BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 611|
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CONSENT
Bill No: AB 611
Author: Bonta (D)
Amended: 6/17/14 in Senate
Vote: 27 - Urgency
SENATE PUBLIC EMPLOY. & RETIRE. COMM. : 5-0, 6/23/14
AYES: Torres, Walters, De Le�n, Gaines, Steinberg
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : Not relevant
SUBJECT : State Peace Officers' and Firefighters' Defined
Contribution Plan
SOURCE : California Correctional Peace Officers' Association
DIGEST : This bill makes technical changes to provisions that
close the State Peace Officers' and Firefighters Defined
Contribution Plan (PO/FFDCP) and define how members' funds in
the plan shall be distributed in order to comply with Internal
Revenue Code (IRC) requirements.
ANALYSIS :
Existing law:
1.Establishes PO/FFDCP, a tax-qualified retirement savings plan
that is administered by the California Public Employees'
Retirement System (CalPERS) and governed under Section 401(a)
CONTINUED
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of the IRC.
2.Establishes an employer contribution equal to 2% of base pay
to PO/FFDCP for members of BU6 beginning on 10/1/1998,
pursuant to a memorandum of understanding (MOU) between the
state and state Bargaining Unit 6 (Correctional Peace
Officers: BU6: 7/1/1998).
3.Terminates the old PO/FFDCP as of the later of January 1,
2014, or upon obtaining approvals from the Internal Revenue
Service (IRS), including a favorable determination letter on
plan termination, and allows participants to withdraw
contributions consistent with federal laws governing
tax-qualified retirement savings plans.
4.Establishes the Supplemental Contributions Program (SCP),
administered by CalPERS, which is a voluntary defined
contribution retirement savings program for CalPERS members
and employers.
5.Requires that all funds in PO/FFDCP be distributed in
accordance with plan requirements and federal laws, and
specifies that if no specific election is made by a
participant, that participant's funds shall be rolled over
into SCP to an account established in that plan in the
participant's name.
6.Allows a participant whose funds have been rolled over into
SCP to withdraw funds at any time to the extent that an
in-service distribution is allowable under applicable state
and federal laws.
This bill:
1.Adds language agreed upon by CalPERS and the IRS to ensure
that administration of the changes to PO/FFDCP and SCP meet
federal requirements for tax-qualified governmental retirement
plans.
2.Changes the effective date of termination to June 1, 2014,
subject to obtaining the appropriate IRS approvals.
3.Adds a section stating that the plan is intended to constitute
a governmental plan within the meaning of Section 414(d) of
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the IRC, and as such, the plan and all payments satisfy IRC
Section 401(a), as specified.
4.Adds additional language to ensure that the trust funds may
only be used for the exclusive benefit of plan members and
their beneficiaries, and that any reversion of funds will be
subject to IRS Revenue Ruling 91-4, as specified.
Prior Legislation
SB 277 (Beall, Chapter 755, Statutes of 2013) closes the
PO/FFDCP and defines how members' funds in the plans will be
distributed.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/5/14)
California Correctional Peace Officers' Association (source)
ARGUMENTS IN SUPPORT : According to the California
Correctional Peace Officers' Association:
In our 2011 collective bargaining agreement, the parties agreed
to stop contributions to the members' supplemental retirement
program accounts as of April 2011, and agreed so long as it was
consistent with relevant state and federal law, the individual
members could manage their balances in a manner similar to the
way private sector employees could manage their 401(k) accounts.
SB 277, which enjoyed unanimous legislative support and was
signed by the Governor, was designed to implement the 2011
agreement. CalPERS and CCPOA have been working diligently to
obtain the necessary sign-off from the IRS to effectuate SB 277.
Unfortunately, we recently learned that the IRS would not
approve the termination of the plan without some minor technical
changes. This measure makes SB 277 compliant with IRS
requirements.
JL:e 8/5/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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