BILL ANALYSIS Ó
SB 277
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Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
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:
SUMMARY
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.
COMMENTS
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