BILL ANALYSIS Ó
SB 322
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Date of Hearing: June 8, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
SB 322 (Negrete McLeod) - As Amended: February 14, 2011
SENATE VOTE : 34-0
SUBJECT : Retirement.
SUMMARY : Clarifies that the federal Internal Revenue Code
(IRC) Section 415 (b) limit applies to the total benefit paid to
a member of the California Public Employees' Retirement System
(CalPERS) regardless of the number of CalPERS-covered employers
that member worked for.
EXISTING STATE LAW :
Requires CalPERS to annually set employer contribution rates.
For the purpose of rate setting, CalPERS looks at individual
contracting employers as separate plans. Additionally, current
law requires that when an employee has service under multiple
CalPERS employers, that individual's retirement benefit is
funded proportionally by the different employers' plans.
EXISTING FEDERAL LAW :
As established in IRC Section 415(b), places a dollar limit on
the annual benefit that can be received from a tax-qualified
pension plan such as CalPERS. Under IRC Section 415(b), the
maximum annual retirement benefit payable at the Social Security
"normal retirement age" is $195,000 for calendar year 2010.
This annual benefit limit may be adjusted by the Internal
Revenue Service (IRS) annually for Cost-of-Living Adjustments.
Determination of whether a retirement benefit is subject to this
limit is made at retirement.
FISCAL EFFECT : None.
COMMENTS : According to the author, "This bill emphasizes that
service under multiple employers may not be considered
separately with regard to the IRC Section 415(b) limit.
"For example, in 2011 a highly compensated individual subject to
SB 322
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the IRC Section 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.
"SB 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 IRC
Section 415(b) limit by virtue of the fact that the cost of the
benefit is spread among multiple employer's plans."
The committee is informed by CalPERS that this bill is
consistent with CalPERS' current application of the law with
respect to this limitation. For purposes of compliance with the
IRS and IRC Section 415(b), CalPERS must aggregate the
retirement allowance of individuals based on service with
multiple employers.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957