BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 277
                                                                  Page  1

          Date of Hearing:  August 14, 2013

                                  Mike Gatto, Chair

                     SB 277 (Beall) - As Amended:  June 18, 2013 

          Policy Committee:                             PERSS Vote:   6-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              


          This bill closes the State Peace Officers and Firefighters  
          Defined Contribution Plan (PO/FF DCP) and establishes procedures  
          for distributing members' funds.  Specifically, this bill: 

          1)Requires that all funds in PO/FF DCP be distributed in  
            accordance with plan requirements and federal laws, and  
            specifies if a participant does not make an election the  
            participant's funds will be rolled over into an account in the  
            CalPERS Supplemental Contributions Program (SCP).

          2)Specifies that the fiduciary of the SCP will not be liable for  
            any loss that results from a participant's fund selection or  
            participation in the default option.

           FISCAL EFFECT  

          One-time costs estimated at $700,000 to CalPERS, to be paid from  
          the PO/FF DCP Trust (Special Fund).  Administrative costs will  
          result from outreach to participants, making distributions upon  
          the termination of the plan and management of account rollovers  
          into the default Supplemental Contribution Program.  

           1)Purpose  .  According to the author, current law regarding PO/FF  
            DCP does not allow an employee to withdraw or roll over PO/FF  
            DCP funds prior to separation from employment or retirement.   
            The author contends BU 6 employees with funds in PO/FF DCP  
            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  


                                                                  SB 277
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            contribution plans.

           2)Support  .  According to the sponsor, the California  
            Correctional Peace Officers Association (CCPOA), in the late  
            1990's the state agreed to establish a supplemental retirement  
            program for correctional peace officers.  CCPOA notes the  
            program was funded by their members taking a smaller salary  
            increase and the state depositing those funds into an account  
            with CalPERS.  CCPOA notes in the 2011 collective bargaining  
            agreement, the parties agreed to stop contributions to the  
            members' 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 manage their  
            401(k) accounts.

           3)Background  .  These accounts are established under Section  
            401(a) of the Internal Revenue Code.  These are retirement  
            savings plan set up by an employer. The 401(a) plan allows for  
            contributions by the employee, the employer, or both.  
            Contribution amounts, whether dollar-based or  
            percentage-based, eligibility and vesting schedule are all  
            determined by the sponsoring employer.  For this reason, the  
            401(a) plan is commonly used by employers to create inventive  
            programs to help retain employees.

            The SCP, administered by CalPERS, is a voluntary defined  
            contribution retirement savings program for CalPERS members  
            and employers that is formed under Section 401(c) of the  
            Internal Revenue Code.

           4)There is no registered opposition to this bill.  

           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081