Public employees' retirement: defined contribution program.

The Public Employees' Retirement Law (PERL) creates the Public Employees' Retirement System (PERS) , which provides a defined benefit to members of the system, based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration. Under PERL, membership in PERS is compulsory for specified public employees and optional for other public employees. The California Public Employees' Pension Reform Act of 2013 (PEPRA) generally requires a public retirement system, as defined, to modify its plan or plans to comply with the act. PEPRA authorizes a public employer to provide a contribution to a defined contribution plan for compensation in excess of certain federal compensation limits applicable to qualified pension trusts, if the plan and contribution meet the requirements set forth in federal law. PEPRA prohibits any of those employer contributions to an employee defined contribution plan from exceeding the employer's contribution rate, as a percentage of pay, required to fund the defined benefit plan. Existing law establishes an alternate retirement program and provides that certain state employees, as defined, who become new members of PERS during their first 24 months of employment, do not make contributions to PERS or receive service credit for their service. Under existing law, these members are instead required to contribute either 5% or 6% of their monthly compensation, as specified, to the alternate retirement program. This bill would create a new optional defined contribution plan for new state employees who first begin employment in a miscellaneous or industrial classification on or after January 1, 2020, and who were not members of any public retirement system prior to that date. The bill would require state employees who are subject to the bill's provisions, within 30 days of beginning employment, to choose either to contribute to the defined contribution plan or to become a member of PERS. The bill would require, if an employee fails to make this decision within the above timeframe, that the employee automatically be placed in PERS. The bill would require state employees who opt to participate in this alternate system to contribute the same percent of compensation as similarly situated employees who contribute to the defined pension program, subject to applicable limits of federal law. The bill would authorize an employee in the defined contribution program, after 5 years, to have the right to continue in the program or switch to the defined benefit plan, subject to certain terms and conditions. The bill would require the Department of Human Resources to administer the defined contribution retirement program established by the bill.