BILL ANALYSIS Ó
SB 277
Page 1
SENATE THIRD READING
SB 277 (Beall)
As Amended June 18, 2013
Majority vote
SENATE VOTE :38-0
PUBLIC EMPLOYEES 6-0 APPROPRIATIONS 17-0
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|Ayes:|Bonta, Allen, |Ayes:|Gatto, Harkey, Bigelow, |
| |Jones-Sawyer, Mullin, | |Bocanegra, Bradford, Ian |
| |Rendon, Wieckowski | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Hall, Holden, Linder, |
| | | |Pan, Quirk, Wagner, Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Closes the State Peace Officers and Firefighters
Defined Contribution Plan (PO/FF DCP) and defines how members'
funds in the plan will be distributed. Specifically, this bill :
1)Includes findings and declarations that state contributions to
PO/FF DCP 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 State Bargaining
Unit 8 (BU 8) employees and certain state peace officers and
firefighters.
3)Requires that all funds in PO/FF DCP 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
the Supplemental Contributions Program (SCP) to an account
established in that plan in the participant's name.
4)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.
5)Specifies that a distribution of funds from PO/FF DCP to a
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participant constitutes a discharge and release of the
California Public Employees' Retirement System (CalPERS) from
liability for payments and that the CalPERS board and system
will not be treated as fiduciaries with respect to a transfer
of funds from PO/FF DCP to SCP.
6)Specifies that SCP may accept rollovers from PO/FF DCP if the
CalPERS board establishes separate rollover accounts for PO/FF
DCP participants.
7)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.
8)Authorizes participants to elect investment fund options, as
specified, in the SCP.
9)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.
10)Makes various clarifying and technical changes in the SCP.
EXISTING LAW :
1)Establishes PO/FF DCP, a tax-qualified retirement savings plan
that is administered by CalPERS and governed under section
401(a) of the Internal Revenue Code.
2)Allows a participant in PO/FF DCP to receive a distribution of
his or her balance of funds in PO/FF DCP upon separation from
service or retirement. The distribution must be a lump-sum
unless the balance is over $5,000, 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.
Pursuant to a memorandum of understanding (MOU) between the
state and State Bargaining Unit 6 (BU 6), established an
employer contribution equal to 2% of base pay to PO/FF DCP for
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members of BU 6 beginning on October 1, 1988.
3)Pursuant to a subsequent MOU (May 16, 2011), eliminated the
employer contribution to PO/FF DCP as of April 1, 2011, in
exchange for increased employer health care contributions and
a 1% increase to the top salary steps of BU 6 employees,
effective July 1, 2013, and allows participants of PO/FF DCP
to withdraw contributions consistent with federal laws
governing tax-qualified retirement savings plans.
4)Allows state employees in BU 8 to bargain to receive an
employer contribution to PO/FF DCP; however, no bargaining
agreement was ever reached between the state and BU 8 for an
employer contribution to PO/FF DCP for BU 8 members.
5)Establishes the Supplemental Contributions Program (SCP),
administered by CalPERS, which is a voluntary defined
contribution retirement savings program for CalPERS members
and employers.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 : According to the sponsor, "In the late 1990's, the
California Correctional Peace Officers Association (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 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."
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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 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 contribution plans."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0002098