BILL ANALYSIS
AB 609
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 609 (Conway)
As Amended August 19, 2010
Majority vote
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|ASSEMBLY: |77-0 |(June 3, 2009) |SENATE: |28-6 |(August 23, |
| | | | | |2010) |
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Original Committee Reference: P.E.,R.&S.S.
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 the
greater of either twenty-one hundredths of 1% (0.12%) of the
accrued actuarial liability or two million dollars to be
adjusted annually as specified.
2)Excludes expenditures for computer software, computer
hardware, and computer technology consulting services, as
specified, from the administrative budget cap.
The Senate amendments make changes to the amount that a '37 Act
retirement system may spend on administration and delete the
specific administrative cap amounts that a retirement system may
operated under in years when they incur expenses for software,
hardware, and computer technology consulting services.
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
software, hardware, and computer technology consulting services,
providing the annual expenditure does not exceed the greater of:
AB 609
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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.
AS PASSESD BY THE ASSEMBLY , this bill:
1)Increased 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)Increased 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.
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."
AB 609
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The sponsor, the State Association of County Retirement Systems,
notes that the amendments taken in the Senate will ensure that
the smaller county retirement systems can be appropriately
funded.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN:
0006598