BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 609
                                                                  Page  1

          Date of Hearing:   May 6, 2009

            ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL  
                                      SECURITY
                                 Ed Hernandez, Chair
                    AB 609 (Conway) - As Amended:  April 30, 2009
           
          SUBJECT  :   County employees retirement: disability retirement.

           SUMMARY  :   Declares the Legislature's intent to examine the  
          advisability of linking, in statute, the administrative budgets  
          of retirement systems being operated under the County Employees'  
          Retirement Law of 1937 ('37 Act) to the value of the assets of  
          the retirement system. 

           EXISTING LAW  provides, generally, that the annual budget for  
          administrative expenses of a '37 Act retirement system may not  
          exceed eighteen hundredths of 1% (0.18%) of the total assets of  
          the retirement system.

          Additionally, as provided for by AB 1124 (Karnette), Chapter  
          327, Statutes of 2007, '37 Act counties are allowed, until  
          January 1, 2013, to increase the budget for administration of  
          the retirement system in years when they incur expenses for  
          software, hardware, and computer technology consulting services,  
          providing the annual expenditure does not exceed the greater of:

          1)Eighteen hundredths of 1% (0.18%) of the total assets of the  
            retirement system plus $1 million; or,

          2)Twenty-three hundredths of 1% (0.23%) of the total assets of  
            the retirement system.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, because the cost of  
          administration of a '37 Act retirement system is based on the  
          assets of the retirement system, the current significant decline  
          in the market value of those assets will result in reduced  
          operating budgets, potentially in the range of 30% to 50%.

          The author states, "The costs of administration are driven by  
          staff activities with regard to processing employees into  
          retirement, disability retirement process, retiree payroll,  
          supporting accounting responsibilities and IT systems; these day  








                                                                  AB 609
                                                                  Page  2

          to day functions make up the bulk of the administrative costs of  
          system operations. Regardless of investment market cycles, the  
          responsibility to assist the system's clients remains relatively  
          constant."

          The Committee is informed that the author would like to move  
          this bill forward as a vehicle for possible legislative action  
          to better enable '37 Act systems to function properly regardless  
          of market cycles while also taking into account the differing  
          sizes of the twenty '37 Act systems in California.





           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          State Association of County Retirement Systems (Sponsor)

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)  
          319-3957