BILL ANALYSIS �
AB 89
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 89 (Hill)
As Amended September 2, 2011
2/3 vote. Urgency
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|ASSEMBLY: |75-0 |(May 26, 2011) |SENATE: |36-0 |(September 7, |
| | | | | |2011) |
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Original Committee Reference: P.E.,R.& S.S.
SUMMARY : Allows the County of San Mateo to implement lower
retirement tiers for safety employees represented by the Deputy
Sheriffs Association.
The Senate amendments :
1)Allow San Mateo County to implement recently negotiated lower
pension tiers for safety members represented by the Deputy
Sheriffs Association.
2)Delete provisions that would have required all public retirement
systems in California to adhere to the federal compensation limit
under Internal Revenue Code (IRC) Section 401(a)(17) when
calculating retirement benefits for members who first join the
retirement system on or after January 1, 2012, and prohibited a
public employer from making contributions to any qualified public
retirement plan based on any portion of compensation that exceeds
that amount.
EXISTING FEDERAL LAW : Section 401(a)(17) of the Internal Revenue
Code limits the amount of annual compensation that can be taken into
account under qualified retirement plans. The compensation limit
for the 2011 calendar year is $245,000. The compensation limit is
only applicable to persons who first became members or participants
in a qualified retirement system on or after July 1, 1996. The
compensation limit does not limit the salary an employer can pay an
employee, but rather limits the amount of compensation taken into
account under the retirement plan.
AS PASSED BY THE ASSEMBLY, this bill required all public retirement
systems in California to adhere to the federal compensation limit
under IRC Section 401(a)(17) when calculating retirement benefits
for members who first join the retirement system on or after January
AB 89
Page 2
1, 2012, and prohibited a public employer from making contributions
to any qualified public retirement plan based on any portion of
compensation that exceeds that amount.
FISCAL EFFECT : According to the Senate Appropriations Committee,
the provisions of the bill affecting San Mateo County could
potentially result in millions of dollars in future savings to the
county.
COMMENTS : The County of San Mateo has recently negotiated a new
six yea Memorandum of Understanding with the Deputy Sheriffs
Association that will require new hires to choose reduced retirement
formulas of either 2% at age 50, or 3% at age 55 (the formula for
current employees is 3% at age 50). This bill provides the
statutory authority for the county to implement this new retirement
formulas. Employees will be able to choose between the two new
formulas. It is expected that the County of San Mateo will save
nearly $23 million in pension costs over the next ten years.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
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