BILL ANALYSIS
SB 581
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Date of Hearing: June 20, 2007
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Ed Hernandez, O.D., Chair
SB 581 (Wiggins) - As Amended: June 11, 2007
SENATE VOTE : 35-1
SUBJECT : Firefighters: volunteer firefighters length of
service awards.
SUMMARY : Transfers the Volunteer Firefighters Length of
Service Award System (VFLSAS) from the California Public
Employees' Retirement System (CalPERS) to the California State
Fire Employees Welfare Benefit Corporation (CSFEWBC).
Specifically, this bill :
1)Removes, by March 1, 2008, responsibility for administration
of the VFLSAS from the CalPERS Board and places it with the
board of the CSFEWBC.
2)Requires the CalPERS Board of Administration to divulge and
transfer to the CSFEWBC, data and files of the VFLSAS members
in its possession.
3)Authorizes local fire departments to contract with the CSFEWBC
board to make their volunteer firefighter members of the
service award system.
4)Requires the CSFEWBC board 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.
5)Requires the CSFEWBC board to administer the award system
subject to specified fiduciary duties and for the exclusive
purpose of providing benefits to members of the service award
system.
6)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.
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7)Establishes a qualifications review commission for purposes of
determining eligibility for service award benefits.
8)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.
9)Requires the state to indemnify, from the General Fund, and
hold harmless, past, present and future CalPERS board members,
officers and employees from all claims, as specified, arising
out of the transfer of the VFLSAS.
FISCAL EFFECT : According to the Senate Appropriations
Committee, "There could be some savings to fire districts which
participate in the program because the annual cost per person is
currently derived from three factors, activity in the program,
the interest earnings, and the cost of administrative expenses.
This bill, by providing a new administrator, could reduce the
annual per person cost paid by participating employers if the
new administrator is able to increase participation and lower
administrative costs. Costs to CalPERS to transfer the VFLSAS
are expected to be minor, and will be deducted from the fund
prior to the transfer.
COMMENTS : The VFLSAS was established by SB 273 (R. Johnson),
Chapter 1145, Statutes 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 CalPERS
Board and is funded entirely by contributions from contracting
fire entities and the investment earnings of the Volunteer
Firefighters Length of Service Award Fund.
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).
The monthly VFLSAS award is $100 per month for the lifetime of
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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 five dollars 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 percent 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 CalPERS Board. The supplemental payment is reviewed
annually by the CalPERS 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 CalPERS Board adopted no payment of the supplement for the
2007-08 plan year due to lack of adequate funding.
According to the sponsor, the California State Firefighters
Association, "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."
REGISTERED SUPPORT / OPPOSITION :
Support
SB 581
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California State Firefighters Association (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957