continue
to be paid to the option beneficiary.
(2) Seventy-five percent beneficiary option. The modified
retirement allowance shall be paid to the retired member and upon the
member's death, 75 percent of the modified allowance shall continue
to be paid to the option beneficiary. Pursuant to Section 401(a)(9)
of the Internal Revenue Code, unless the option beneficiary is the
member's spouse or former spouse who has been awarded a community
property interest in the benefits of the member under this part, the
member may not designate an option beneficiary under this option who
is more than exactly 19 years younger than the member.
(3) Fifty percent beneficiary option. The modified retirement
allowance shall be paid to the retired member and upon the member's
death, 50 percent of the modified allowance shall continue to be paid
to the option beneficiary.
(4) Compound option. The member may designate multiple option
beneficiaries or one or multiple option beneficiaries with a
designated percentage to remain unmodified. The member shall elect an
option as described in paragraph (1), (2), or (3) for each
designated option beneficiary that would provide an actuarially
modified retirement allowance payable throughout the lives of the
retired member and the member's option beneficiary or beneficiaries
upon the member's death.
(A) The modified retirement allowance shall be paid to the member
as long as the member and at least one option beneficiary is living.
Upon the member's death, an allowance shall be paid to each surviving
option beneficiary in accordance with the option elected respective
to that option beneficiary.
(B) The member shall specify the percent of the unmodified
allowance that will be modified by the election of each option
described in paragraph (1), (2), or (3) of this subdivision. The
percent of the unmodified allowance that is not modified by an
option, if any, shall be payable to the member. The sum of the
percentages specified for the option beneficiary or beneficiaries and
the member's remaining unmodified allowance, if any, shall equal 100
percent.
(C) The member's election of the compound option is subject to all
of the following:
(i) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
unless the option beneficiary is the member's spouse or former spouse
who has been awarded a community property interest in the member's
benefits under this part, the member may not designate an option
beneficiary under the 100 percent beneficiary option within this
compound option who is more than exactly 10 years younger than the
member.
(ii) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
unless the option beneficiary is the member's spouse or former spouse
who has been awarded a community property interest in the member's
benefits under this part, the member may not designate an option
beneficiary under the 75 percent beneficiary option within this
compound option who is more than exactly 19 years younger than the
member.
(b) For purposes of this section, the member shall designate an
option beneficiary on a properly executed retirement application.
Except as otherwise provided by this chapter, the option shall become
effective on the member's benefit effective date.
(c) Except as provided in subdivision (d), a member may revoke or
change an election of an option no later than 30 days from the date
the member's initial benefit payment for the member's most recent
retirement under the Defined Benefit Program is paid by the system. A
revocation of an option may not be made in derogation of a spouse's
or a former spouse's community property rights as specified in a
court order.
(d) (1) A member may change the beneficiary designated pursuant to
this section without penalty by designating a trust as beneficiary
if all of the following requirements are met:
(A) The trust conforms to the definition of trust in Section
22149.
(B) The beneficiary of the trust is the same person as the
previously named option beneficiary.
(C) The member files an application and any required documents in
a form prescribed by the system.
(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit pursuant to this section.
(e) Notwithstanding Section 297 or 299.2 of the Family Code, a
spouse described in paragraphs (2) and (4) of subdivision (a) does
not include the domestic partner of the member, pursuant to Section 7
of Title 1 of the United States Code.
(f) If there is a determination of community property rights as
described in Chapter 12 (commencing with Section 22650) of this part
on or before December 31, 2006, the member may elect the option that
is required by the judgment or court order. Nothing in this part
shall permit the member to change the option to the detriment of the
community property interest of the nonmember spouse.
(g) The board may evaluate the existing options and annuities
provided pursuant to this section, Chapter 38 (commencing with
Section 25000) of this part, and Part 14 (commencing with Section
26000) and adopt, as a plan amendment, any appropriate changes to the
options and annuities based on the needs of the members,
participants, and their beneficiaries, including, but not limited to,
providing economic security for beneficiaries and reducing the
complexity of the options and annuities. The changes to the options
and annuities may have no net actuarial impact on the retirement fund
and the board may establish any eligibility criteria the board deems
necessary to prevent an adverse actuarial impact to the fund. The
board shall designate the effective date of the plan amendment, which
shall be at least 18 months after the amendment is adopted by the
board, and notwithstanding any other provision of this section, the
options and annuities available to members and participants eligible
to retire pursuant to this part and Part 14 (commencing with Section
26000), after the effective date of the plan amendment made pursuant
to this subdivision, shall reflect the changes adopted as a plan
amendment to this subdivision.
SEC. 8. Section 24307 of the Education Code is amended to read:
24307. (a) A member who qualifies to apply for retirement under
Section 24201 or 24203 may make a preretirement election of an
option, as provided in Section 24300.1 without right of revocation or
change after the benefit effective date, except as provided in this
part. The preretirement election of an option shall become effective
as of the date of the member's signature on a properly executed form
prescribed by the system, subject to the following requirements:
(1) The form includes the signature of the member's spouse or
registered domestic partner, if applicable, and the signature is
dated.
(2) The date the form is received at the system's headquarters
office is within 30 days after the date of the member's signature
and, if applicable, the spouse's or registered domestic partner's
signature.
(b) A member who makes a preretirement election of an Option 2,
Option 3, Option 4, Option 5, Option 6, or Option 7 pursuant to
Section 24300, or an election as described in paragraph (1), (2), or
(3) of Section 24300.1 may subsequently make a preretirement election
of the compound option described in paragraph (4) of subdivision (a)
of Section 24300.1. The member may retain the same option and the
same option beneficiary as named in the prior preretirement election
for a designated percentage within the compound option.
(c) Upon the member's death prior to the benefit effective date,
the beneficiary who was designated under the option elected and who
survives shall receive an allowance calculated under the option,
under the assumption that the member retired for service pursuant to
Chapter 27 (commencing with Section 24201) on the date of death. The
payment of the allowance to the option beneficiary shall be in lieu
of the family allowance provided in Section 23804, the payment
provided in paragraph (1) of subdivision (a) of Section 23802, the
survivor benefit allowance provided in Section 23854, and the payment
provided in subdivisions (a) and (b) of Section 23852, except that
if the beneficiary dies before all of the member's accumulated
retirement contributions are paid, the balance, if any, shall be paid
to the estate of the person last receiving or entitled to receive
the allowance. The accumulated annuity deposit contributions and the
death payment provided in Sections 23801 and 23851 shall be paid to
the beneficiary in a lump sum.
(d) If the member subsequently retires for service, and the
elected option has not been canceled pursuant to Section 24309, a
modified service retirement allowance computed under Section 24300 or
24300.1 and the option elected shall be paid.
(e) The amount of the service retirement allowance prior to
applying the option factor shall be calculated as of the earlier of
the member's age at death before retirement or age on the last day of
the month in which the member requested service retirement be
effective. The modification of the service retirement allowance by
the option elected shall be based on the ages of the member and the
beneficiary designated under the option, as of the date the election
was signed.
(f) A member who terminates the service retirement allowance
pursuant to Section 24208 shall not be eligible to file a
preretirement election of an option until one calendar year elapses
from the date the allowance is terminated. If the member retires
again within one calendar year of the termination of their benefit
pursuant to Section 24208, the retired member shall keep, upon
subsequent retirement, the option and beneficiary or the unmodified
election in place upon the date the termination of the benefits
became effective.
(1) If the member's option beneficiary or beneficiaries predecease
the member within one calendar year of the termination of benefits
and before the member has retired again, upon notification to the
system, the system shall cancel the option and beneficiary from that
portion of the benefit with reduction pursuant to Section 24309. The
member shall not elect a new option or beneficiary pursuant to
Section 24310 until one calendar year from the termination effective
date has elapsed.
(2) If a final decree of dissolution of marriage or a judgment of
nullity has been entered or an order of separate maintenance has been
made within one calendar year of the termination of benefits and the
member has not retired again, upon notification to the system, the
system shall cancel or change the option election in accordance with
the court order with reduction pursuant to Section 24309. Any
additional changes shall not be made until one calendar year from the
termination effective date has elapsed.
(g) (1) A member may change the beneficiary designated pursuant to
this section without penalty by designating a trust as beneficiary
if all of the following requirements are met:
(A) The trust conforms to the definition of trust in Section
22149.
(B) The beneficiary of the trust is the same person as the
previously named option beneficiary.
(C) The member files an application and any required documents in
a form prescribed by the system.
(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit pursuant to this section.
(h) The system shall inform members who are qualified to make a
preretirement election of an option, through the annual statements of
account, that the
election of an option can be made.
SEC. 9. Section 24309 of the Education Code is amended to read:
24309. (a) A member may change or cancel the election of an
option made pursuant to Section 24307. The change or cancellation
shall be on a properly executed form provided by the system and
received at the system's headquarters office within 30 days after the
date of the member's signature and, if applicable, the spouse's
signature, and no later than 30 days from the date the member's
initial benefit payment for the member's most recent retirement under
the Defined Benefit Program is paid by the system. The change or
cancellation shall become effective as of the date of the member's
signature or the day prior to the member's benefit effective date,
whichever is earlier. Except as provided in subdivision (g) of
Section 24307, both of the following shall apply:
(1) Any change to an election of an option shall be made according
to Section 24307 and shall be considered a new preretirement
election of an option.
(2) Regardless of how the member elects to receive his or her
retirement allowance, a change made to an election of an option or a
cancellation of an option shall result in the reduction of that
allowance by an amount determined by the board to be the actuarial
equivalent of the coverage the member received as a result of the
preretirement election and that does not result in any adverse
funding to the plan.
(b) If the option beneficiary designated in the preretirement
election of an option pursuant to Section 24307 dies prior to the
member's retirement, the preretirement election shall be canceled as
of the day following the date of death and the member's subsequent
retirement allowance under this part shall be subject to the
allowance reduction prescribed in this section.
(c) If the option elected pursuant to Section 24307 is "Option 8"
as described in paragraph (7) of subdivision (a) of Section 24300 or
the compound option as described in paragraph (4) of subdivision (a)
of Section 24300.1, a member may cancel the designation of an option
beneficiary. If the member cancels the designation of the option
beneficiary or the option beneficiary predeceases the member prior to
the member's retirement, the member may elect to receive that
portion of the retirement allowance without modification for the
option or elect one or multiple new or existing option beneficiaries
as described in Section 24307. Any change or cancellation of the
designation of the option beneficiary under this subdivision shall
result in the allowance reduction prescribed in this section.
SEC. 10. Section 24331 of the Education Code is amended to read:
24331. (a) An option beneficiary or a trustee or beneficiary of a
trust that is an option beneficiary who is receiving an allowance
pursuant to the option elected by the member may designate a
beneficiary to receive any allowance that has accrued and is unpaid,
and any remaining balance of the retired member's accumulated
retirement contributions payable pursuant to Section 23881, upon the
death of the option beneficiary.
(b) Unless otherwise specified in the trust instrument, the
trustee of the trust that is an option beneficiary is entitled to
name a subsequent beneficiary if the trust is valid. If the trust is
determined to be invalid or terminates, any election by the trustee
pursuant to this division shall be void and the beneficiary shall be
entitled to exercise all rights provided to option beneficiaries
under this part.
SEC. 11. Section 24613.5 is added to the Education Code, to read:
24613.5. The board shall not be required to determine the powers
of a trustee or the validity of a trust or of any of the terms of a
trust that is elected as a beneficiary, option beneficiary, or other
payee under the plan. Such a determination by the board shall not be
inferred from the fact that a member or trustee has provided a copy
of all or part of the trust instrument. The acknowledged
certification pursuant to Section 22450 by the member or trustee that
the trustee has the powers declared therein and that the trust meets
the requirements described in this part and Part 14 shall be
conclusive. Payment of benefits to a trust pursuant to the board's
determination in good faith of the existence, identity, or other
facts relating to entitlement of the trust to receive a benefit under
this part constitutes a complete discharge and release of the board,
system, and plan from liability for the benefit.
SEC. 12. Section 25015 of the Education Code is amended to read:
25015. (a) If a member elects to receive a benefit payable under
the Defined Benefit Supplement Program as a joint and survivor
annuity, the designation of the beneficiary made pursuant to Section
24300 or 24300.1 shall apply to the benefit payable under this
chapter. The annuity beneficiary designation shall not be changed
after the date the benefit becomes payable to the member, except as
provided in Section 24300, 24300.1, 24324, 25011, 25011.1, 25018, or
25018.1, or Chapter 12 (commencing with Section 22650).
(b) If the member designates one or multiple option beneficiaries
within Option 8 pursuant to Section 24300 or the compound option
pursuant to Section 24300.1, the percentage of the unmodified
allowance attributable to each option beneficiary specified in that
designation shall apply to the joint and survivor annuity payable
under this chapter. The member shall elect one joint and survivor
annuity type and this annuity type shall be applied the same for each
beneficiary and each designated percentage of the member only
annuity. If any percentage of the allowance was designated to remain
unmodified, the member only annuity shall apply for the corresponding
percentage of the annuity provided under this chapter. The annuity
amount payable to the member during his or her lifetime shall be
modified to be payable over the combined lives of the member and the
annuity beneficiary or beneficiaries.
(1) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
the member shall not designate the 100 percent beneficiary annuity
type under this subdivision if any annuity beneficiary is more than
exactly 10 years younger than the member, unless that annuity
beneficiary is the member's spouse or former spouse who has been
awarded a community property interest in the member's benefits under
this part.
(2) Pursuant to Section 401(a)(9) of the Internal Revenue Code,
the member shall not designate the 75 percent beneficiary annuity
type under this subdivision if any annuity beneficiary is more than
exactly 19 years younger than the member, unless that annuity
beneficiary is the member's spouse or former spouse who has been
awarded a community property interest in the member's benefits under
this part.
(c) (1) If the member predeceases an annuity beneficiary, the
annuity beneficiary may designate, on a properly executed form
provided by the system, a payee to receive an amount that may be
payable in a lump sum pursuant to Section 25023 upon the death of the
annuity beneficiary.
(2) Unless otherwise specified in the trust instrument, the
trustee or beneficiary of the trust that is an annuity beneficiary is
entitled to name a subsequent beneficiary if the trust is valid. If
the trust is determined to be invalid or terminates, any election by
the trustee pursuant to this paragraph shall be void and the
beneficiary shall be entitled to exercise all rights provided to
annuity beneficiaries under this part.
SEC. 13. Section 26106.5 is added to the Education Code, to read:
26106.5. (a) For purposes of this part, "annuity beneficiary"
means the person or trust designated by a participant pursuant to
Section 26807, 26807.5, 26906, or 26906.5 to receive an annuity upon
the participant's death.
(b) For purposes of this section, "trust" means an irrevocable
trust with the following characteristics:
(1) The trust satisfies the requirements of subparagraph (A) or
(C) of paragraph (4) of subdivision (d) of Section 1396p of Title 42
of the United States Code.
(2) The trust satisfies the requirements of Section 1.401(a)(9)-4
of Title 26 of the Code of Federal Regulations.
(3) The trust, or the account in a pooled trust, is for the sole
benefit of a single beneficiary and other beneficiaries to the trust,
if any, are successor beneficiaries.
(4) The beneficiary of the trust who is beneficiary with respect
to the trust's interest in the participant's benefit shall be
considered the designated beneficiary for the purpose of determining
eligibility for, and the amount and duration of, benefits under the
program.
SEC. 14. Section 26306 of the Education Code is amended to read:
26306. (a) Upon request by the system, a participant or
beneficiary with respect to the Cash Balance Benefit Program shall
provide to the system any information affecting his or her status as
a participant or beneficiary.
(b) Upon request by the system, the participant shall provide
proof of his or her date of birth.
(c) A participant who has not contributed to the Cash Balance
Benefit Program during the immediately preceding plan year shall
provide the system with his or her current mailing address and
beneficiary information.
(d) For a trust as defined in subdivision (b) of Section 26106.5
that is designated as a joint and survivor annuity beneficiary, the
following documentation is required:
(1) The participant shall provide an acknowledged certification
that includes each declaration prescribed by clause A-6 of Section
1.401(a)(9)-4 of Title 26 of the Code of Federal Regulations and a
declaration that the trust meets the requirements and conditions as
defined in subdivision (b) of Section 26106.5. The certification
shall be submitted to the system at the time of election of the
beneficiary and is required for the election to be valid. The
certification shall be in the form of an acknowledged declaration
signed by the participant and by all then-acting trustees of the
trust.
(2) After the participant's death, the then-acting trustee or
trustees of the trust shall provide an acknowledged certification
that includes each of the declarations prescribed by clause A-6 of
Section 1.401(a)(9)-4 of Title 26 of the Code of Federal Regulations
and a declaration that the trust meets the requirements and
conditions as defined in subdivision (b) of Section 26106.5. The
certification by the trustee or trustees of the trust shall be
submitted to the system upon the participant's death and shall
additionally certify that the trust has not been revoked, modified,
or amended in any manner which would cause the representations
contained in the certification to be incorrect. The certification
shall contain a statement that it is being signed by all of the
then-acting trustees of the trust and shall be in the form of an
acknowledged declaration signed by all the then-acting trustees.
(3) At any time, upon demand by the system, the participant or
trustee of the trust shall provide a copy of the trust instrument.
SEC. 15. Section 26811 of the Education Code is amended to read:
26811. (a) Except as provided in subdivision (b), the annuity
beneficiary under the joint and survivor annuity elected pursuant to
paragraph (3) or (4) of subdivision (b) of Section 26807 or paragraph
(2), (3), or (4) of subdivision (a) of Section 26807.5 shall be the
person designated by the participant on the application for a
retirement benefit under this part, and shall not be changed after
the original retirement date unless the beneficiary has predeceased
the participant.
(b) (1) A participant may change the annuity beneficiary
designated pursuant to this section without penalty by designating a
trust as beneficiary if all of the following requirements are met:
(A) The trust conforms to the definition of trust in Section
26105.5.
(B) The beneficiary of the trust is the same person as the
previously named annuity beneficiary.
(C) The member files an application and any required documents in
a form prescribed by the system.
(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit pursuant to this section.
SEC. 16. Section 26910 of the Education Code is amended to read:
26910. (a) Except as provided in subdivision (b), the beneficiary
under the joint and survivor option elected pursuant to paragraph
(3) or (4) of subdivision (b) of Section 26906 or paragraph (2), (3),
or (4) of subdivision (a) of Section 26906.5 shall be the person or
trust designated by the participant on the application for a
disability benefit under this part, and shall not be changed after
the original disability date unless the beneficiary has predeceased
the participant.
(b) (1) A participant may change the annuity beneficiary
designated pursuant to this section without penalty by designating a
trust as beneficiary if all of the following requirements are met:
(A) The trust conforms to the definition of trust in Section
26105.5.
(B) The beneficiary of the trust is the same person as the
previously named annuity beneficiary.
(C) The member files an application and any required documents in
a form prescribed by the system.
(2) If a trust is determined to be invalid or terminates after the
system commences payment to the trust, beginning on the effective
date of termination of the trust, the benefit shall be paid to, and
all associated rights and responsibilities shall accrue to, the
beneficiary of the trust so long as that beneficiary is eligible to
receive a benefit pursuant to this section.
SEC. 17. Section 27004 of the Education Code is amended to read:
27004. (a) A beneficiary, other than an entity except a trust as
defined in Section 26106.5, may elect to receive the final benefit
payable under the Cash Balance Benefit Program as an annuity payable
in monthly installments provided that the sum of the employee account
and the employer account that is payable to the beneficiary equals
at least three thousand five hundred dollars ($3,500).
(b) A beneficiary who elects to receive an annuity pursuant to
this section shall elect a period certain annuity. This form of
payment is an annuity equal to the actuarial equivalent of the sum of
the balance of the employee account and the employer account on the
date of the participant's death. The annuity shall be payable in
whole year increments over a period of years specified by the
beneficiary, from a minimum of three years to a maximum of 10 years.
However, the annuity period shall not exceed the life expectancy of
the beneficiary of the trust that is beneficiary with respect to the
trust's interest in the plan.
(c) The beneficiary may designate a payee to receive the
remaining balance of payments if the beneficiary dies prior to the
end of the period certain. Unless otherwise specified in the trust
instrument, the trustee or beneficiary of the trust that is an
annuity beneficiary is entitled to name a subsequent beneficiary if
the trust is valid. If the trust is determined to be invalid or
terminated, any election by the trustee pursuant to this subdivision
shall be void and the beneficiary shall be entitled to exercise all
rights provided to annuity beneficiaries under this part.
