BILL ANALYSIS                                                                                                                                                                                                    �






          SENATE PUBLIC EMPLOYMENT & RETIREMENT    BILL NO:  SB 322
          Gloria Negrete McLeod, Chair                              
          Hearing date:  March 21, 2011
          SB 322 (Negrete McLeod)    as introduced  2/14/11        
          FISCAL:  NO

           CALPERS:  CLARIFIES APPLICATION OF 415 (b) LIMIT FOR SERVICE 
          UNDER MULTIPLE EMPLOYERS
           
           HISTORY  :    

              Sponsor:  Author

              Prior legislation:  SB 2372 (Russell) 
                         Chapter 798, Statutes of 1990


           SUMMARY  : 

          Senate Bill 322 clarifies existing law with regard to federal 
          limits (IRS Code 415 (b)) on the amount of retirement 
          allowance that may be paid to any individual who entered 
          CalPERS membership after January 1, 1990. 
          

           BACKGROUND AND ANALYSIS  : 

        1)Existing state and federal laws place a dollar limit on the 
          annual benefit that may be received from a tax-qualified 
          pension plan such as CalPERS.  The limit applies to 
          individuals who entered retirement system membership after 
          1990 and is subject to specific criteria, such as the 
          individual's age at the time of retirement and type of 
          service.  The limit may only be determined and applied at the 
          time of retirement.  The limit in calendar year 2011 is 
          $195,000.

          2)   Existing laws  governing the California Public Employees' 
          Retirement System (CalPERS), require:

            a)  CalPERS to annually set employer contribution rates.  
            For the purpose of rate setting, CalPERS looks at 
            individual contracting employers as separate plans.
          Pamela Schneider
          Date:  3/14/11                                         Page 1 











            b)  that when an employee has service under multiple 
            CalPERS employers, that individual's retirement benefit is 
            funded proportionally by the different employers' plans.

           This bill  emphasizes that service under multiple employers 
          may not be considered separately with regard to the 415 (b) 
          limit.

          For example, in 2011 a highly compensated individual subject 
          to the 415 (b) limits who worked for only one employer and 
          who retired with an annual benefit of $210,000 would be 
          limited to $195,000.

          Senate Bill 322 clarifies that another individual, retiring 
          with a similar annual benefit funded by member and employer 
          contributions under multiple jobs (for example, three 
          employers at an annual benefit of $70,000 each) may not 
          exceed the 415 (b) limit by virtue of the fact that the cost 
          of the benefit is spread among multiple employer's plans.


           FISCAL IMPACT  :

          None
           

          COMMENTS :

          The committee is informed by CalPERS that this bill is 
          consistent with CalPERS' current application of the law with 
          respect to this limitation.  Therefore, this bill clarifies 
          that no individual may make a claim for a benefit exceeding 
          the 415 (b) limit based on the benefit being spread over 
          multiple employer plans.


          1)   OPPOSITION  :

               None to date



          Pamela Schneider
          Date:  3/14/11                                         Page 2 










          
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          Pamela Schneider
          Date:  3/14/11                                         Page 3