BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 277
Jim Beall, Chair HEARING DATE: April 8, 2013
SB 277 (Beall) as amended 3/21/13 FISCAL: YES
STATE PEACE OFFICERS' AND FIREFIGHTERS' DEFINED CONTRIBUTION
PLAN
HISTORY :
Sponsor: California Correctional Peace Officers'
Association (CCPOA)
Other legislation: AB 2472 (Leonard)
Chapter 820, Statutes of 1998
SUMMARY :
SB 277 closes the State Peace Officers' and Firefighters
Defined Contribution Plan (PO/FFDCP) and defines how members'
funds in the plan shall be distributed.
BACKGROUND AND ANALYSIS :
1) Existing law :
a) establishes 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) allows a participant in PO/FFDCP to receive a
distribution of his or her balance of funds in PO/FFDCP
upon separation from service or retirement . The
distribution must be a lump-sum unless the balance is
over $5000, in which case the participant may choose
between a lump-sum payment, or an annuity extending for
no more than the expected life-span of the participant.
c) pursuant to a memorandum of understanding (MOU) between
the State and state Bargaining Unit 6 (Correctional Peace
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Officers: BU6; 7/1/1998), established an employer
contribution equal to 2 percent of base pay to PO/FFDCP
for members of BU6 beginning on 10/1/1998.
d) pursuant to a subsequent MOU (5/16/2011), eliminated
the employer contribution to PO/FFDCP as of 4/1/2011 in
exchange for increased employer health care contributions
and a 1 percent increase to the top salary steps of BU6
employees, effective 7/1/2013, and allows participants of
PO/FFDCP to withdraw contributions consistent with
federal laws governing tax-qualified retirement savings
plans.
e) allows state employees in state Bargaining Unit 8
(California Department of Forestry Firefighters: BU8) to
bargain to receive an employer contribution to PO/FFDCP;
however, no bargaining agreement was ever reached between
the State and BU8 for an employer contribution to
PO/FFDCP for BU8 members.
f) establishes the Supplemental Contributions Program
(SCP), administered by CalPERS, which is a voluntary
defined contribution retirement savings program for
CalPERS members and employers.
2) This bill :
a) includes findings and declarations that state
contributions to PO/FFDCP have been eliminated and that
the plan shall be terminated no later than January 1,
2014, or upon obtaining approval from the Internal
Revenue Service.
b) deletes the provision that would have allowed BU8
employees to participate in PO/FFDCP.
c) 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.
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d) specifies that a distribution of funds from PO/FFDCP to
a participant constitutes a discharge and release of
CalPERS from liability for payments and that the CalPERS
board and system shall not be treated as fiduciaries with
respect to a transfer of funds from PO/FFDCP to SCP.
e) specifies that SCP may accept rollovers from PO/FFDCP
if the board establishes separate rollover accounts for
PO/FFDCP participants.
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.
FISCAL :
Costs are anticipated to be absorbable within existing
program functions. Funds in PO/FFDCP are the property of the
plan participants. PO/FFDCP has not received contributions
since April of 2011. SCP already exists and allows CalPERS
members to open and contribute to SCP accounts.
COMMENTS :
1) Arguments in Support :
According to the sponsor:
In the late 19990's, CCPOA and the state agreed to
establish a supplemental retirement program for
correctional peace officers. The program was funded by our
members taking a two percent less salary increase and the
state depositing two percent of salaries into a
tax-deferred account with CalPERS. The plan provided our
members with a 401(k)-like account, but one that was
managed only by CalPERS.
In our 2011 collective bargaining agreement, the parties
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agreed to stop contributions to the members' accounts as of
April 2011, and agreed that 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.
According to the author:
Current law regarding PO/FFDCP does not allow an employee
to withdraw or roll over PO/FFDCP funds prior to separation
from employment or retirement. The BU6 employees with
funds in PO/FFDCP would like to have the ability to roll
over funds into other tax-qualified retirement plans or to
make withdrawals, consistent with federal laws and tax
requirements for defined contribution plans.
2) SUPPORT :
California Correctional Peace Officers Association (CCPOA),
Sponsor
3) OPPOSITION :
None to date
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