AB1054 - Public employees’ retirement: deferred retirement option program: public employee health benefits.

Amended IN Senate August 13, 2026 Amended IN Senate June 25, 2026 Amended IN Assembly January 05, 2026 Amended IN Assembly March 24, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 1054 Introduced by Assembly Member Gipson (Coauthor: Assembly Member Alanis) February 20, 2025 An act to amend Section 22760 of, and to add Chapter 20 (commencing with Section 21717) to Part 3 of Division 5 of Title 2 of of, the Government Code, relating to retirement. LEGISLATIVE COUNSEL'S DIGEST AB 1054, as amended, Gipson. Public employees’ retirement: deferred retirement option program. program: public employee health benefits. Existing law, the County Employees Retirement Law of 1937, prescribes retirement benefits for members of specified county and district retirement systems. Existing law establishes the Deferred Retirement Option Program as an optional benefit program for specified safety members of those systems that, by ordinance or resolution by the county board of supervisors or the governing body, elect to adopt it. The program provides eligible members access, upon service retirement, to a lump sum or, in some cases, monthly payments in addition to a monthly retirement allowance, as specified. Existing law, the Public Employees’ Retirement Law (PERL), creates the Public Employees’ Retirement System (PERS) for the purpose of providing pension benefits to state employees and employees of contracting agencies and prescribes the rights and duties of members of the system and their beneficiaries. Existing law vests management and control of PERS in its board of administration. PERS provides a defined benefit to members of the program, based on final compensation, credited service, and age at retirement, subject to certain variations. This bill would establish the Deferred Retirement Option Program as a voluntary program within PERS for employees of State Bargaining Units 5 (Highway Patrol) and 8 (Firefighters). (Firefighters), and certain supervisory or managerial employees of the Department of the California Highway Patrol or the Department of Forestry and Fire Protection. The bill would require certain actions to occur, including completion of an actuarial analysis to determine the proposed program will be cost neutral, before the program becomes effective and applicable. The bill would require members who elect to participate in the program to meet certain requirements, including waiving any claims with respect to age and other discrimination in employment laws relative to the program. The bill would establish a program account for each participant and would require the Board of Administration of the Public Employees’ Retirement System to, among other things and at least once annually, provide a statement to the participant that displays the value or balance of the participant’s program account. The bill would require PERS to commence paying the member their monthly retirement allowance as of the first day of the month following the deferred retirement date. The bill would authorize the participant to designate a person or persons as beneficiaries of the participant’s program account at any time during the program period from their election date to the deferred retirement calculation date. Beginning on July 1, 2027, 1 of the fiscal year the program is implemented, and on that date every 5 consecutive fiscal years thereafter, the bill would require the Board of Administration of the Public Employees’ Retirement System to submit a report of an actuarial analysis to specified entities. The bill would entitle participants who entered the program prior to the effective date of any modifications by the Legislature to elect whether to become subject to those modified provisions or to remain subject to the program as it existed on the participant’s election date. The bill would specify that the Legislature reserves the right to suspend the program through legislative action ratified by the Governor under certain circumstances. If the Legislature and the Governor approve the program’s suspension, the bill would terminate all participants’ benefit accrual and would prohibit any participant, eligible spouse, or beneficiary from having any vested right to any prospective program benefit, as specified. The bill would require the member’s spouse, as applicable, to execute a signed statement acknowledging the spouse’s understanding of, and agreement with, the member’s election to participate in the program together with an express statement of the spouse’s understanding and agreement that benefits payable to the spouse may be reduced as a result of participation in the program. Existing law requires the board of administration of PERS to administer the Public Employees’ Medical and Hospital Care Act (PEMHCA). PEMHCA further grants the board the power to approve health benefit plans and to contract with carriers offering health benefit plans. Under PEMHCA, an employee or annuitant may enroll in a health benefit plan approved or maintained by the board either as an individual or for self and family. Existing law defines an annuitant for purposes of receiving postretirement health benefits pursuant to PEMHCA and generally requires that a person retire within 120 days of separation from public employment, with specified exceptions. This bill would expand the definition of annuitant, thereby permitting a person, or a surviving family member of that person, as specified, whose deferred retirement date is within 120 days of separation from the Deferred Retirement Option Program and who receives a retirement allowance under any state retirement system to which the state was a contributing party to enroll in a health benefit plan under PEMHCA. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares all of the following: (a) The Department of the California Highway Patrol (CHP) has taken on an increasingly diverse and dangerous mission, as it is now regularly called upon to serve as both a local and statewide law enforcement entity. (b) The Department of Forestry and Fire Protection (CAL FIRE) is California’s fire department, and catastrophic disasters have significantly increased the complexity of its mission. (c) A deficiency in the recruitment and retention of CHP officers and CAL FIRE firefighters has resulted in a chronic shortage of needed personnel, and the challenges now being confronted by both the CHP and CAL FIRE are dangerously protracted, requiring an increasing reliance on existing experience and expertise. (d) A Deferred Retirement Option Program is a method to address these challenges that other public safety agencies in California successfully use to address these challenges. (e) A Deferred Retirement Option Program allows sworn peace officers and firefighter personnel who would otherwise retire the ability to remain employed in the same classification by the employer for a period of up to five years beyond their planned date of retirement for service. This benefits California public safety agencies by allowing them to keep highly trained and experienced public safety personnel actively employed, and able to meet the ongoing public safety needs of the state. (f) To address this immediate and ongoing need, it is the intent of the Legislature to establish a Deferred Retirement Option Program for eligible California Public Employees’ Retirement System safety members of State Bargaining Unit 5 (CHP) and State Bargaining Unit 8 (CAL FIRE) to ensure that California can effectively maintain and provide vital safety services to the public as the next generation prepares to enter these public service professions. SEC. 2. Chapter 20 (commencing with Section 21717) is added to Part 3 of Division 5 of Title 2 of the Government Code, to read: CHAPTER 20. Deferred Retirement Option Program 21717. This chapter shall be known and may be cited as the Deferred Retirement Option Program. 21717.1. (a) The Deferred Retirement Option Program is hereby created to add flexibility to the state employers and eligible employees of State Bargaining Unit 5 and State Bargaining Unit 8, respectively, who are a peace officer or firefighter patrol or state peace officer/firefighter member of the California Public Employees’ Retirement System and who may elect to participate in the program to receive a one-time lump-sum payment of their program account upon termination of employment and subsequent retirement from the system through the Deferred Retirement Option Program. (b) Pursuant to Sections 21717.4, 21717.5, and 21717.6, as applicable, the Deferred Retirement Option Program shall become operative with respect to peace officer or firefighter patrol members of State Bargaining Unit 5 and or state peace officer/firefighter members of State Bargaining Unit 8, respectively, 8 on the date specified in a memorandum of understanding between the employer and the recognized employee organization only after certification that the program is cost neutral and the Board of Administration of the Public Employees’ Retirement System has adopted regulations to implement and administer the program pursuant to this chapter. 21717.2. (a) (1) Unless the context otherwise requires, the definitions and general provisions set forth in this chapter shall govern its construction. (2) The Public Employees’ Retirement Law (Part 3 (commencing with Section 20000)) shall apply, as necessary and applicable. (3) Article 4 (commencing with Section 7522) of Chapter 21 of Division 7 of Title 1 shall apply, as necessary and applicable. (b) Notwithstanding paragraph (3) of subdivision (a), a member who elects to participate in the program shall, on and after the election date, return to employment with the employer, but shall cease to accrue, nor shall have any right or entitlement to accrue, accrue or purchase, any additional service credit or retirement benefit in any public employee retirement system for service performed during the program period. Service during the program period shall not be counted as “state service” for postretirement health vesting. A member shall not elect to purchase any service credit after the member’s election date for participation in the Deferred Retirement Option Program. (c) The implementation and administration of the Deferred Retirement Option Program shall conform to the applicable provisions of Title 26 of the United States Code and the Revenue and Taxation Code. 21717.3. For purposes of this chapter, the following definitions apply: (a) “Board” has the same meaning as in Section 20021. (b) “Deferred retirement date” means all of the following: (1) The date on which the member’s employment shall be terminated. (2) The date on which the member shall be retired for service from the system, except as otherwise provided in this chapter. (3) The date on which the member’s program participation shall conclude and be terminated. (4) The period of time for which the present value of deferred retirement option program benefits, including cumulative contributions and accrued interest in the participant’s account, shall become payable as a one-time lump-sum payment to the participant or their survivor or beneficiary. (c) “Deferred retirement calculation date” means the date prior to the member’s actual program retirement date at which time benefits under the program shall be calculated for distribution as provided in this chapter. (d) “Department” means the Department of Human Resources. (e) “DROP” or “program” means the Deferred Retirement Option Program established by this chapter. (f) “Election date” means the date the member elects to participate and begins active participation in the program. (g) “Participant” or “member” means an eligible peace officer patrol member of State Bargaining Unit 5 or firefighter 5, state peace officer/firefighter member of State Bargaining Unit 8, as applicable and consistent with Section 21717.6, or a supervisory or managerial employee of the Department of the California Highway Patrol or the Department of Forestry and Fire Protection who would otherwise be included in State Bargaining Unit 5 or State Bargaining Unit 8, respectively, but for supervisory or managerial designation, who is an active member of the system and who elects to participate in the program. (h) “Program account” means an account established by the system for each program participant pursuant to Section 21717.10. (i) “Program period” means the period of time commencing on the date the member has elected to participate in the program and ending on the member’s deferred retirement date, and where the total duration of program participation by the participant shall not exceed 60 consecutive months from the date of the member’s election date. (j) “Public retirement system” has the same meaning as subdivision (j) of Section 7522.04. (k) “Regulations” means the administrative regulations adopted by the board pursuant to subdivision (c) of Section 21717.2, and Sections 21717.4, 21717.5, and 21717.21, providing for the implementation and administration of the program. (l) “System” means the Public Employees’ Retirement System established pursuant to Article 1 (commencing with Section 20000) of Chapter 1. 21717.4. (a) This chapter shall become effective and applicable to State Bargaining Unit 5 only after all of the following have occurred: (1) The department and State Bargaining Unit 5 have agreed to implement the program pursuant to the Ralph C. Dills Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1). (1) (2) The board has completed an actuarial analysis of the proposed program pursuant to Section 21717.18 21717.20 and determined that the proposed program will be cost neutral. The actuarial analysis shall be provided to both the Department of Finance and the department. (2) (3) The board has adopted regulations to implement and administer this chapter. (3) The department and State Bargaining Unit 5 have agreed to its implementation pursuant to the State Employer-Employee Relations Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1). (b) Notwithstanding paragraph (3) (1) of subdivision (a), the department and State Bargaining Unit 5 shall not agree to the an implementation date of this chapter prior to the completion of paragraphs (1) and (2), (2) and (3), inclusive, of subdivision (a). 21717.5. (a) This chapter shall become effective and applicable to State Bargaining Unit 8 only after all of the following have occurred: (1) The department and State Bargaining Unit 8 have agreed to implement the program pursuant to the Ralph C. Dills Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1). (1) (2) The board has completed an actuarial analysis of the proposed program pursuant to Section 21717.18 21717.20 and determined that the proposed pr [Text truncated for display. Full text available on Congress.gov.]