BILL ANALYSIS
SB 581
Page 1
SENATE THIRD READING
SB 581 (Wiggins)
As Amended August 30, 2007
Majority vote
SENATE VOTE :35-1
PUBLIC EMPLOYEES 6-0 APPROPRIATIONS 16-0
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|Ayes:|Hernandez, Jeffries, |Ayes:|Leno, Walters, Caballero, |
| |Anderson, Mullin, | |Davis, DeSaulnier, |
| |Swanson, Torrico | |Emmerson, Huffman, |
| | | |Karnette, Krekorian, La |
| | | |Malfa, Lieu, Ma, |
| | | |Nakanishi, Nava, Sharon |
| | | |Runner, Solorio |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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, upon the date of transfer, responsibility for
administration of VFLSAS from the CalPERS Board and places it
with the Board of CSFEWBC.
2)Requires the CalPERS Board of Administration to divulge and
transfer to 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
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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.
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)Require CalPERS, in the event the transfer of the VFLSAS is
not completed on or before March 1, 2008, to terminate the
program, reimburse itself for administrative expenses
incurred, and distribute the remaining assets first to award
recipients and those qualified to receive an award as of March
1, 2008, as a lump-sum payment, and the remainder of award
system assets to participating fire districts on a pro-rata
basis.
10)Requires CalPERS or the CSFEWBC to notify award recipients
and participating fire districts in writing of the transfer of
the award system, and requires fire districts to provide
written notice of the transfer to its participating volunteer
firefighters.
11)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 Assembly Appropriations
Committee, potential savings to fire districts which participate
in the VFLSAS program. Costs to CalPERS for transferring the
program are expected to be minor, and will be deducted from the
fund prior to the transfer. Any local enforcement costs
associated with the provision requiring participants in the
VFLSAS program to provide certain information under the penalty
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of perjury is not state-reimbursable.
COMMENTS : VFLSAS was established by SB 273 (Ross 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. 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
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).
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
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
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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."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0002504