Two New Laws Impacting CalSTRS and CalPERS Members

Two laws that went into effect on January 1, 2017 should help some CalSTRS and CalPERS members.

Special Needs Trusts May Be Designated Beneficiaries

Assembly Bill 1875 amended various sections of the Education Code to allow Defined Benefit Program members and Cash Balance Benefit Program participants to designate a special needs trust as an option or annuity beneficiary. A special needs trust shields the assets and income of disabled individuals and protects their eligibility for other public benefits and services.

Previously, option beneficiaries could only be an individual or individuals. Granting lifetime benefits to disabled individuals could jeopardize their eligibility for other public benefits and services.

The amendments also allow members and participants to change an existing option or annuity beneficiary to a special needs trust without penalty, as long as the trust’s beneficiary is the same as the previously named option or annuity beneficiary.

Employees Who Are Involuntarily Terminated and Reinstated May Receive Benefits 

California Government Code section 20969.3 was amended to provide that an employee who is involuntarily terminated and subsequently reinstated pursuant to an administrative, arbitral, or judicial proceeding is entitled to all retirement benefits, including compensation and service credit, that the employee otherwise would have accrued.

The amended statute further states that contributions must be made for the period for which salary is awarded. The amendment does not specify whether the employee or employer must make these contributions. The legislative history emphasizes “reinstatement,” so presumably the delegation of contributions would be the same as if the employee had never been terminated.

The amended statute also requires employers to notify the pension board of an employee’s reinstatement within five days of the decision becoming final.

Note that this amendment does not apply to employees who are reinstated pursuant to a settlement agreement or to employees who were terminated before January 1, 2017.


It makes a mockery of due process to argue that an employee who successfully defends disciplinary charges—and is reinstated to employment—must still be denied CalPERS benefits.  For that reason, many governmental and educational agencies already report such service to CalPERS. This law doesn’t fully resolve the due process problem, but is at least a positive step in more closely aligning California Public Employees’ Retirement Law with practical reality.

Categories: Public Pensions


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