BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        SB 277|
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                                 UNFINISHED BUSINESS


          Bill No:  SB 277
          Author:   Beall (D)
          Amended:  6/18/13
          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 León, Walters, Hill, Lara, Padilla, Steinberg
          NO VOTE RECORDED:  Gaines

           SENATE FLOOR  :  38-0, 5/29/13 (Consent)
          AYES: Anderson, Beall, Berryhill, Block, Calderon, Cannella,  
            Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Fuller,  
            Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,  
            Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,  
            Padilla, Pavley, Price, Roth, Steinberg, Torres, Walters,  
            Wolk, Wyland, Yee
          NO VOTE RECORDED: Wright, Vacancy

           ASSEMBLY FLOOR  :  78-0, 9/9/13 - See last page for vote


           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  
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          how members funds in the plan will be distributed.

           Assembly Amendments  provide that a fiduciary of the Supplemental  
          Contributions Program is not liable for losses resulting from  
          investments in fund options selected by participants or provided  
          to participants who fail to elect an option.

           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.

          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),  

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             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  
             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. Provides that a fiduciary of the SCP is not liable for losses  
             resulting from investments in fund options selected by  
             participants or provided to participants who fail to select  
             an option.

          9. Requires that certain rollover contributions be invested in  

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             the applicable target retirement date fund investment fund  
             option available, until the participant elects another  
             investment fund option. 

          10.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,  
             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. 


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           SUPPORT  :   (Verified per Assembly PERS Committee Analysis of  
          6/26/13) (Unable to reverify at time of writing)

          California Correctional Peace Officers Association (source)

           ASSEMBLY FLOOR  :  78-0, 9/9/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,  
            Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden,  
            Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell,  
            Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,  
            Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas,  
            Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,  
            Wilk, Williams, Yamada, John A. Pérez
          NO VOTE RECORDED:  Vacancy, Vacancy


          JL:AL:d  9/9/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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