BILL ANALYSIS �
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THIRD READING
Bill No: SB 277
Author: Beall (D)
Amended: 5/13/13
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 5-0, 4/8/13
AYES: Beall, Walters, Block, Gaines, Yee
SENATE APPROPRIATIONS COMMITTEE : 6-0, 5/23/13
AYES: De Le�n, Walters, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Gaines
SUBJECT : State Peace Officers and Firefighters Defined
Contribution Plan
SOURCE : California Correctional Peace Officers Association
DIGEST : This bill closes the State Peace Officers and
Firefighters Defined Contribution Plan (PO/FFDCP) and defines
how members funds in the plan will be distributed.
ANALYSIS :
Existing law:
1. 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.
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2. Allows a participant in PO/FFDCP to receive a distribution of
his/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.
3. Pursuant to a memorandum of understanding (MOU) between the
state and State Bargaining Unit 6 (BU6), established an
employer contribution equal to 2% of base pay to PO/FFDCP for
members of BU6 beginning on October 1, 1988.
4. Pursuant to a subsequent MOU (May 16, 2011), eliminated the
employer contribution to PO/FFDCP as of April 1, 2011, in
exchange for increased employer health care contributions and
a 1% increase to the top salary steps of BU6 employees,
effective July 1, 2013, and allows participants of PO/FFDCP
to withdraw contributions consistent with federal laws
governing tax-qualified retirement savings plans.
5. Allows state employees in State Bargaining Unit 8 (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.
6. Establishes the Supplemental Contributions Program (SCP),
administered by CalPERS, which is a voluntary defined
contribution retirement savings program for CalPERS members
and employers.
This bill:
1. Includes findings and declarations that state contributions
to PO/FFDCP have been eliminated and the plan terminates no
later than January 1, 2014, or upon obtaining approval from
the Internal Revenue Service.
2. Deletes provisions extending plan coverage to BU8 employees.
3. 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
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participant, that participant's funds shall be rolled over
into SCP to an account established in that plan in the
participant's name.
4. 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.
5. Specifies that SCP may accept rollovers from PO/FFDCP if the
CalPERS board establishes separate rollover accounts for
PO/FFDCP participants.
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.
7. Authorizes participants to elect investment fund options, as
specified, in the SCP.
8. Requires that certain rollover contributions be invested in
the applicable target retirement date fund investment fund
option available, until the participant elects another
investment fund option.
9. Make various clarifying and technical changes in the SCP.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis,
one-time costs estimated at $476,500 to the POFF DCP Trust
(Special).
Administrative costs result from activities involving outreach
to participants, making distributions upon the termination of
the plan, and management of account rollovers into the default
Supplemental Contribution Program. Third party administrator
costs will result from the following activities:
General implementation of the termination, including
participant data analysis, establishing the rollover source,
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adding on-line functionality for distributions, managing
default distributions of less than $1,000, facilitating data
and fund transfer, and reviewing and updating the CalPERS'
Web site, publications and forms.
Participant Communication including a general announcement,
reminder letters, SCP welcome kits, and missing participant
search.
System and business analyses for the transfer of assets from
the POFF DCP to the SCP.
The POFF DCP administrative account is funded through account
maintenance fees paid by participants. The fee was reduced
March 1, 2013 from .55% to .45%. Any administrative expenses
associated with terminating the plan and distributing the funds
to members will be paid out of an existing surplus in that
maintenance fees account. To the extent that members choose to
withdraw their money instead of rolling it over to another
investment option, there could be several million dollars in
state tax revenue from an existing 2.5% penalty if the member is
subject to the early distribution penalty.
SUPPORT : (Verified 5/23/13)
California Correctional Peace Officers Association (source)
JL:d 5/24/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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