SECTIONS 21750-21765 - California Statutes

GOVERNMENT CODE

SECTION 21750-21765

21750. The purpose of this part is to ensure the federal tax-exempt
status of the Public Employees' Retirement System, and any other
retirement system administered by the board, to preserve the deferred
treatment of federal income tax on public employer contributions to
public employee pensions, and to ensure that members are provided
with retirement and other related benefits that are commensurate, to
the extent deemed reasonable, with the actuarial value of the
benefits that would have been received but for the limitations
imposed by Section 415 of Title 26 of the United States Code.
To achieve this purpose, this part incorporates certain pension
payment limitations and elects the "grandfather" option in Section
415(b)(10) of Title 26 of the United States Code. Also, this part
contains certain payment provisions and replacement benefits.

21751. The definitions in Part 3 (commencing with Section 20000)
shall apply to this part. The following definition shall also govern
the interpretation of this part:
"Participating agency" means any public agency that meets the
criteria for becoming a contracting agency in this system pursuant to
Chapter 5 (commencing with Section 20460) of Part 3, but that has
not elected to participate in this system as a contracting agency,
and that elects to contract with the board to participate in the
replacement benefit plan administered pursuant to this part by the
board.

21752. (a) (1) In accordance with Section 21756, a member's annual
retirement benefits, adjusted to the actuarial equivalent of a
straight-life annuity if payable in a form other than a straight-life
annuity or a qualified joint and survivor annuity as provided under
Section 21460, and determined without regard to any employee
contributions or rollover contributions, as defined in Sections 402
(a)(5), 403(a)(4), and 408(d)(3) of Title 26 of the United States
Code, otherwise payable to the member under Part 3 (commencing with
Section 20000) and under any other defined benefit plan maintained by
the employer that is subject to Section 415 of Title 26 of the
United States Code, shall not exceed, in the aggregate, the dollar
limit applicable pursuant to Section 415(b)(1)(A) of Title 26 of the
United States Code, as appropriately modified by Section 415(b)(2)(F)
and (G) of Title 26 of the United States Code.
(2) However, the annual retirement benefit payable to a member
shall be deemed not to exceed the limitations prescribed in paragraph
(1) if the benefit does not exceed ten thousand dollars ($10,000)
and the member has at no time participated in a tax qualified defined
contribution plan maintained by the employer.
(b) These limitations shall be applied pursuant to Section 415(b)
(10) of Title 26 of the United States Code.
(c) Part 3 (commencing with Section 20000) shall be construed as
if it included this section.

21752.5. The amount of compensation that is taken into account in
computing benefits payable to any person who first becomes a member
of this system on or after July 1, 1996, shall not exceed the
limitations in Section 401(a)(17) of Title 26 of the United States
Code upon public retirement systems, as that section may be amended
from time to time and as that limit may be adjusted by the
Commissioner of Internal Revenue for increases in cost of living. The
determination of compensation for each 12-month period shall be
subject to the annual compensation limit in effect for the calendar
year in which the 12-month period begins. In a determination of
average annual compensation over more than one 12-month period, the
amount of compensation taken into account for each 12-month period
shall be subject to the applicable annual compensation limit.

21753. Notwithstanding any other provision of law, and except as
provided in Section 21310.5, the retirement allowance of a member
shall be increased to reflect cost-of-living adjustments to the
limits contained in Section 415 of Title 26 of the United States Code
as provided in Section 415(d) of that code, provided that the member'
s allowance determined without regard to Section 415 equals or
exceeds the applicable limit as indexed. Nothing in this section is
intended to, nor shall be construed to, entitle a retired member to a
cost-of-living adjustment to his or her allowance in excess of that
provided pursuant to Part 3 (commencing with Section 20000).

21754. In addition to the benefit limitations specified in this
part, if a member participates in other defined benefit plans
maintained by the employer, to the extent the aggregation of benefits
payable under those plans and pursuant to Part 3 (commencing with
Section 20000) are subject to and exceed the limits prescribed by
Section 415 of Title 26 of the United States Code, the benefits
payable pursuant to the other defined benefit plans maintained by the
employer shall be reduced, but not below zero, to the extent
necessary to satisfy Section 415, before adjustments to the benefits
provided under Part 3 are made. Nothing in this section shall limit a
member's entitlement to replacement benefits as provided by Section
21757.

21755. Internal Revenue Service Procedure 92-42 shall apply to all
changes in benefit structure adopted by any employer regardless of
whether the change was adopted before August 3, 1992, or on or after
August 3, 1992. Internal Revenue Service Notice 89-45 shall not be
applied to any changes in benefit structure adopted by any employer.

21756. (a) Notwithstanding any other provision of law, the
retirement rights conferred by this part upon any person who for the
first time becomes a member on or after January 1, 1990, shall be
subject to, and that person shall not have any retirement right or
benefit that exceeds, and no retirement right or benefit under this
part shall accrue to or vest in that person, that exceeds, the
limitations in the Internal Revenue Code upon public retirement
systems.
(b) The board shall provide to each employer a notice of the
content and effect of subdivision (a) for distribution, prior to
employment, to each person who may become a member and to each person
who for the first time becomes a member on or after January 1, 1990.
(c) Part 3 (commencing with Section 20000) shall be construed as
if it included this section.

21757. (a) If the retirement benefits of any member or his or her
survivors or beneficiaries payable pursuant to Part 3 (commencing
with Section 20000) would be limited by Section 415 of Title 26 of
the United States Code, the board shall adjust the payment of those
benefits, including, but not limited to, cost-of-living adjustments,
cost-of-living banks, temporary annuities, survivor continuance
benefits, or any combinations thereof, in order to maximize benefits
within the limits of Section 415.
(b) The board shall establish a plan of replacement benefits for
members and any survivors or beneficiaries whose retirement benefits
are limited by Section 415 and cannot be fully maximized pursuant to
Part 3 (commencing with Section 20000). The benefits provided by that
plan may consist of deferred compensation, cash payments, health
benefits, or supplemental disability benefits, as shall be determined
by the board to give effect to the purpose of this part. The factors
the board may take into consideration in making its determination
shall include, but not be limited to, the following: legal
constraints, administrative feasibility, and cost effectiveness. The
board may periodically modify the replacement benefits plan and may
add or eliminate any type of replacement benefits, as necessary, to
carry out the purpose of this part. The administrative costs of the
replacement benefits plan shall be satisfied out of funds credited to
the accounts of the participant members, and shall not be paid from
the retirement fund or the retirement trust fund of a participating
agency.
(c) The application of Section 415 to benefits provided under Part
3 (commencing with Section 20000) and this part shall not be taken
into account for purposes of determining employers' or employees'
contribution rates, until replacement benefits are implemented
pursuant to Section 21758.
(d) Under no circumstances shall the replacement benefit plan
result in increased benefit costs to an employer, member, or
annuitant.

21758. (a) There is in the State Treasury a Replacement Benefit
Custodial Fund, that shall be administered exclusively by the board,
that is separate and apart from the retirement fund or any other
retirement trust fund and that is, notwithstanding Section 13340,
continuously appropriated, without regard to fiscal years, to the
board to carry out the purposes of this part.
(b) The earnings on the assets of the Replacement Benefit
Custodial Fund are continuously appropriated to the board for
expenditure solely to pay the costs of administering this part.
(c) The Replacement Benefit Custodial Fund shall also consist of
employer contributions, in amounts equivalent to the benefits that
are not paid from either the retirement fund or the retirement trust
fund of a participating agency to annuitants because of the
application of the payment limitations under Section 415 of Title 26
of the United States Code; and administrative costs assessed to and
paid by members enrolled in the replacement benefit plan.
(d) The board shall determine the amount of employer contributions
required for deposit into the Replacement Benefit Custodial Fund,
based on all of the following:
(1) The amount of benefits that will not be payable from the
retirement fund, or the retirement trust fund of a participating
agency, because of the payment limitations in Section 415.
(2) The amount by which an employer's contributions to the
retirement fund, or the retirement fund of a participating agency
shall be reduced, for annuitants whose benefit payments are limited
by Section 415.
(e) The board shall establish within the Replacement Benefit
Custodial Fund an individual account for each annuitant whose benefit
payments are limited by Section 415. Employer contributions shall be
credited to each account as of the date accrued and payable to the
account of each annuitant as of the date on which the contribution is
made. Replacement benefits shall be debited from each account as of
the date paid to each annuitant.
(f) If all sections of this part, except Section 21763 and this
section, become inoperative, pursuant to Section 21763, and all acts
required and authorized by Section 21763 have been fully performed,
any remaining balance in a member's individual account in the
Replacement Benefit Custodial Fund shall revert to, and become part
of, the trust fund of the retirement system from which the member
retired.

21759. This part shall be administered by the board in conformity
with its powers and duties set forth in Part 3 (commencing with
Section 20000). The board shall, to the extent it determines
feasible, follow the procedures set forth in Article 7 (commencing
with Section 20220) of Chapter 2 of Part 3. The power conferred upon
the board by Sections 20134 and 20160 shall encompass any retirement
system under this part, including participating agencies that
contract for board administration of replacement benefits and
employers that are required to enroll members in replacement benefits
pursuant to Section 21757.

21760. The board, in addition to its general rulemaking authority
under Section 20121, may adopt regulations that implement this part.
Those regulations shall be exempt from review by the Office of
Administrative Law. However, the board shall transmit those
regulations to the Office of Administrative Law for filing with the
Secretary of State and publication in the California Code of
Regulations.

21761. The state, school employers, as defined in Section 20063,
and all contracting agencies under this system shall be deemed to
have elected to contract with the board for administration of the
replacement benefit plan pursuant to this part. A participating
agency may contract with the board for administration to participate
in the replacement benefit plan administered by the board, as
follows:
(a) A participating agency shall deposit its replacement benefit
contributions into the Replacement Benefit Custodial Fund, as the
board directs.
(b) At the request of the board, the participating agency shall
furnish any data concerning its members the board requires to direct
the payment of replacement benefit contributions.
(c) A public agency that intends to contract under this section
and become a participating agency shall do so only pursuant to the
procedure set forth in Sections 20469 to 20471, inclusive.
(d) The ordinance or resolution by which a public agency approves
a contract under this section shall be filed with the board. A
participating agency under this section shall not maintain any other
replacement benefit plan, except upon the express approval of the
board.
(e) A contract entered into under this section may be amended
pursuant to the procedure set forth in Section 20472.

21762. If the Internal Revenue Service determines that any
provision of Part 3 (commencing with Section 20000) or this part
cannot be given effect without placing a retirement system
administered under this part or Part 3 out of conformity with Section
415 of Title 26 of the United States Code, that provision, only to
the extent that it causes that nonconformity and only with respect to
the affected parties, shall become inoperative with respect to the
payment of benefits pursuant to Part 3 as of the effective date of
the determination. The board shall notify the Secretary of State
whenever a nonconforming provision becomes inoperative under this
section.

21763. (a) If Section 415 of Title 26 of the United States Code is
amended to exclude public retirement systems, or if the application
of Section 415 to public retirement systems is invalidated by the
final decision of an appellate court of proper jurisdiction, all
sections of this part, except this section and Section 21758, shall
become inoperative as of the effective date of that amendment or
decision. The board shall immediately notify the Secretary of State
whenever any provision of this part becomes inoperative pursuant to
this section.
(b) Whenever all sections of this part, except this section and
Section 21758, become inoperative pursuant to this section, and to
the extent not prohibited by the Internal Revenue Code, the board
shall do all of the following:
(1) Remove the pension limitations imposed by Section 415 for
prospective payments to annuitants.
(2) Eliminate the replacement benefits, and reimburse annuitants
for that portion of their pension funds that had been credited to the
Replacement Benefit Custodial Fund but not yet been disbursed, with
accrued interest.
(3) Take any and all other actions it deems necessary or feasible.

21764. It is the sole intent of the Legislature, in enacting this
part, to fully comply with the provisions of the Internal Revenue
Code that apply to public retirement systems in order to maintain and
ensure the federal income tax exempt status of the Public Employees'
Retirement System, to elect the "grandfather" option in Section 415
(b)(10) of Title 26 of the United States Code, and to provide, to the
extent deemed reasonable, commensurate replacement benefits to
affected members of this system and of other participating agencies
that elect to contract with this system for the administration of a
replacement benefits plan.
The Legislature finds and declares that all costs of local public
agencies and local public retirement systems of complying with
Section 415 of Title 26 of the United States Code are a federal
mandate within the meaning of Section 6 of Article XIII B of the
California Constitution and Part 7 (commencing with Section 17500) of
Division 4 of Title 2, as construed in City of Sacramento v. State
of California (50 Cal. 3d 51).
It is the intent of the Legislature, in enacting this part, to not
impose upon local public agencies that are contracting agencies with
this system or upon other local public agencies that elect to
contract with this system for the administration of a replacement
benefits plan, state-reimbursable, state-mandated local program
benefit costs within the meaning of Section 6 of Article XIII B of
the California Constitution and Part 7 (commencing with Section
17500) of Division 4 of this title.
If either the Commission on State Mandates or a court determines
that this part imposes upon any local agency state-mandated local
program benefit costs, notwithstanding any other provision of law, no
reimbursement therefor shall be made from the State Mandates Claims
Fund pursuant to Part 7 (commencing with Section 17500) of Division 4
of this title or from any other state fund.

21765. The Legislature reserves the power and right to amend this
part, as needed to effect its purposes. This part shall be
controlling over any memorandum of understanding reached between
employers and employees pursuant to Chapter 10 (commencing with
Section 3500), Chapter 10.3 (commencing with Section 3512), or
Chapter 12 (commencing with Section 3560) of Division 4 of Title 1.