All contributions based on salary earned by a participant, together with amounts credited under the minimum interest rate and additional earnings credit amounts, shall be treated as credits to individual accounts in the name of the participant. These accounts shall be nominal accounts used to determine the amount of retirement benefit, disability benefit, death benefit, or termination benefit of the participant or beneficiary. The participant shall have no actual individual account and shall have no claim to any particular assets of the plan or the fund.
Chapter 7Employee and Employer Accounts
Section § 26600
This law section states that any money put into a retirement plan from an employee's salary, plus interest and extra earnings, will be recorded in a specific account for that employee. However, the account is only for calculating benefits like retirement, disability, death, or leaving the job, and the employee doesn’t own the account or any specific funds in it.
retirement benefits disability benefits death benefits termination benefits salary contributions minimum interest rate earnings credit participant account retirement plan fund assets nominal accounts benefit calculation beneficiary
Section § 26601
This law ensures that when employees contribute money, and earn interest and additional earnings on those contributions, it all goes into their personal employee account.
All employee contributions and interest credited under the minimum interest rate and additional earnings credits in respect of those contributions shall be treated as credits to the participant’s employee account.
employee contributions interest credited minimum interest rate additional earnings credits employee account participant credits personal account contributions treatment financial benefits
Section § 26602
This law section says that any money an employer puts into an employee's retirement account, as well as any interest earned at a set minimum rate or additional earnings, will be recorded in the employee’s specific employer account.
All employer contributions on behalf of the participant and interest credited under the minimum interest rate and additional earnings credits in respect of those contributions shall be treated as credits to the participant’s employer account.
employer contributions participant's employer account interest credited minimum interest rate additional earnings credits retirement account employee benefits credited interest employer account participant account
Section § 26603
This law section states that employee contributions are added to their accounts and employer contributions are added to their accounts from the day they must be sent to the retirement plan, according to another law section referred to here. This rule started being enforced on July 1, 2018.
(a)CA Education Code § 26603(a) All employee contributions shall be credited to employee accounts and all employer contributions shall be credited to employer accounts effective as of the day contributions are required to be transmitted to the plan pursuant to subdivision (a) of Section 26303.
(b)CA Education Code § 26603(b) This section shall become operative on July 1, 2018.
employee contributions employer contributions retirement plan funding date operative date July 1 2018 account credits transmission of contributions Section 26303 employee accounts employer accounts
Section § 26604
This section outlines how interest is handled in a retirement savings plan called the Cash Balance Benefit Program. Each year, the board sets a minimum interest rate to be applied to the plan's accounts. Interest is calculated daily based on this rate. However, once an account is used to set up payments for retirement (an annuity), it stops accruing interest.
(a)CA Education Code § 26604(a) Beginning June 1, 1996, prior to the Cash Balance Plan becoming effective, and prior to the beginning of each plan year thereafter, the board, by plan amendment with respect to the Cash Balance Benefit Program, shall declare the minimum interest rate for crediting employee accounts and employer accounts with respect to the Cash Balance Benefit Program during the following plan year.
(b)CA Education Code § 26604(b) All interest shall be computed at the minimum interest rate on the balance of the employee account and the employer account and shall be compounded daily.
(c)CA Education Code § 26604(c) Interest shall not be credited to employee accounts and employer accounts
that have been transferred to the Annuitant Reserve for payment of an annuity.
Cash Balance Benefit Program minimum interest rate employee accounts employer accounts plan amendment interest computation compounded daily Annuitant Reserve annuity payment retirement savings
Section § 26605
If the investment earnings of a retirement plan exceed what's needed to cover the minimum interest to employees and employers and administrative costs, the board can decide if that extra money is added as additional earnings to participants' accounts.
In the event that the total amount of investment earnings of the plan for any plan year exceeds the sum of the total amount required to credit all employee and employer accounts at the minimum interest rate for the plan year plus the administrative costs of the plan for the plan year, then following the determination by the board with respect to additions to the Gain and Loss Reserve described in subdivision (c) of Section 26202 the board may declare by means of plan amendment an additional earnings credit for the plan year with respect to the employee and employer accounts of the plan participants.
investment earnings employee and employer accounts minimum interest rate administrative costs gain and loss reserve board determination additional earnings credit plan amendment retirement plan plan year board declaration plan participants
Section § 26606
This law section explains that any extra earnings credited to an employee's or employer's account in the Cash Balance Benefit Program will be calculated as a percentage increase based on the account balance at the end of the plan year. These additional earnings are added to the account balances when the board decides to apply them. However, accounts that have already been moved to the Annuitant Reserve for paying out annuities won't get this extra earnings credit.
Any additional earnings credit declared shall be determined as a specified percentage increase in the closing balance of each employee account and employer account with respect to the Cash Balance Benefit Program measured as of the last day of the plan year. The additional earnings credit shall be credited to employee account and employer account balances as of the date the board declares the additional earnings credit is to be applied. The additional earnings credit shall not be credited to employee accounts and employer accounts that have been transferred to the Annuitant Reserve for payment of an annuity under the Cash Balance Benefit Program.
additional earnings credit employee account employer account Cash Balance Benefit Program plan year closing balance Annuitant Reserve annuity payment specified percentage increase board declaration account balances extra earnings plan year end account transfer benefit program rules
Section § 26607
This section allows the board to increase annuity payments under the Cash Balance Benefit Program through a plan amendment. They can only do this when there’s excess investment earnings after covering necessary costs and obligations for the year. If conditions are met, the excess funds can be used to provide a one-time, lump-sum payment based on the participant’s or beneficiary’s annuity amount for that year.
(a)CA Education Code § 26607(a) The board may declare by means of plan amendment with respect to the Cash Balance Benefit Program an additional annuity credit applicable to annuities being paid under the Cash Balance Benefit Program.
(b)CA Education Code § 26607(b) The declaration authorized by subdivision (a) may be made only when the board by plan amendment with respect to the Cash Balance Benefit Program declares an additional earnings credit as provided in Section 26605 and if the total amount of investment earnings of the plan with respect to the Cash Balance Benefit Program for the plan year exceeds the sum of the total amount required to credit all employee and employer accounts at the minimum interest rate, the administrative costs of the plan with respect to the Cash Balance Benefit Program for the plan year, any addition to be made to the Gain and Loss Reserve under subdivision (c) of Section 26202, the total amount required to credit all employee and employer accounts in respect of the additional earnings credit so declared, and any other obligations incurred by the plan with respect to the Cash Balance Benefit Program.
(c)CA Education Code § 26607(c) Any additional annuity credit with respect to the Cash Balance Benefit Program shall be based upon the annuity of the participant or beneficiary for the plan year and shall be paid as a lump sum to the participant or beneficiary on the date specified by the board.
Cash Balance Benefit Program annuity credit investment earnings plan amendment excess funds lump sum payment participant beneficiary gain and loss reserve additional earnings credit minimum interest rate administrative costs
