BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 611
Jim Beall, Chair HEARING DATE: June 23, 2014
AB 611 (Bonta) as amended 6/17/14 FISCAL: YES
STATE PEACE OFFICERS' AND FIREFIGHTERS' DEFINED CONTRIBUTION
PLAN
HISTORY :
Sponsor: California Correctional Peace Officers'
Association (CCPOA)
Other legislation: SB 277 (Beall),
Chapter 755, Statutes of 2013
AB 2472 (Leonard),
Chapter 820, Statutes of 1998
ASSEMBLY VOTES :
Not relevant - new bill with June 17, 2014, amendments
SUMMARY :
In order to comply with Internal Revenue Code requirements,
AB 611 makes technical changes to provisions that close the
State Peace Officers' and Firefighters Defined Contribution
Plan (PO/FFDCP) and define how members' funds in the plan
shall be distributed. THIS IS AN URGENCY MEASURE .
BACKGROUND AND ANALYSIS :
1)Existing law :
a) established PO/FFDCP, a tax-qualified retirement
savings plan that is administered by the California
Public Employees' Retirement System (CalPERS) and
governed under section 401(a) of the Internal Revenue
Code.
b) pursuant to a memorandum of understanding (MOU)
between the State and state Bargaining Unit 6
(Correctional Peace Officers: BU6: 7/1/1998),
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established an employer contribution equal to 2 % of
base pay to PO/FFDCP for members of BU6 beginning on
10/1/1998.
c) terminates the old PO/FFDCP as of the later of
January 1, 2014, or upon obtaining approvals from the
Internal Revenue Service, including a favorable
determination letter on plan termination, and allows
participants to withdraw contributions consistent with
federal laws governing tax-qualified retirement savings
plans.
d) establishes the Supplemental Contributions Program
(SCP), administered by CalPERS, which is a voluntary
defined contribution retirement savings program for
CalPERS members and employers.
e) requires that all funds in PO/FFDCP be distributed in
accordance with plan requirements and federal laws, and
specifies that if no specific election is made by a
participant, that participant's funds shall be rolled
over into SCP to an account established in that plan in
the participant's name.
f) allows a participant whose funds have been rolled
over into SCP to withdraw funds at any time to the
extent that an in-service distribution is allowable
under applicable state and federal laws.
1)This bill adds language agreed upon by CalPERS and the IRS
to ensure that administration of the changes to PO/FFDCP
and SCP meet federal requirements for tax-qualified
governmental retirement plans:
a) changes the effective date of termination to June 1,
2014, subject to obtaining the appropriate IRS
approvals.
b) adds a section stating that the plan is intended to
constitute a governmental plan within the meaning of
Section 414(d) of the Internal Revenue Code (IRC), and
as such, the plan and all payments satisfy IRC code
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section 401(a), as specified.
c) adds additional language to ensure that the trust
funds may only be used for the exclusive benefit of plan
members and their beneficiaries, and that any reversion
of funds will be subject to IRS Revenue Ruling 91-4, as
specified.
FISCAL :
None specific to this bill. It is intended to clarify
existing law.
COMMENTS :
1)Argument in Support :
According to the CCPOA:
In our 2011 collective bargaining agreement, the parties
agreed to stop contributions to the members'
[supplemental retirement program] accounts as of April
2011, and agreed so long as it was consistent with
relevant state and federal law, the individual members
could manage their balances in a manner similar to the
way private sector employees could manage their 401(k)
accounts.
SB 277, which enjoyed unanimous legislative support and
was signed by the Governor, was designed to implement
the 2011 agreement. Cal-PERS and CCPOA have been
working diligently to obtain the necessary sign-off from
the Internal Revenue Service (IRS) to effectuate SB 277.
Unfortunately, we recently learned that the IRS would
not approve the termination of the plan without some
minor technical changes. This measure makes SB 277
compliant with IRS requirements.
2)SUPPORT :
California Correctional Peace Officers' Association (CCPOA)
3)OPPOSITION :
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None.
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