BILL ANALYSIS �
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THIRD READING
Bill No: AB 2473
Author: Assembly Public Employees, Retirement and Social
Security Committee
Amended: 8/14/14 in Senate
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 5-0, 6/9/14
AYES: Torres, Walters, Block, Evans, Gaines
ASSEMBLY FLOOR : 78-0, 5/15/14 (Consent) - See last page for
vote
SUBJECT : County Employees Retirement Law of 1937: federal
law compliance
SOURCE : State Association of County Retirement Systems
DIGEST : This bill conforms sections of the County Employees
Retirement Law of 1937 (37 Act) to provisions of the federal
Internal Revenue Code (IRC) in order to ensure compliance with
federal tax law.
Senate Floor Amendments of 8/14/14 delete prior amendments to
the bill which erroneously placed the Public Employees' Pension
Reform Act of 2013 (PEPRA) felony forfeiture statute references
in code sections related to federal pension forfeiture rules.
ANALYSIS :
Existing law:
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AB 2473
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1.Establishes the '37 Act, which provides for retirement systems
for county and district employees in those counties adopting
its provisions. Currently, 20 counties operate retirement
systems under the '37 Act.
2.Establishes comprehensive public employee pension reform
through enactment of PEPRA that applies to all public
employers and public pension plans on and after January 1,
2013, excluding the University of California and charter
cities and counties that do not participate in a retirement
system governed by state statute.
3.Contains several statutes in the '37 Act that may not conform
with the federal IRC requirements for maintaining a tax-exempt
qualified retirement plan.
4.Provides that any provision of the '37 Act that is out of
conformity with Section 415 of the IRC shall become
inoperative with respect to payment of benefits.
This bill amends several sections of the '37 Act to clarify
statutory provisions and ensure conformity with the federal IRC,
including the following:
Forfeiture rules;
Early retirement distributions;
Prohibition of in-service distributions/break in service
requirement;
Normal retirement age and vesting;
Refunds, distributions, reversions limited to qualified plans;
Treatment of excess reserves and contributions for health
benefits;
Service credit for military service;
Employee representative contributions;
Calendar year also applicable for imposition of IRC annual
compensation limits;
Life and disability insurance premiums and medical benefit
payments - funding;
Increased allowance in lieu of supplemental benefits;
Post - employment benefits trust accounts - segregation;
Long-term care benefits - segregation and prohibition against
co-mingling; and
Vision care program.
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Background
According to information provided by the bill's sponsor, State
Association of County Retirement Systems, they negotiated for
several years with the Internal Revenue Service (IRS) on an
acceptable approach for submitting and evaluating applications
for tax qualified plan status. One of the goals of that
exercise was for there to be one coordinated set of corrections
to the '37 Act rather than a series of non-integrated
corrections. The IRS agreed to this outcome and all the '37 Act
systems submitted the same proposed set of '37 Act changes to
the IRS. The IRS has now issued qualified plan letters to all
the '37 Act systems premised on the '37 Act being amended in
accordance with the materials provided to them.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/15/14)
State Association of County Retirement Systems (source)
Los Angeles County Employees Retirement Association
Orange County Board of Supervisors
Ventura County Employees' Retirement Association
ARGUMENTS IN SUPPORT : According to the author, "AB 2473 is
sponsored by the State Association of County Retirement Systems
(SACRS). All 20 county employee retirement systems operating
under the '37 Act are tax-qualified plans, as determined by the
Internal Revenue Service (IRS). Tax-qualified status is the
legal mechanism that allows retirement contributions made by
employees and employers, and the earnings on those
contributions, to accrue to the benefit of the retirement system
members on a tax-deferred basis.
This important technical bill conforms sections of the '37 Act
to provisions of the Internal Revenue Code in order to ensure
that all 20 retirement systems operating under the '37 Act are
governed by state law consistent with federal tax law
requirements governing retirement plans."
ASSEMBLY FLOOR : 78-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
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AB 2473
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Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Vacancy
JL:k 8/17/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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