BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 581
Patricia Wiggins, Chair Hearing date: April 23, 2007
SB 581 (Wiggins) as introduced 2/22/07 FISCAL: YES
PERS: VOLUNTEER FIREFIGHTERS LENGTH OF SERVIC AWARD:
SUCCESSOR ADMINISTRATOR FOR THE PROGRAM
HISTORY :
Sponsor: California State Firefighters Association
(CSFA)
Prior legislation: AB 2330 (Samuelian) 2004
Vetoed
SB 273 (Ray Johnson)
Chapter 1145 of 1979
SUMMARY :
Would require the California Public Employees Retirement
System (PERS) Board of Administration to seek an appropriate
successor administrator for the Volunteer Firefighters Length
of Service Award program (VFLSAS).
BACKGROUND :
1) What is the Volunteer Firefighters Length of Service
Award System (VFLSAS) ?
The VFLSAS was established by Chapter 1145 of 1979 to provide
a means for fire departments and districts to offer a small
lifetime award each month to their volunteer firefighters
when they reach retirement age as a recruitment and retention
incentive, and to thank them for their service.
The VFLSAS is administered by the PERS Board and is funded
entirely by contributions from contracting fire entities and
the investment earnings of the Volunteer Firefighters Length
of Service Award Fund.
2) Who is eligible for VFLSAS ?
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Date: 4/19/06 Page 1
To be eligible for benefits, a VFLSAS member must have
attained age 60 and have at least 10 years of volunteer
firefighter service. The years of service do not have to be
consecutive (due to the nature of the volunteer work, many
members have frequent breaks in their service).
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Date: 4/19/06 Page 2
3) What are the VFLSAS benefits ?
The monthly VFLSAS award is $100 per month for the lifetime
of the member, reduced proportionately for service of less
than 20 years (e.g. the award is $50 for 10 years of service,
with an additional $5 for every year of service up to a
maximum of $100 with 20 years of service).
The VFLSAS also provides a $3,000 lump sum death benefit
payable to the named beneficiary of any member of the system
with 10 years of service.
A supplemental payment of 50% of the basic award amount, not
to exceed $50 per month, is authorized in statute and may be
added to the VFLSAS service award payment, based on an
actuarial analysis of the condition of the fund by the PERS
Board. The supplemental payment is reviewed annually by the
PERS Board to ensure that it remains consistent with the
maintenance of adequate actuarial reserves. A supplement was
paid every year from the 1993-94 to 2002-03. The PERS Board
adopted no payment of the supplement for the 2007-08 plan
year due to lack of adequate funding.
4) Who is participating in VFLSAS ?
The committee is advised that, as of June 30, 2006, there
were 54 fire departments participating in the VFLSAS, with
nearly 800 active members and a total membership of 4,301
volunteer firefighters (this total includes active and
in-active firefighter members, and current VFLSAS award
recipients).
128 volunteer firefighters are receiving VFLSAS monthly
payments ranging from $600 to $1,200 per member per year,
depending on length of service, and eligible for a lump-sum
$3,000 benefit when they die.
5) How is the VFLSAS funded ?
Annual contributions from participating fire departments and
interest earnings from the Volunteer Firefighters Fund (VFF)
pay all costs of the VFLSAS awards and the administration of
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Date: 4/19/06 Page 3
the program. There is no cost to the volunteer firefighters .
The PERS Board orders an annual actuarial assessment to
consider the number of volunteer firefighters, their ages,
when they are likely to start collecting awards, for how
long, and then determines the annual contracting department
contribution amount to pay for the program.
6) VFLSAS has been an effective recruiting tool
According to the sponsor, the VFLSAS has proven to be a
recruitment and retention success to those participating
departments.
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Date: 4/19/06 Page 4
7) What is the problem this bill seeks to address ?
The committee is advised that the current balance in the
VFLSAS fund is about $2.6 million, and has over 3,000 members
in over 60 participating fire departments.
In 1998, PERS changed the methods and assumptions in
determining the administrative cost of the VFLSA. The
result, according to the sponsor, is that the VFF was charged
less than $10,000 for administrative costs in 1998, while the
current year cost is $139,025.
The cost to the VFLSAS per member continues to increase. The
cost to the employer for each active member in fiscal year
2006/2007 was $340.34, but has increased to $427.73 for
fiscal year 2007/2008. Active membership has decreased from
783 in 2006 to 726 at present.
ANALYSIS :
1) This bill :
a) removes responsibility for administration of the VFLSAS
from the PERS Board and places it with the board of the
California State Fire Employees Welfare Benefit Corporation
(CSFEWBC),
b) requires the PERS Board of Administration to transfer,
upon request of the CSFEWBC board, data and files of the
VFLSAS members in its possession,
c) authorizes local fire departments to contract with the
CSFEWBC board to make their volunteer firefighters members
of the service award system,
d) requires the CSFEWBC Board of Administration to
maintain a benefit plan pursuant to specified provisions of
the Internal Revenue Code, and to select a financial
institution or other qualified entity to act as trustee and
establish a trust for the award system,
e) requires the CSFEWBC Board to administer the award
system subject to specified fiduciary duties and for the
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exclusive purpose of providing benefits to members of the
service award system,
f) requires the CSFEWBC Board to adopt rules and
regulations to administer the award system, including, but
not limited to, eligibility requirements for membership in
the award system, requirements for a member to receive an
award, and the amount of an award payable,
g) establishes a qualifications review commission for
purposes of determining eligibility for service award
benefits, and
h) requires a volunteer firefighter who is a member of the
award system and the members of the qualifications review
commission, as specified, to certify, under penalty of
perjury, that the volunteer firefighter has actively
participated in specified fire department activities.
COMMENTS :
1) 2004 state General Fund bail out bill vetoed
The committee is advised that AB 2330 (Samuelian) 2004 would
have provided funding of up to $120,000 per year for the
administrative costs of the VFLSAS from the state General
Fund, contingent upon appropriation in the Annual Budget Act.
In his veto message, the Governor stated:
"The Volunteer Firefighters Length of Service Award System
is a local program that has historically been financed
through local government participants. The program was
established to provide an incentive and recruitment tool
for local fire departments and districts that utilize
volunteer firefighters by offering lifetime awards to their
volunteer firefighters.
"This bill requires that the administrative costs, now
being paid by the local agencies for the VFLSAS program, be
shifted to the State. This bill mandates funding from the
General Fund at a time when the State is unable to absorb
additional costs."
2) Arguments in support
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Date: 4/19/06 Page 6
According to the sponsor :
"The ever rising cost to administer the system will
eventually make the system cost prohibitive. While CalPERS
has been extremely supportive of this program, it has
become clear to CSFA as its creators, fire chiefs, and even
CalPERS Board members and staff that the program should not
have been legislatively created to be administered by
CalPERS. The VFLSAS is not a retirement program, it a
small stipend award that more closely resembles a Rabbi
Trust and 457 plan. The future of the program relies on
its growth, but due to the high administrative cost, the
program has become stagnant.
"The most recent CalPERS Actuarial Valuation presented to
the Legislature and Governor dated April 18, 2007 states,
"?the report shows the development of the actuarially
required employer contribution per active plan member for
the fiscal year July 1, 2007 to June 30, 2008. This amount
is $427.73 as compared to $340.34 for the previous fiscal
year.
"After working with the CalPERS staff for over four years
trying to research ways to save the program, we have all
come to determine that this very worthy program can no
longer be administered in its current form."
3) SUPPORT :
County of Mendocino
4) OPPOSITION :
None to date
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David Felderstein
Date: 4/19/06 Page 7