BILL ANALYSIS Ó 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 ##### Pamela Schneider Date: 3/14/11 Page 3