BILL ANALYSIS �
AB 611
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 611 (Bonta)
As Amended June 17, 2014
2/3 vote. Urgency
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|ASSEMBLY: |76-1 |(May 30, 2013) |SENATE: |34-0 |(August 7, |
| | | | | |2014) |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : 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 are to be
distributed. Specifically, this bill :
1)Changes the effective date of termination to June 1, 2014,
subject to obtaining the appropriate Internal Revenue Service
(IRS) approvals.
2)Adds a section stating that the plan is intended to constitute
a governmental plan within the meaning of the Internal Revenue
Code (IRC) Section 414(d), and as such, the plan and all
payments satisfy IRC Section 401(a), as specified.
3)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.
4)Contains an urgency clause, allowing this bill to take effect
immediately upon enactment.
The Senate amendments delete the Assembly version of the bill
and instead add language agreed upon by the California Public
Employees' Retirement System (CalPERS) and the IRS to ensure
that administration of the changes to PO/FFDCP and the
Supplemental Contributions Program (SCP) meet federal
requirements for tax-qualified governmental retirement plans.
EXISTING LAW :
1)Established PO/FFDCP, a tax-qualified retirement savings plan
that is administered by CalPERS and governed under the IRC
AB 611
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Section 401(a).
2)Pursuant to a memorandum of understanding (MOU) between the
state and state Bargaining Unit (BU) 6 (Correctional Peace
Officers: BU 6: 7/1/1998), established an employer
contribution equal to 2% of base pay to PO/FFDCP for members
of BU 6 beginning on 10/1/1998.
3)Terminates the old PO/FFDCP as of the later of January 1,
2014, or upon obtaining approvals from the 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 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 will 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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : This bill 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.
According to the sponsor of the bill, the California
Correctional Peace Officers' Association (CCPOA), "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
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way private sector employees could manage their 401(k) accounts.
"SB 277 [(Beall), Chapter 755, Statutes of 2013], 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 Internal Revenue Service (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."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004404