Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes any public agency to make its employees members of PERS by contract. Under existing law, when a contracting agency is succeeded by another agency, the successor agency may become a contracting agency of PERS. Existing law provides that if the successor agency contracts with PERS, the contract of the former agency shall merge with the contract of the succeeding agency. Existing law authorizes specified successor agencies to provide employees the defined benefit plan or formula that those employees received from their respective contracting agency employer prior to the consolidation.

This bill would authorize a successor agency for the El Dorado County Fire Protection District and the Diamond Springs-El Dorado Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of El Dorado.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes any public agency to make its employees members of PERS by contract. Under existing law, when a contracting agency is succeeded by another agency, the successor agency may become a contracting agency of PERS. Existing law provides that if the successor agency contracts with PERS, the contract of the former agency shall merge with the contract of the succeeding agency. Existing law authorizes specified successor agencies to provide employees the defined benefit plan or formula that those employees received from their respective contracting agency employer prior to the consolidation.

This bill would authorize a successor agency for the El Dorado County Fire Protection District and the Diamond Springs-El Dorado Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of El Dorado.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes any public agency to make its employees members of PERS by contract. Under existing law, when a contracting agency is succeeded by another agency, the successor agency may become a contracting agency of PERS. Existing law provides that if the successor agency contracts with PERS, the contract of the former agency shall merge with the contract of the succeeding agency. Existing law authorizes specified successor agencies to provide employees the defined benefit plan or formula that those employees received from their respective contracting agency employer prior to the consolidation.

This bill would authorize a successor agency for the El Dorado County Fire Protection District and the Diamond Springs Springs-El Dorado Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of El Dorado.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes any public agency to make its employees members of PERS by contract. Under existing law, when a contracting agency is succeeded by another agency, the successor agency may become a contracting agency of PERS. Existing law provides that if the successor agency contracts with PERS, the contract of the former agency shall merge with the contract of the succeeding agency. Existing law authorizes specified successor agencies to provide employees the defined benefit plan or formula that those employees received from their respective contracting agency employer prior to the consolidation.

This bill would authorize a successor agency for the El Dorado County Fire Protection District and the Diamond Springs Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of El Dorado.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law, the Public Employees Retirement Law (PERL), establishes the Public Employees Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL authorizes any public agency to make its employees members of PERS by contract. Under existing law, when a contracting agency is succeeded by another agency, the successor agency may become a contracting agency of PERS. Existing law provides that if the successor agency contracts with PERS, the contract of the former agency shall merge with the contract of the succeeding agency. Existing law authorizes specified successor agencies to provide employees the defined benefit plan or formula that those employees received from their respective contracting agency employer prior to the consolidation.

This bill would authorize a successor agency for the El Dorado County Fire Protection District and the Diamond Springs Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of El Dorado.

This bill would declare that it is to take effect immediately as an urgency statute.

 UNFINISHED BUSINESS  

Bill No: SB 1240

Author: Alvarado-Gil (R)

Amended: 5/8/24

Vote: 27 - Urgency

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/10/24

AYES: Smallwood-Cuevas, Wilk, Cortese, Durazo, Laird

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 36-0, 4/25/24 (Consent)

AYES: Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

NO VOTE RECORDED: Allen, Dahle, Eggman, Ochoa Bogh

ASSEMBLY FLOOR: 75-0, 8/15/24 (Consent) - See last page for vote

SUBJECT: Public Employees’ Retirement System: contracting agencies: consolidation

SOURCE: California Professional Firefighters

DIGEST:

This bill allows a successor agency for the El Dorado County Fire Protection District and the Diamond Springs-El Dorado Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

Assembly Amendments

revise the name of one of the districts from “Diamond Springs” to “Diamond Springs-El Dorado” Fire Protection District to reflect the correct name of the district.

ANALYSIS:

Existing law:

1. Allows a public agency to participate in the California Public Employees’ Retirement System (CalPERS) by contract to provide retirement benefits to its employees as specified (Government Code (GC § 20460).
2. Permits a successor agency that assumes the functions of the public agency to assume the contract of the public agency, as specified. The former agency’s contract is merged into the successor agency’s contract and the former agency’s contract ceases to exist. The successor agency takes on the obligations and receives credit for the contributions to CalPERS from the former agency’s contract as specified (GC § 20508).
3. Prohibits public employers from offering “classic” public pension formulas to new employees after December 31, 2012, and instead provides pension formulas as defined in the Public Employees’ Pension Reform Act (PEPRA). However, existing members of CalPERS who move to a new CalPERS employer as specified remain eligible for the “classic” pension formula that was offered by the new employer on December 31, 2012 (GC § 7522 et seq.).
4. Prohibits a public agency from providing CalPERS retirement benefits for some but not all members of specified member classifications (e.g., local firefighters) or providing a different benefit for subgroups (e.g., bargaining units) within the member classification (GC § 20479).

This bill:

1. Authorizes a successor agency for the Diamond Springs – El Dorado Fire Protection District and the El Dorado County Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the districts’ merger.
2. Makes legislative findings and declarations that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique need to consolidate fire protection districts in the County of El Dorado to remove redundancies while continuing fire and emergency response services.
3. Declares that an urgency statute is necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.

Comments

This bill is necessary to implement a proposed annexation/merger of two fire districts in El Dorado County. After December 31, 2012, PEPRA requires a public employer to offer less generous “PEPRA” pension formulas to new employees rather than previously available “classic” pension formulas. Because the annexed employees would technically be new employees of the new successor employer, the successor agency could not provide them their current classic formula under existing law.

This bill protects the annexed district employees’ existing benefit formula, thereby facilitating the annexation/merger of the two fire districts. Proponents argue that the annexation will provide better, more efficient fire protection for the El Dorado county region, which is increasingly prone to fire hazards.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. Minor and absorbable administrative costs to California Public Employees’ Retirement System (CalPERS) to implement the provisions of this bill.

According to CalPERS, establishing a successor agency contract for the fire districts will require an additional level of review to ensure all affected employees are enrolled with the correct benefits. However, any additional review is expected to be manageable within existing staffing and resources levels.

1. No costs to CalPERS for increased benefits.

According to CalPERS, all assets and liabilities for employees and retirees of these two fire districts would be assumed by the successor agency—the El Dorado Fire Protection District. As a result of the merger, the successor agency will be liable for any gain and loss of the members of these two fire districts and for their prospective liabilities on and after the merger effective date. The employees retaining their existing defined benefit pension formula are not expected to change benefit costs.

Because this bill authorizes the fire protection district to provide certain employees defined benefits package, but does not require the district do so, the state will not need to reimburse the district for any resulting costs.

SUPPORT: (Verified 8/15/24)

California Professional Firefighters (source)
City of Placerville
Diamond Springs Professional Firefighters, Local 4972
Diamond Springs-El Dorado Fire Protection District
El Dorado County Fire Protection District
El Dorado County Professional Firefighters Association
Elderly Care Everywhere

OPPOSITION: (Verified 08/15/24)

None received.

ARGUMENTS IN SUPPORT:

According to the El Dorado Fire Protection District:

“SB1240 will allow for our specific annexation of Diamond Springs – El Dorado Fire District into El Dorado County Fire Protection District to occur without causing a negative impact to employees carried over, allowing them to maintain their current pension accrual formulas. Both our fire districts currently have a similar mix of legacy and Public Employees’ Pension Reform Act (PEPRA) CalPERS employees, therefore, SB1240 would not cause any disparity for the successor agency.”

According to the El Dorado County Professional Firefighters Association:

“To gain efficiencies and strengthen sustainability, rural fire protection districts often look to annexation and consolidation (similar to mergers) to cooperate regionally to provide a better vehicle for essential fire, rescue and emergency medical services within our communities. An unintended consequence of annexation can be the reclassification of loyal employees into lesser Public Employee Retirement accruals and benefits — even though their work remains the same as it was when wearing the shoulder patch of the agency that originally hired them.”

“SB 1240 will allow this specific instance of an annexation of fire protection districts to occur without causing disparate impact to the employees who are carried over - allowing them to maintain their existing pension accrual rates.”

ASSEMBLY FLOOR: 75-0, 8/15/24

AYES: Addis, Aguiar-Curry, Alanis, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Megan Dahle, Davies, Dixon, Essayli, Mike Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Alvarez, Chen, Flora, Holden

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1556

8/16/24 12:47:49

**** END ****

Date of Hearing: August 7, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 1240

Author:(Alvarado-Gil) – As Amended Ver:May 8, 2024

Urgency: Yes State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the El Dorado Fire Protection District to provide the employees of the Diamond Springs-El Dorado Fire Protection District the defined benefit packages that those employees received prior to the merger of the two fire districts. This bill is an urgency measure.

The bill states an urgency statute is necessary to “lead to enhanced public safety and protection through efficient fire services, and to protect the benefits of those individuals risking their lives as firefighters.”

FISCAL EFFECT:

1. Minor and absorbable administrative costs to California Public Employees’ Retirement System (CalPERS) to implement the provisions of this bill.

According to CalPERS, establishing a successor agency contract for the fire districts will require an additional level of review to ensure all affected employees are enrolled with the correct benefits. However, any additional review is expected to be manageable within existing staffing and resources levels.

1. No costs to CalPERS for increased benefits.

According to CalPERS, all assets and liabilities for employees and retirees of these two fire districts would be assumed by the successor agency—the El Dorado Fire Protection District. As a result of the merger, the successor agency will be liable for any gain and loss of the members of these two fire districts and for their prospective liabilities on and after the merger effective date. The employees retaining their existing defined benefit pension formula are not expected to change benefit costs.

Because this bill authorizes the fire protection district to provide certain employees defined benefits package, but does not require the district do so, the state will not need to reimburse the district for any resulting costs.

COMMENTS:

Background. The El Dorado County Fire Protection District and its neighboring fire district, Diamond Springs-El Dorado Fire District, plan to merge into one fire district. Specifically, the Diamond Springs-El Dorado Fire District is to be absorbed into the El Dorado County Fire Protection District, through a process known as “annexation.” The El Dorado County Fire Protection District will be known as the “successor agency” of the Diamond Springs-El Dorado Fire District.

According to the fire chief of the El Dorado County Fire Protection District, the combining of the two fire districts will create efficiencies in service delivery and streamline administrative functions to reduce costs.

Eligible employees of the El Dorado County Fire Protection District and Diamond Springs-El Dorado Fire District generally receive defined benefit packages through CalPERS. However, the merger of the two fire districts may impact the benefit packages of Diamond Springs-El Dorado Fire District employees. Specifically, these employees may be reclassified by during the merger to receive lesser accruals and benefits through CalPERS.

This bill authorizes the El Dorado County Fire Protection District to provide the same defined benefit packages to the employees of Diamond Springs-El Dorado Fire District as they had prior to the merger.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: June 19, 2024

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT

Tina S. McKinnor, Chair

SBPCA Bill Id:SB 1240

Author:(Alvarado-Gil) – As Amended Ver:May 8, 2024

SENATE VOTE: 36-0

SUBJECT: Public Employees’ Retirement System: contracting agencies: consolidation

SUMMARY: Authorizes a successor agency for the El Dorado Fire Protection District and the Diamond Springs-El Dorado Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexations, and includes legislative findings and declarations as to the necessity of a special statute for the County of El Dorado as well as an urgency clause for the statute to take immediate effect.

EXISTING LAW:

1. Establishes the Public Employees’ Retirement Law (PERL) administered by the California Public Employees’ Retirement System (CalPERS) to effect economy and efficiency in the public service by providing a means whereby employees who become superannuated or otherwise incapacitated may, without hardship or prejudice be replaced by more capable employees, and to that end provide a retirement system consisting of retirement compensation and death benefits. Also known as a DB plan, benefits administered by CalPERS to members of the system are based on final compensation credited years of service, and age at retirement, subject to certain variations.^[1]
2. Authorizes a public agency to participate in CalPERS by contract to provide retirement benefits to its employees, as specified.^[2]
3. Authorizes a successor agency to assume the functions of an agency or CalPERS contracting agency, regardless of whether the former agency ceases to exist, and requires the contract of the former agency to be merged into the contract of the successor agency, and the successor agency may become a CalPERS contracting agency, as provided.^[3]
4. Prohibits a public agency from providing CalPERS retirement benefits for some but not all members of specified member classifications (e.g., local firefighters) or providing a different benefit for subgroups (e.g., bargaining units) within the member classification.^[4]
5. Establishes the Public Employees’ Pension Reform Act of 2013 (PEPRA) that effectuated substantial and numerous changes to public employee retirement, and among other things, prohibits public employers from offering “classic” (i.e., pre-PEPRA) pension formulas to new employees after December 31, 2012, and instead provides pension formulas as defined in the PEPRA.^[5]
6. Establishes, following enactment of Chapter 761, Statutes of 2000 (Assembly Bill 2838, Hertzberg), the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, that, among other things, requires the local agency formation commission in each county to review and approve or disapprove proposals for changes of organization or reorganization of cities and districts within the county.^[6]

FISCAL EFFECT: This bill was passed by the Senate Appropriations Committee pursuant to Senate Rule 28.8.

COMMENTS:

1. Background

Information provided by the author states that, “[the] Diamond Springs-El Dorado Fire Protection District was founded in 1942 as a volunteer fire department and operated as such for thirty years before consolidating with another volunteer department to become the Diamond Springs-El Dorado Fire Protection District. This District serves a span of El Dorado County surrounding the town of Diamonds Springs with 13 full-time staff and five stations throughout their service area.

The El Dorado County Fire District is an independent special district that serves approximately 50,000 residents across 281 square miles of El Dorado County, stretching from Shingle Springs to the Summit on Highway 50. With a $15.8 million budget, the District staffs 80 uniformed personnel in rural, urban, and wildland-urban interface areas.

The Public Employees’ Retirement Law (PERL) contemplates scenarios where agencies may consolidate to achieve economies of scale while maintaining their contract with CalPERS. Annexations, consolidations, and mergers are particularly prevalent in the fire service as larger agencies are able to economize across jurisdictional boundaries to provide the same level of high-quality service throughout a community.

The current law governing agency consolidations and other changes of organization of local governments, known as the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, make clear that when agencies consolidate or merge that any obligations of the original agencies become the obligation of the newly formed agency that emerges from that proceeding.

While Diamond Springs-El Dorado Fire Protection District and the El Dorado County Fire District believe that the laws governing agency mergers and consolidations granted them the authority necessary to consolidate the agencies’ CalPERS contracts that govern the delivery of benefits to the firefighters and other employees, authorization under the PERL is necessary.

1. Statement by the Author

The author states that, “[this bill] will permit the successor agency of the annexation of the Diamond Springs-El Dorado Fire Protection District into the El Dorado County Fire Protection District to provide the defined benefit plan to employees that they received from their employers prior to the annexation,” and “… ensure that the employees of the Diamond Springs Fire Protection District maintain their retirement formula when they join the El Dorado County Fire Protection District.”

1. Comments by Supporters

The California Professional Firefighters offer statements similar to those of the author regarding this bill.

Among other things, the El Dorado County Professional Firefighters Association, Local 3556, IAFF, AFL-CIO states that, “[to] gain efficiencies and strengthen sustainability, rural fire protection districts often look to annexation and consolidation (similar to mergers) to cooperate regionally in providing a better vehicle for essential fire, rescue and emergency medical services within our communities. An unintended consequence of annexation can be the reclassification of loyal employees into lesser Public Employee Retirement accruals and benefits — even though their work remains the same as it was when wearing the shoulder patch of the agency that originally hired them. “[This bill] will allow this specific instance of an annexation of fire protection districts to occur without causing disparate impact to the employees who are carried over — allowing them to maintain their existing pension accrual rates. Since both existing agencies have a similar mix of legacy and PEPRA CalPERS employees, the impact of [this bill] will not be cause for disparity in the successor agency.”

The Fire Chief of the El Dorado County Fire Protection District states in part that, “[in] a continual search for opportunities to enhance and strengthen our service levels to our citizens, we identified the benefits of annexation (similar to merger or consolidation) with our neighboring fire district, Diamond Springs-El Dorado Fire District. The combining of our two fire districts will create greater efficiencies and depth in our service delivery, while streamlining administrative functions to reduce redundancy and costs. One of the unintended consequences of annexation is the impacts to our dedicated employees who can be reclassified into lesser Public Employee Retirement accruals and benefits, solely due to a change of the patch on their uniform, with no change to the citizens and communities they are sworn to protect. “[This bill] will allow for our specific annexation of Diamond Springs – El Dorado Fire District into El Dorado County Fire Protection District to occur without causing a negative impact to employees carried over, allowing them to maintain their current pension accrual formulas.”

Others in support offer statements similar to those of other supporters.

1. Comments by Opponents

None on file.

1. Prior or Related Legislation

Assembly Bill 2301 (Nguyen, 2024) proposes to enact the Sacramento Area Sewer District Pension Protection Act of 2014 that authorizes the Sacramento Area Sewer District (SASD) to assume all rights, obligations, liabilities, and status previously occupied by the County of Sacramento (county) relating to the portion of the county safety (defined benefit (DB)) pension plan attributed to SASD employees who are retirement system members and their beneficiaries, among other provisions. This bill is currently pending on the Senate Floor (consent calendar).

Chapter 65, Statute of 2020 (Assembly Bill 1140, Stone) authorizes on or after June 30, 2020, a successor agency for the Central Fire Protection District and the Aptos/La Selva Fire Protection District to provide employees the defined benefit plan or formula that those employees received from the respective employer prior to the consolidation, and includes legislative findings and declarations for these purposes.

Chapter 72, Statutes of 2018 (Assembly Bill 2004, Obernolte) enacted the Big Bear Fire Agencies Pension Consolidation Act of 2018, which provides that all safety employees currently employed by the Big Bear Lake Fire Protection District must become employees of the Big Bear Fire Authority, as specified, which must assume all associated retirement liabilities.

Chapter 531, Statutes of 2016 (Senate Bill 24, Hill), a joint powers authority (JPA) formed by the Belmont Fire Protection District, the Estero Municipal Improvement District, and the City of San Mateo on or after January 1, 2013, to provide employees who are not new members under the Public Employees’ Pension Reform Act of 2013 (PEPRA) with the defined benefit plan or formula that was received by those employees from their respective employers on December 31, 2012, if they are employed by the JPA within 180 days of the agency providing for the exercise of a common power, to which the employee was associated, by the JPA.

Chapter 729, Statutes of 2016 (Senate Bill 1203, Hertzberg), authorized a JPA to offer defined benefit plans or formulas that are not PEPRA plans or formulas provided that the plans or formulas were those that the employees received prior to the creation of the JPA; the employees are not new members under PEPRA, and they are employed by the authority within 180 days, as specified.

REGISTERED SUPPORT / OPPOSITION:

Support

California Professional Firefighters (Sponsor)

El Dorado County Fire Protection District

El Dorado County Professional Firefighters Association, Local 3556, IAFF, AFL-CIO

Elderly Care Everywhere

Opposition

None on file.

Analysis Prepared by: Michael Bolden / P. E. & R. / (916) 319-3957

1. Sections 20000 et seq. of the Government (Gov.) Code. ↑

2. Section 20460 of the Gov. Code. ↑

3. Section 20508 of the Gov. Code. ↑

4. Section 20479 of the Gov. Code. ↑

5. Sections 7522 et seq. of the Gov. Code. ↑

6. Sections 56000 et seq. of the Gov. Code. ↑

 CONSENT  

Bill No: SB 1240

Author: Alvarado-Gil (D)

Amended: 3/21/24

Vote: 27 - Urgency

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/10/24

AYES: Smallwood-Cuevas, Wilk, Cortese, Durazo, Laird

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Public Employees’ Retirement System: contracting agencies: consolidation

SOURCE: California Professional Firefighters

DIGEST:

This bill allows a successor agency for the El Dorado County Fire Protection District and the Diamond Springs Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

ANALYSIS:

Existing law:

1. Allows a public agency to participate in the California Public Employees’ Retirement System (CalPERS) by contract to provide retirement benefits to its employees as specified (Government Code (GC § 20460).
2. Permits a successor agency that assumes the functions of the public agency to assume the contract of the public agency, as specified. The former agency’s contract is merged into the successor agency’s contract and the former agency’s contract ceases to exist. The successor agency takes on the obligations and receives credit for the contributions to CalPERS from the former agency’s contract as specified (GC § 20508).
3. Prohibits public employers from offering “classic” public pension formulas to new employees after December 31, 2012, and instead provides pension formulas as defined in the Public Employees’ Pension Reform Act (PEPRA). However, existing members of CalPERS who move to a new CalPERS employer as specified remain eligible for the “classic” pension formula that was offered by the new employer on December 31, 2012 (GC § 7522 et seq.).
4. Prohibits a public agency from providing CalPERS retirement benefits for some but not all members of specified member classifications (e.g., local firefighters) or providing a different benefit for subgroups (e.g., bargaining units) within the member classification (GC § 20479).

This bill:

1. Authorizes a successor agency for the Diamond Springs – El Dorado Fire Protection District and the El Dorado County Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the districts’ merger.
2. Makes legislative findings and declarations that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique need to consolidate fire protection districts in the County of El Dorado to remove redundancies while continuing fire and emergency response services.
3. Declares that an urgency statute is necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.

Comments

This bill is necessary to implement a proposed annexation/merger of two fire districts in El Dorado County. After December 31, 2012, PEPRA requires a public employer to offer less generous “PEPRA” pension formulas to new employees rather than previously available “classic” pension formulas. Because the annexed employees would technically be new employees of the new successor employer, the successor agency could not provide them their current classic formula under existing law.

This bill protects the annexed district employees’ existing benefit formula, thereby facilitating the annexation/merger of the two fire districts. Proponents argue that the annexation will provide better, more efficient fire protection for the El Dorado county region, which is increasingly prone to fire hazards.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 4/23/24)

California Professional Firefighters (source)
City of Placerville
Diamond Springs-El Dorado Fire Protection District
El Dorado County Fire Protection District
El Dorado County Professional Firefighters Association

OPPOSITION: (Verified 4/23/24)

None received

ARGUMENTS IN SUPPORT: According to the El Dorado Fire Protection District:

SB1240 will allow for our specific annexation of Diamond Springs – El Dorado Fire District into El Dorado County Fire Protection District to occur without causing a negative impact to employees carried over, allowing them to maintain their current pension accrual formulas. Both our fire districts currently have a similar mix of legacy and Public Employees’ Pension Reform Act (PEPRA) CalPERS employees, therefore, SB1240 would not cause any disparity for the successor agency.

According to the El Dorado County Professional Firefighters Association:

To gain efficiencies and strengthen sustainability, rural fire protection districts often look to annexation and consolidation (similar to mergers) to cooperate regionally to provide a better vehicle for essential fire, rescue and emergency medical services within our communities. An unintended consequence of annexation can be the reclassification of loyal employees into lesser Public Employee Retirement accruals and benefits — even though their work remains the same as it was when wearing the shoulder patch of the agency that originally hired them.

SB 1240 will allow this specific instance of an annexation of fire protection districts to occur without causing disparate impact to the employees who are carried over — allowing them to maintain their existing pension accrual rates.

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1556

4/24/24 11:16:22

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2023 - 2024 Regular

Bill No: SB 1240 Hearing Date: April 10, 2024

SUBJECT: Public Employees’ Retirement System: contracting agencies: consolidation

KEY ISSUE

This bill allows a successor agency for the El Dorado County Fire Protection District and the Diamond Springs Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the annexation.

ANALYSIS

Existing law:

1. Allows a public agency to participate in the California Public Employees’ Retirement System (CalPERS) by contract to provide retirement benefits to its employees as specified (Government Code (GC § 20460).
2. Permits a successor agency that assumes the functions of the public agency to assume the contract of the public agency, as specified. The former agency’s contract is merged into the successor agency’s contract and the former agency’s contract ceases to exist. The successor agency takes on the obligations and receives credit for the contributions to CalPERS from the former agency’s contract as specified (GC § 20508).
3. Prohibits public employers from offering “classic” public pension formulas to new employees after December 31, 2012, and instead provides pension formulas as defined in the Public Employees’ Pension Reform Act (PEPRA). However, existing members of CalPERS who move to a new CalPERS employer as specified remain eligible for the “classic” pension formula that was offered by the new employer on December 31, 2012 (GC § 7522 et seq.).
4. Prohibits a public agency from providing CalPERS retirement benefits for some but not all members of specified member classifications (e.g., local firefighters) or providing a different benefit for subgroups (e.g., bargaining units) within the member classification (GC § 20479).

This bill:

1. Authorizes a successor agency for the Diamond Springs – El Dorado Fire Protection District and the El Dorado County Fire Protection District to provide employees the defined benefit plan or formula that those employees received from their respective employer prior to the districts’ merger.
2. Makes legislative findings and declarations that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique need to consolidate fire protection districts in the County of El Dorado to remove redundancies while continuing fire and emergency response services.
3. Declares that an urgency statute is necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.

COMMENTS

1. Need for this bill?

This bill is necessary to implement a proposed annexation/merger of two fire districts in El Dorado County. After December 31, 2012, PEPRA requires a public employer to offer less generous “PEPRA” pension formulas to new employees rather than previously available “classic” pension formulas. Because the annexed employees would technically be new employees of the new successor employer, the successor agency could not provide them their current classic formula under existing law.

This bill would protect the annexed district employees’ existing benefit formula, thereby facilitating the annexation/merger of the two fire districts. Proponents argue that the annexation will provide better, more efficient fire protection for the El Dorado county region, which is increasingly prone to fire hazards.

2. Proponent Arguments

According to the El Dorado Fire Protection District:

“SB1240 will allow for our specific annexation of Diamond Springs – El Dorado Fire District into El Dorado County Fire Protection District to occur without causing a negative impact to employees carried over, allowing them to maintain their current pension accrual formulas. Both our fire districts currently have a similar mix of legacy and Public Employees’ Pension Reform Act (PEPRA) CalPERS employees, therefore, SB1240 would not cause any disparity for the successor agency.”

According to the El Dorado County Professional Firefighters Association:

“To gain efficiencies and strengthen sustainability, rural fire protection districts often look to annexation and consolidation (similar to mergers) to cooperate regionally to provide a better vehicle for essential fire, rescue and emergency medical services within our communities. An unintended consequence of annexation can be the reclassification of loyal employees into lesser Public Employee Retirement accruals and benefits — even though their work remains the same as it was when wearing the shoulder patch of the agency that originally hired them.

SB 1240 will allow this specific instance of an annexation of fire protection districts to occur without causing disparate impact to the employees who are carried over — allowing them to maintain their existing pension accrual rates.”

3. Opponent Arguments:

None received.

4. Prior Legislation:

AB 1140 (Stone, Chapter 65, Statutes of 2020) authorized a successor agency for the Central Fire Protection District and the Aptos/La Selva Fire Protection District to provide employees on and after June 30, 2020, the defined benefit plan or formula that those employees received from their respective employer prior to the consolidation.

SUPPORT

California Professional Firefighters
City of Placerville
Diamond Springs-El Dorado Fire Protection District
El Dorado County Fire Protection District
El Dorado County Professional Firefighters Association

OPPOSITION

None received.

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