BILL ANALYSIS Ó AB 2404 Page 1 Date of Hearing: April 27, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2404 (Cooley) - As Amended April 12, 2016 ----------------------------------------------------------------- |Policy |Public Employees, |Vote:|7 - 0 | |Committee: |Retirement/Soc Sec | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No This bill consolidates optional retirement benefit settlements available to members of the California Public Employees' Retirement System (CalPERS), the Judges' Retirement System (JRS I), and the Judges' Retirement System II (JRS II), who retire on or after January 1, 2018. Specifically, this bill: 1)Limits the availability of current optional settlements to members of CalPERS, JRS I, and JRS II that retire on or before December 31, 2017. AB 2404 Page 2 2)Allows members of CalPERS, JRS I, JRS II that retire on or after January 1, 2018 to elect an unmodified allowance, as defined, or the following optional settlements: a) Return of Remaining Contributions Option 1; b) The 100 Percent Beneficiary Option 2; c) The 50 Percent Beneficiary Option 4; d) The Flexible Beneficiary Option 4, which provides a specified dollar or percentage of the member's unmodified allowance to one or more beneficiaries; and e) Option Settlement 5, which provides for a partial present distribution of the actuarial present value of a portion of the unmodified monthly allowance of specified members of the State Peace officer/Firefighter and State Patrol payment options. FISCAL EFFECT: 1)Minor and absorbable administrative costs to CalPERS. 2)Any actuarial reduction to a member's benefit is cost-neutral to CalPERS and is based on his or her age at retirement and the age of the designated beneficiary or beneficiaries. COMMENTS: AB 2404 Page 3 1)Purpose. According to the author, this bill will streamline CalPERS plan design and simplify pension payment options. The author notes that in 2013, CalPERS participated in a cost-effectiveness analysis and was found to have the most complicated set of pension payment options when compared to other similar retirement systems. 2)Background. Existing law allows a retiring CalPERS member to receive a lifetime benefit paid to the member alone, or elect one of twelve optional settlements that reduce his or her lifetime benefit in order to provide a lump sum payment or continuing allowance to a designated beneficiary upon their death. 3)Support. This bill is sponsored by CalPERS. Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081