BILL ANALYSIS Ó
AB 611
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 611 (Bonta)
As Amended June 17, 2014
2/3 vote. Urgency
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|ASSEMBLY: |76-1 |(May 30, 2013) |SENATE: |34-0 |(August 7, |
| | | | | |2014) |
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|COMMITTEE VOTE: |5-0 |(August 12, 2014) |RECOMMENDATION: |concur |
|(P.E., R. & | | | | |
|S.S.) | | | | |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : 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 are to be
distributed. Specifically, this bill :
1)Changes the effective date of termination to June 1, 2014,
subject to obtaining the appropriate Internal Revenue Service
(IRS) approvals.
2)Adds a section stating that the plan is intended to constitute a
governmental plan within the meaning of the Internal Revenue Code
(IRC) Section 414(d), and as such, the plan and all payments
satisfy IRC Section 401(a), as specified.
3)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.
4)Contains an urgency clause, allowing this bill to take effect
immediately upon enactment.
The Senate amendments delete the Assembly version of the bill and
instead add language agreed upon by the California Public
Employees' Retirement System (CalPERS) and the IRS to ensure that
AB 611
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administration of the changes to PO/FFDCP and the Supplemental
Contributions Program (SCP) meet federal requirements for
tax-qualified governmental retirement plans.
EXISTING LAW :
1)Established PO/FFDCP, a tax-qualified retirement savings plan
that is administered by CalPERS and governed under the IRC
Section 401(a).
2)Pursuant to a memorandum of understanding (MOU) between the state
and state Bargaining Unit (BU) 6 (Correctional Peace Officers:
BU 6: July 1, 1998), established an employer contribution equal
to 2% of base pay to PO/FFDCP for members of BU 6 beginning on
October 1, 1998.
3)Terminates the old PO/FFDCP as of the later of January 1, 2014,
or upon obtaining approvals from the IRS, including a favorable
determination letter on plan termination, and allows participants
to withdraw contributions consistent with federal laws governing
tax-qualified retirement savings plans.
4)Establishes the SCP, administered by CalPERS, which is a
voluntary defined contribution retirement savings program for
CalPERS members and employers.
5)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 will be rolled over into SCP to an account established in
that plan in the participant's name.
6)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.
FISCAL EFFECT : According to the Senate Appropriations Committee,
pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : 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.
AB 611
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According to the sponsor of this bill, the California Correctional
Peace Officers' Association (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 [(Beall), Chapter 755, Statutes of 2013], which enjoyed
unanimous legislative support and was signed by the Governor, was
designed to implement the 2011 agreement. CalPERS 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."
There is no opposition on file.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004574