State teachers' retirement: Defined Benefit Program: funding.

The State Teacher's Retirement Law (STRL) creates the Defined Benefit Program of the State Teachers' Retirement Plan for the provision of benefits to members of the plan, which is administered by the Teachers' Retirement Board (board) . The Defined Benefit Program is funded by employer and employee contributions as well as investment returns and state appropriations. Employee and employer contributions are deposited in the Teachers' Retirement Fund, which is continuously appropriated. The Defined Benefit Program provides for an improvement factor, as defined, to be applied to monthly allowances or benefits of retired members of the system, as specified. STRL specifies that the Legislature reserves the right to adjust the amount of the improvement factor as economic conditions dictate, provided that an adjustment is prohibited from reducing the retirement allowance, annuity, or benefit below that which would have been payable to the recipient. Existing case law holds that the right to a pension is a contractually protected vested right and that the specific provisions of a pension system that a member earns through employment may be modified to the detriment of the member only if a comparable new advantage is provided. This bill, beginning July 1, 2014, would vest the improvement factor, as described above, as a benefit for an active member in any calendar year in which active members paid increased member contributions, pursuant to specified provisions. The bill would condition this vesting on the increased member contributions and if those contributions cease to be required, the Legislature would reserve the right to adjust the improvement factor, as specified. The bill would state that the vesting of the improvement factor is a comparable new advantage provided in exchange for the contribution increases and is contractually enforceable. The bill would also increase employer and state contributions to the Defined Benefit Program according to prescribed schedules, to be operative until July 1, 2046, or until the Director of Finance makes a certain determination of the status of these increases in connection with constitutionally required funding for schools or reimbursable mandates for local entities and provides notice of that determination, as specified. By increasing amounts deposited in a continuously appropriated fund, this bill would make an appropriation. This bill would prescribe requirements for any action or proceeding challenging the validity of any matter authorized by its provisions, including that any challenge be filed within 60 days. The bill would require, until July 1, 2046, that the Teachers' Retirement Board report to the Legislature on or before July 1, 2019, and every 5 years thereafter, on the fiscal health of the Defined Benefit Program and the unfunded actuarial obligation with respect to the service of certain members and funding adjustments needed to eliminate by June 30, 2046, those obligations, among other things. The bill would prescribe how excess contributions to the Defined Benefit Supplement account are to be returned. The bill make certain findings and declarations and conforming changes. The bill would provide that its provisions are not severable. This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.