Article 2. Program Accounts of California Education Code >> Division 1. >> Title 1. >> Part 13. >> Chapter 38. >> Article 2.

(a) The board shall establish a segregated account within the retirement fund to be known as the Gain and Loss Reserve, and the board shall have sole authority over the reserve. The Gain and Loss Reserve shall be maintained for the Defined Benefit Supplement Program and may be used to credit interest at the minimum interest rate for plan years in which the board determines that the obligation cannot be met from investment earnings. The Gain and Loss Reserve may also be used to provide additions to the Annuitant Reserve for monthly annuities payable under the Defined Benefit Supplement Program.
  (b) The board shall establish a goal for the balance of the Gain and Loss Reserve and periodically shall review the sufficiency of the reserve based on the recommendations of the actuary.
  (c) The board may allocate excess earnings of the plan with respect to assets attributable to the Defined Benefit Supplement Program to the Gain and Loss Reserve. In addition, the board may allocate any liability gains and losses attributable to the Defined Benefit Supplement Program to the Gain and Loss Reserve. Upon the recommendation of the actuary, the board shall determine annually the amount, if any, that is to be allocated to the Gain and Loss Reserve for that plan year. That determination shall be made upon recommendation of the actuary after adoption of the actuarial valuation undertaken following the plan year pursuant to Section 22311.5, but no later than June 30 following the end of the plan year. In determining whether to allocate excess earnings to the Gain and Loss Reserve, the board shall consider all of the following:
  (1) Whether or not the plan has excess earnings attributable to the Defined Benefit Supplement Program.
  (2) The sufficiency of the Gain and Loss Reserve in light of the goal established pursuant to subdivision (b).
  (3) The amount required for the plan's administrative costs with respect to the Defined Benefit Supplement Program.
  (4) The amount required for crediting members' accounts at the minimum interest rate.
  (d) In determining whether to allocate liability gains and losses to the Gain and Loss Reserve, the board shall consider the matters described in paragraphs (2), (3), and (4) of subdivision (c).

The board shall establish and maintain a segregated account within the retirement fund to be known as the Annuitant Reserve and the board shall have sole authority over the reserve. The Annuitant Reserve shall be used for the payment of annuities under the Defined Benefit Supplement Program. The board shall transfer the balance of credits in a member's accumulated Defined Benefit Supplement account to the reserve when a benefit is to be paid as an annuity.

The board may transfer amounts between the Gain and Loss Reserve and the Annuitant Reserve upon the recommendation of the actuary.

Member accounts under the Defined Benefit Supplement Program shall be nominal accounts. Member contributions and employer contributions on behalf of the member that are specifically identified as creditable to the Defined Benefit Supplement Program shall be treated as credits to the member's Defined Benefit Supplement account, together with interest credited at the minimum interest rate and additional earnings credit thereon. The balance of credits in a member's account shall determine the amount to which the member is entitled under the Defined Benefit Supplement Program upon termination of employment subject to coverage by the plan. The member shall not have a right or claim to any specific assets of the account, program, plan, or retirement fund.

(a) Prior to July 1 of the initial plan year, and prior to the beginning of each plan year thereafter, the board shall adopt a plan amendment with respect to the Defined Benefit Supplement Program to declare the rate at which interest shall be credited to Defined Benefit Supplement accounts for the following plan year.
  (b) The minimum interest rate declared annually by the board shall be in accordance with applicable federal laws and related regulations and shall not be less than the rate at which interest is credited under the Defined Benefit Program.
  (c) Interest shall be credited to Defined Benefit Supplement accounts and shall be computed at the minimum interest rate on the balance of credits in a member's account and shall be compounded daily.
  (d) Credited interest shall not be applied to the balance of credits in a member's Defined Benefit Supplement account that has been transferred to the Annuitant Reserve.

(a) The board may declare an additional earnings credit to be applied to Defined Benefit Supplement accounts for a plan year. Prior to declaring an additional earnings credit, the board shall consider all of the following:
  (1) Whether the plan's investment earnings with respect to the Defined Benefit Supplement Program for the plan year exceed the amount required to meet the liabilities identified in paragraphs (2), (3), and (4).
  (2) The amount required for the plan year to credit interest on members' nominal accounts at the minimum interest rate.
  (3) The amount of the plan's administrative expenses with respect to the Defined Benefit Supplement Program for the plan year.
  (4) The sufficiency of the Gain and Loss Reserve and whether any additions must be made to that reserve.
  (b) For any plan year that the board declares an additional earnings credit, the board shall specify the amount to be added to members' accounts as a percentage increase. The additional earnings credit shall be applied to the balance of credits in each member's nominal account as of the last day of the plan year and shall be applied as of the date specified by the board. The additional earnings credit shall not be added to the balance of credits transferred from a member's Defined Benefit Supplement account to the Annuitant Reserve.
  (c) The declaration of an additional earnings credit shall be made as a plan amendment adopted by the board with respect to the Defined Benefit Supplement Program upon recommendation of the actuary after adoption of the actuarial valuation undertaken following the plan year pursuant to Section 22311.5, but no later than June 30 following the end of the plan year.

When the board declares an additional earnings credit for a plan year, the board also may declare by plan amendment an additional annuity credit, for members and annuity beneficiaries who are receiving an annuity as of the date specified by the board pursuant to Section 25006, based on the annuity of the member and annuity beneficiaries for the plan year. The additional annuity credit shall be paid in a lump sum to the members and annuity beneficiaries on the date specified by the board. In addition to the considerations specified in Section 25006, prior to declaring an additional earnings credit, the board shall consider both of the following:
  (a) The amount required for the plan year to apply the additional earnings credit to the Defined Benefit Supplement accounts of members who are not receiving an annuity under the Defined Benefit Supplement Program for the plan year.
  (b) Any other obligations incurred by the plan with respect to the Defined Benefit Supplement Program.

A member's right to an amount equal to the member's Defined Benefit Supplement account balance shall be vested at the time contributions are initially credited to the member's account.

Notwithstanding any other law, if (a) a member or beneficiary whose effective date for a benefit received pursuant to any other chapter of this part was prior to January 1, 2010, (b) the member or beneficiary was required to receive a distribution of the balance of credits from the member's Defined Benefit Supplement account pursuant to this chapter, and (c) the member or beneficiary failed to submit an application for the distribution of the member's Defined Benefit Supplement account prior to January 1, 2010, the system shall distribute the balance of credits in the member's Defined Benefit Supplement account in a lump-sum payment to the member or beneficiary, as applicable, by March 31, 2010.