BILL ANALYSIS �
AB 1633
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Date of Hearing: April 26, 2012
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 1633 (Wagner) - As Introduced: February 9, 2012
SUBJECT : Public employees' retirement.
SUMMARY : Caps the retirement benefit paid to new members of
any public retirement system to members of any public retirement
system first hired on or after January 1, 2013 at $100,000 for
members whose service is not included in Social Security and
$80,000 for new members whose service is included in Social
Security. Specifically, this bill :
1)Limits the annual benefit of public retirement system members
to either $80,000 for a pension based on Social
Security-covered employment or $100,000 for a pension based on
non-covered employment.
2)Requires each retirement system to adjust these amounts
annually for inflation using the Consumer Price Index for All
Urban Consumers.
3)Specifies that this cap applies to public employees who is
employed by a public agency for the first time and becomes a
member of a public retirement system on or after January 1,
2013.
4)Exempts from the cap:
a) Former public employees employed before January 1, 2013,
who return to employment in the same public agency on or
after January 1, 2013.
b) State employees hired prior to January 1, 2013, who were
in the Alternate Retirement Plan during the first 24 months
of state employment.
c) Public employees on an approved leave of absence
employed prior to January 1, 2013, who return to active
employment on or after January 1, 2013.
EXISTING FEDERAL LAW :
AB 1633
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1)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 limit for the 2012
calendar year is $250,000. 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.
2)Section 415 of the Internal Revenue Code limits the amount of
retirement benefits that may be paid to a participant in a
defined benefit plan. In 2012, the limit for members who
retire at age 65 is $171,202.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "Currently, state and local
public retirement systems provide defined benefits based on age
at retirement, service credit, and final compensation. With all
of these factors, employees' retirement benefits have far
exceeded the $100,000 level. At present, there are 12,199
people receiving pensions that exceed the $100,000 figure, which
is a significant jump from the 1,600 people who reportedly made
six-figure pensions in 2005. These out-of-control pensions have
cost the state upward of $100 million."
In 2011, the Legislature established the Conference Committee on
Public Employee Pensions under the provisions of AB 340
(Furutani) and SB 827 (Simitian). The Conference Committee is
tasked with crafting "?responsible, comprehensive legislation to
reform state and local pension systems in a manner that reflects
both the legitimate needs of public employees and the fiscal
circumstances of state and local governments." Since that time,
the Conference Committee has met five times and anticipates
releasing its report in the next several months. The
Legislature will then have the opportunity to vote on the
Conference Committee report in both houses.
The subject matter of this bill is under the purview of the
Conference Committee. It is, therefore, the recommendation of
this Committee that this bill be referred to interim study.
REGISTERED SUPPORT / OPPOSITION :
AB 1633
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Support
Howard Jarvis Taxpayers Association
Opposition
Association of California Community College Administrators
Association for Los Angeles Deputy Sheriffs
California Association of Professional Scientists
California Police Chiefs Association
California Professional Firefighters
California School Employees Association
Desert Water Agency
Los Angeles County District Attorney's Office
Los Angeles Probation Officers Union
Newhall County Water District
Orchard Dale Water District
Professional Engineers in California Governement
Riverside Sheriffs' Association
Rowland Water District
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957