BILL NUMBER: SB 1727 CHAPTERED 09/29/94 CHAPTER 1094 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 1994 APPROVED BY GOVERNOR SEPTEMBER 28, 1994 PASSED THE SENATE AUGUST 19, 1994 PASSED THE ASSEMBLY AUGUST 11, 1994 AMENDED IN ASSEMBLY MAY 27, 1994 AMENDED IN SENATE APRIL 27, 1994 INTRODUCED BY Senator Hughes FEBRUARY 24, 1994 An act to amend Sections 12420.2 and 20215.5 of the Government Code, relating to public employees, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1727, Hughes. Public employees: home loan program: annuity contracts. (1) Existing law authorizes the Controller to purchase annuity contracts for permanent employees of specified state departments and boards. The bill would include additional state agencies in that list. (2) The California Constitution provides that the Board of Administration of the Public Employees' Retirement System has plenary authority and fiduciary responsibility for investment of moneys and administration of the system subject to the Legislature's authority to prohibit certain investments under specified circumstances. The Public Employees' Retirement Law authorizes members to obtain home loans secured by both the purchased home and a portion of the member's individual retirement account. This bill revises member home loan program provisions to provide that 95% of the loan be secured by the purchased home and not to exceed 5% be secured by the members accumulated contributions and vested accrued benefits. The changes would be deemed to have become operative on November 1, 1993. (3) This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 12420.2 of the Government Code is amended to read: 12420.2. The Controller may purchase annuity contracts for permanent employees of the State Department of Education, Department of the Youth Authority, Board of Governors of the California Community Colleges, Department of Corrections, State Department of Mental Health, California Maritime Academy, Commission for Teacher Credentialing, State Department of Developmental Services, California State Library, California Postsecondary Education Commission, Private Postsecondary Vocational Education Council, Department of Consumer Affairs, Board of Vocational Nurse and Psychiatric Technician Examiners, and the Board of Registered Nursing, and shall reduce the salary of each employee for whom an annuity contract is purchased by the amount of the cost thereof provided that all of the following conditions are met: (a) The annuity contract is under an annuity plan which meets the requirements of subdivision (b) of Section 403 of the Internal Revenue Code and Section 17512 of the Revenue and Taxation Code. (b) The employee makes application to the Controller for the purchase and reduction of salary. (c) All provisions of the Insurance Code applicable to the purchase of those annuities are satisfied. SEC. 2. Section 20215.5 of the Government Code is amended to read: 20215.5. (a) It is the intent of the Legislature that the provisions of this section be available to assist members in obtaining homes in this state. The Legislature intends that home loans made pursuant to Section 20215 and this section shall be secured primarily by the property acquired except as authorized pursuant to paragraph (1) of subdivision (b) and shall not exceed the fair market value of the property acquired. (b) The board shall include in any program established pursuant to Section 20215 a procedure whereby a member may obtain 100 percent financing for the purchase of a single-family dwelling unit in accordance with the following criteria: (1) The member shall obtain one loan with a loan-to-value ratio not to exceed 95 percent secured by the purchased home and a second personal loan with a loan-to-value ratio not to exceed 5 percent secured by a portion of the accumulated contributions and vested accrued benefits in the member's individual account. (2) The loan secured by the purchased home shall be consistent with the loan-to-value ratios specified in the schedules established pursuant to Section 20215. (3) The amount of any loan on a single family dwelling unit shall not exceed 95 percent of the median value of those dwellings in the county in which the dwelling is located or two hundred thousand dollars ($200,000), whichever is the greater amount. The amount shall be increased annually by the increase in the consumer price index, as defined in Section 21221. In no event, shall the loan amount exceed three hundred fifty thousand dollars ($350,000). (4) In no event may the personal loan secured by the accumulated contributions and vested accrued benefits in the member's individual account exceed 50 percent of the current value amount of the accumulated contributions. (5) The pledge of security under this section shall remain in effect until the loan is paid in full. (c) In the event of a default on the personal loan secured by the member's contributions as authorized by this section, the board may deduct an amount from the member's contributions on deposit and adjust the member's accrued benefit, up to the amount pledged as security, prior to making any disbursement of retirement benefits. (d) The secured personal loan permitted under this section shall be made available only to currently employed members who meet such eligibility criteria as the board deems advisable. (e) If the member is married at the time the home is purchased with a personal loan secured by the member's contributions as authorized by this section, then the member's spouse shall agree in writing to the pledge of security, as to his or her community interest in the amount pledged regardless of whether title to the home is in joint tenancy. (f) The pledge of security under this section shall take binding effect, notwithstanding Section 21201. In the event of default, the accumulated contributions in the member's account shall be reduced as necessary to recover any outstanding loan balance, not to exceed the pledged amount. (g) Appropriate administrative costs of implementing this section shall be paid by the members utilizing this section. Those costs may be included in the loan amount. (h) Appropriate interest rates shall be periodically reviewed and adjusted to provide loans to members consistent with the financial integrity of the member home loan program and the sound and prudent investment of the retirement fund. (i) The amendments to this section during the 1993-94 Regular Session of the Legislature shall be deemed to have become operative on November 1, 1993. (j) The board shall administer this section under such other terms and conditions as it deems appropriate and in keeping with the investment standard set forth in Section 20205.8. The board may adopt procedural guidelines as necessary for its administration of this section and to assure compliance with applicable state and federal laws. SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to make the annuity and housing programs available to public employees in time for them to benefit from the current housing market conditions and in order to increase home sales to stimulate the California economy, it is necessary that this act take effect immediately.