Public employees’ retirement

The law changes how retirement benefits and service credit are administered for educators, state safety employees, and county retirement-system members. It also sets new notice deadlines and expands certain benefit options.

What the law does ​

• Starting July 1, 2027, treats all qualifying work in the public school system by retired teachers and Cash Balance Benefit Program participants as post-retirement service, including work as employees, contractors, or third-party employees, subject to a limited exception.
• Sets a sick-leave day as the full-time daily hours for the position, but no fewer than six hours.
• Requires school employers to notify part-time and substitute employees of their Defined Benefit Program membership option within 10 working days of hire.
• Requires CalSTRS retirement applications and changes or cancellations to be received within 30 days after required signatures.
• Lets retired CalSTRS members permanently convert a Defined Benefit Supplement annuity to a lump-sum payment based on the remaining account balance.
• Allows CalPERS members to buy up to one year of service credit for fellowship service with the California Council on Science and Technology.
• Adds specified California Correctional Health Care Services positions to state safety-member classifications and updates related classifications.
• Requires active county retirement-system board members to be elected by active members, establishes statewide county-system rules for correcting certain erroneous payments, and prevents duplicate reciprocal lump-sum death benefits.

Who it affects ​

• CalSTRS members and retirees, including part-time, substitute, and Cash Balance Benefit Program participants.
• Public-school employers and third-party employers that engage retired CalSTRS members.
• CalPERS members who served as California Council on Science and Technology fellows.
• Specified employees of the California Department of Corrections and Rehabilitation, California Correctional Health Care Services, and State Department of State Hospitals.
• Members, beneficiaries, and boards of county retirement systems.

Context ​

The law increases contributions to continuously appropriated public retirement funds, creating an appropriation.

Breakdown ​

Broader Retiree Work Definition ​

Beginning July 1, 2027, AB 2780 expands the definition of “retired member activities” under the State Teachers’ Retirement System. The term will cover all work a service-retired STRS member performs in the California public school system when employed in specified roles, including as an employee or independent contractor.

Key takeaways

• The change takes effect on July 1, 2027.
• The bill replaces the prior definition, which covered only listed activities, with a broader definition covering all qualifying service.
• The new definition applies to service performed by STRS members who retired for service.
• Covered work includes specified positions held as an employee or an independent contractor within the California public school system.

STRS Sick Leave Day Calculations ​

The bill changes how sick leave days are calculated from hours for State Teachers’ Retirement System purposes. Instead of always dividing hours by six, a sick leave day will equal the number of creditable-service hours in a full-time workday for that position, with a minimum of six hours.

Key takeaways

• The bill removes the rule that converts sick leave hours into days by dividing the hours by six.
• A sick leave day will generally be based on the length of a full-time workday in the employee’s position.
• A full-time workday used for this calculation cannot be treated as less than six hours.
• The new calculation applies when determining sick leave days, including for specified service-credit standards.

STRS Investment Diversification ​

The bill changes the investment duty for the State Teachers’ Retirement System (STRS). It requires STRS to diversify plan investments to reduce the risk of loss and maximize returns, unless doing so would clearly not be prudent.

Key takeaways

• The bill replaces the goal of minimizing the risk of large losses with minimizing the risk of loss.
• It adds maximizing the rate of return as a purpose of diversifying STRS investments.
• STRS may depart from this diversification approach only when it is clearly not prudent under the circumstances.

Faster Retirement Membership Notice ​

This part requires employers to notify part-time and substitute employees sooner about their option to join the Defined Benefit Program. Instead of having up to 30 days after hiring, employers must provide the notice within 10 working days of the employee’s hire date.

Key takeaways

• Employers must notify part-time and substitute employees of their option to elect Defined Benefit Program membership within 10 working days of hire.
• The bill replaces the previous 30-day notice deadline.
• The notice concerns an employee’s ability to elect Defined Benefit Program membership while employed.

Service Credit Limits ​

The bill prevents certain members who apply for service retirement while a disability application is pending from receiving an extra two years of service credit. It also removes the requirement for the retirement board to set and post an implementation date for related changes.

Key takeaways

• Members using service retirement while awaiting a disability decision cannot receive the additional two years of service credit available in specified circumstances.
• The bill keeps the existing restriction on service credit for unused qualifying leave in these cases.
• The bill eliminates the retirement board's duty to determine when the system can implement the related changes.
• The bill also eliminates the requirement to post that implementation date on the board's website by January 1, 2026.

STRS Retirement Application Deadlines ​

The bill requires STRS to receive retirement applications and retirement-change or cancellation forms within 30 days after they are signed, including a spouse’s or registered domestic partner’s signature when required. It also lets retirees change a Defined Benefit Supplement Program annuity to a lump-sum payment after retirement if they use the required form and meet other requirements. The bill removes the delayed-implementation date process.

Key takeaways

• A service retirement application must reach STRS within 30 days after the member signs it, and within 30 days after any required spouse or registered domestic partner signature.
• A form to change or cancel a retirement application must also reach STRS within 30 days after the relevant signatures.
• A retiree may elect after retirement to convert a Defined Benefit Supplement Program annuity into a lump-sum payment, subject to required forms and other conditions.
• The bill removes the requirement for the retirement board to set and post an implementation date based on STRS’s ability to make these changes.

Optional Benefit Modifications ​

The bill requires certain retirement benefits for members who return to service after reinstatement or a prior disability retirement to be adjusted if the member chooses an available benefit option. The change applies to benefits calculated under the existing rules for those situations.

Key takeaways

• The bill applies to retirement benefits calculated after a member is reinstated and performs additional creditable service.
• The bill also applies to benefits calculated for service following a prior disability retirement.
• If a member elects an option allowed under existing law, the calculated benefit must be modified by that option.

Additional Earnings Credits ​

This part allows additional earnings credits to be added to Defined Benefit Supplement credits that a member has transferred to the Annuitant Reserve. Previously, those transferred credits could not receive an additional earnings credit.

Key takeaways

• The retirement board may continue to declare additional earnings credits for Defined Benefit Supplement accounts.
• The bill removes the exclusion for credits transferred from a member’s Defined Benefit Supplement account to the Annuitant Reserve.
• Transferred credits may now receive an additional earnings credit when the board declares one.
• The board must still state the additional credit as a percentage increase for each applicable plan year.

Changing Supplement Retirement Payments ​

The bill sets rules for members who switch their Defined Benefit Supplement retirement payment from monthly annuity payments to a lump sum. It requires annuity payments to end based on the remaining account credits and makes the member’s choice final.

Key takeaways

• Members may elect to change a Defined Benefit Supplement retirement annuity into a lump-sum payment.
• The bill establishes conditions for ending the annuity when the member makes this change.
• The remaining balance of credits in the member’s Defined Benefit Supplement account determines the change in payments.
• A member’s election to switch from an annuity to a lump-sum payment cannot be revoked.

STRS Benefit Limits Update ​

Starting July 1, 2027, the bill sets out specific federal-law benefit limits for California State Teachers’ Retirement System participants covered by the 2013 pension reform law. It creates separate limits for participants whose service is covered by Social Security and those whose service is not covered, while allowing the limits to change annually with inflation and other applicable conditions. The bill also updates related STRS definitions and rules.

Key takeaways

• The bill takes effect for this part on July 1, 2027.
• It specifies benefit limits for STRS participants covered by the California Public Employees’ Pension Reform Act of 2013.
• It establishes separate treatment for participants whose service is covered by Social Security and those whose service is not covered by Social Security.
• The limits may be adjusted annually based on changes in the consumer price index and other conditions.
• The bill redefines terms used in these STRS benefit-limit rules and makes related updates.

PERS Service Credit and Safety Classifications ​

The bill lets PERS members buy up to one year of retirement service credit for time served as a fellow with the California Council on Science and Technology. It also updates the state safety member classifications to include specified California Correctional Health Care Services employees and removes or updates outdated classification references, terms, and codes.

Key takeaways

• PERS members may receive up to one year of service credit for work as a California Council on Science and Technology fellow if they make the required contributions.
• The new fellowship service-credit option is added to existing options for purchasing credit for certain public service outside PERS.
• Specified California Correctional Health Care Services officers and employees are added to the state safety member classifications.
• The bill removes obsolete job classification references and updates classification names and codes used in the state safety member definitions.

County Retirement Board Elections and Payment Errors ​

AB 2780 requires certain county retirement board members to be elected by active association members, rather than merely requiring that they be active members elected by the association. It clarifies that an active member is a person in county service and updates related definitions. The bill also extends rules like those already used in Los Angeles County to other county retirement systems, including duties to members and time limits for correcting erroneous retirement payments.

Key takeaways

• Certain retirement board members must be elected by the association’s active members.
• The bill defines an active member as a member in county service and makes related definition updates.
• Counties other than Los Angeles must follow similar retirement-system obligations to members and beneficiaries.
• Actions involving payment errors generally remain subject to a three-year time limit.
• A 10-year time limit applies to erroneous payments caused by a retiree’s or beneficiary’s death, a beneficiary’s remarriage, or fraudulent compensation reports.

Retirement Fund Contributions ​

The bill increases contributions to retirement funds that are continuously funded by law. Because those funds are continuously appropriated, the increase counts as an appropriation.

Key takeaways

• The bill raises contributions to continuously appropriated retirement funds.
• The increased contributions result in an appropriation because the affected funds are continuously appropriated by law.
• This provision concerns the funding level of retirement funds.