BILL ANALYSIS SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1354 Lou Correa, Chair Hearing date: June 28, 2010 AB 1354 (Fong) as amended 6/24/10 FISCAL: NO '37 ACT: MAXIMUM PAYMENTS TO RETIREES PURSUANT TO INTERNAL REVENUE CODE SECTION 415 HISTORY : Sponsor: State Association of County Retirement Systems (SACRS) Prior legislation: AB 1739 of 2010 (Lieu), Senate Appropriations Committee ASSEMBLY VOTES : PER & SS 5-0 5/06/09 Assembly Floor 73-0 5/14/09 SUMMARY : Would bring state laws governing the County Employees' Retirement Law of 1937 ('37 Act) into conformity with federal laws regarding public employees who die while serving on active military duty, and make other clarifying changes to bring the statutes into conformity with federal Internal Revenue Code provisions. BACKGROUND AND ANALYSIS : 1) Existing '37 Act law : a) requires the board of retirement of a '37 Act retirement system to adjust the payment of benefits from the system to members as necessary in order to maximize the benefits available to members who are subject to the IRC Section 415 limits; b) provides that those adjustments include, but are not limited to, cost-of-living adjustments, cost-of-living banks, temporary annuities, or survivor continuance benefits; and c) provides death benefits for active employees who die Pamela Schneider Date: 6/24/10 Page 1 prior to retirement and while in active service that are based on factors such as years of service, and age and compensation at the time of death. 2) Existing federal law : The HEART Act, requires that the survivors of a public employee who is killed while on active military service must receive whatever benefits would have been paid had the employee died from non-industrial causes while actively employed. 3) This bill : a) prohibits the amount payable, including cost-of-living adjustments, to a member of a county retirement system being operated under the County Employees' Retirement Law of 1937 ('37 Act) from exceeding the Internal Revenue Code (IRC) Section 415 limits, as specified; b) specifies that adjustments to the IRC Section 415 limits continue to apply after a member's severance from employment or annuity starting date; c) specifies that the survivors of an employee who dies while on active military duty shall receive the benefits that would have been due had the employee reinstated, following the military duty, into active service and then died from non-work related causes; d) further specifies that the death benefits shall not include benefit accruals occurring during the period of military service, but that the military service time will be credited for purposes of vesting; and e) clarifies that this provision is effective for deaths occurring on or after January 1, 2007, the effective date of the HEART Act. FISCAL : Unknown. Pamela Schneider Date: 6/24/10 Page 2 COMMENTS : 1) Arguments in Support According to that author, SACRS is in the process of reviewing the '37 Act body of law for areas where the '37 Act may not comply precisely with the federal and Internal Revenue Code laws. This bill conforms to IRS rules for compliance with IRC Section 415 distributions and conforms to the HEART Act with regard to public employees who die while on leave to perform active military duty. 2) SUPPORT : State Association of County Retirement Systems (SACRS), (Sponsor) American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO Association for Los Angeles Deputy Sheriffs (ALADS) Los Angeles Probation Officers' Union, AFSCME, Local 685 Orange County Professional Firefighters Association, IAFF Local 3631 3) OPPOSITION : None to date ##### Pamela Schneider Date: 6/24/10 Page 3