BILL ANALYSIS
AB 609
Page 1
ASSEMBLY THIRD READING
AB 609 (Conway)
As Amended June 2, 2009
Majority vote
PUBLIC EMPLOYEES 6-0
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|Ayes:|Hernandez, Furutani, | | |
| |Beall, Conway, Nestande, | | |
| |Torrico | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Increases the administrative budgets of retirement
systems being operated under the County Employees' Retirement
Law of 1937 ('37 Act). Specifically, this bill :
1)Increases the maximum annual amount a '37 Act retirement
system may spend on administration from eighteen hundredths of
1% (0.18%) of the total assets of the retirement system to
nineteen hundredths of 1% (0.19%).
2)Increases the maximum annual amount a '37 Act retirement
system may spend on administration in years when they incur
expenses for software, hardware, and computer technology
consulting services, as follows:
a) From eighteen hundredths of 1% (0.18%) to nineteen
hundredths of 1% (0.19%) of the total assets of the
retirement system plus $1 million; or,
b) From twenty-three hundredths of 1% (0.23%) to
twenty-four hundredths of 1% (0.24%) of the total 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 allows counties, until January 1,
2013, to increase the budget for administration of the
retirement system in years when they incur expenses for
AB 609
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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
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 Assembly Public Employees, Retirement and Social Security
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.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0001400