BILL ANALYSIS                                                                                                                                                                                                    �



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 322|
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                                    CONSENT


          Bill No:  SB 322
          Author:   Negrete McLeod (D)
          Amended:  As introduced
          Vote:     21

           
           SEN. PUBLIC EMPLOY. & RETIRE. COMMITTEE :  5-0, 3/21/11
          AYES:  Negrete McLeod, Walters, Gaines, Padilla, Vargas


           SUBJECT  :    Retirement

           SOURCE  :     Author


           DIGEST  :    This bill clarifies existing law with regard to 
          federal limits (IRS Code 415 (b)) on the amount of 
          retirement allowance that may be paid to any individual who 
          entered the California Public Employees' Retirement System 
          membership after January 1, 1990.

           ANALYSIS  :    Existing state and federal laws place a dollar 
          limit on the annual benefit that may be received from a 
          tax-qualified pension plan such as the California Public 
          Employees' Retirement System (CalPERS).  The limit applies 
          to individuals who entered retirement system membership 
          after 1990 and is subject to specific criteria, such as the 
          individual's age at the time of retirement and type of 
          service.  The limit may only be determined and applied at 
          the time of retirement.  The limit is calendar year in 2011 
          is $195,000.

          Existing law governing CalPERS requires:
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          1.CalPERS to annually set employer contribution rates.  For 
            the purpose of rate setting, CalPERS looks at individual 
            contracting employers as separate plans.

          2.That when an employee has service under multiple CalPERS 
            employers, that individual's retirement benefit is funded 
            proportionally by the different employers' plans.

          This bill emphasizes that service under multiple employers 
          may not be considered separately with regard to the 415 (b) 
          limit.

          For example, in 2011 a highly compensated individual 
          subject to the 415 (b) limit who worked for only one 
          employer and who retired with an annual benefit of $210,000 
          would be limited to $195,000.

          This bill clarifies that another individual, retiring with 
          a similar annual benefit funded by member and employer 
          contributions under multiple jobs (for example, three 
          employers at the annual benefit of $70,000 each) may not 
          exceed the 415 (b) limit by virtue of the fact that the 
          cost of the benefit is spread among multiple employer's 
          plans.

           Comments
           
          According to the Senate Public Employment and Retirement 
          Committee, the committee was informed by CalPERS that this 
          bill is consistent with CalPERS' current application of the 
          law with respect to this limitation.  Therefore, this bill 
          clarifies that no individual may make a claim for a benefit 
          exceeding the 415 (b) limit based on the benefit being 
          spread over multiple employer plans.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No



          CPM:cm  3/23/11   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED







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