00 HOUSE BILL NO. 11 01 "An Act relating to retirement incentives for members of the defined benefit retirement 02 plan of the teachers' retirement system and the defined benefit retirement plan of the 03 Public Employees' Retirement System of Alaska; and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05  * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 06 to read: 07 PURPOSE AND INTENT. The State of Alaska and many local governments and 08 school districts are facing the need to restructure their operations and workforces to reduce 09 expenditures and balance budgets. Retirement incentives are management tools that have been 10 used extensively by the private sector, the federal government, and other state and local 11 governments across the country. The purpose of this Act is to make those management tools 12 temporarily available to the state and to municipalities and school districts in the state. This 13 Act will enable those entities to reduce operating costs by allowing certain positions to 14 become vacant and then eliminating those positions or leaving them vacant. The legislature 01 intends that state agencies that adopt retirement incentive programs under this Act adopt an 02 accompanying policy that prohibits hiring of new employees. 03  * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 RETIREMENT INCENTIVE PROGRAM. (a) An employer, including a state agency, 06 a political subdivision of the state, a public organization, and the University of Alaska, may 07 elect to adopt a retirement incentive program under this Act. The employer may limit 08 applicability of the program to employees 09 (1) in specific budget or administrative components designated by the 10 employer; 11 (2) in specific job classifications designated by the employer; 12 (3) in specific geographic locations identified by the employer; or 13 (4) based on any combination of factors under (1) - (3) of this subsection. 14 (b) Only the administrator may approve or deny an employee's application to 15 participate in a retirement incentive program adopted by an employer under (a) of this section. 16 (c) An employer that elects to adopt a retirement incentive program under (a) of this 17 section shall propose the adopted program to the administrator for approval. The administrator 18 shall approve the program if the program meets the requirements of this section and, if the 19 employer is a state agency, sec. 9(a) of this Act. A program proposed under this section must 20 (1) designate job classifications, and specific budget and administrative 21 components related to those job classifications, that are wholly or partially made up of 22 employees who may be eligible to participate in the program; 23 (2) include a reimbursement agreement that requires 24 (A) the employer, for each employee who participates in the program, 25 to reimburse the defined benefit retirement plan in the appropriate retirement system, 26 within three years after the end of the fiscal year in which the employee is appointed 27 to retirement, in an amount equal to the actuarial equivalent of the difference between 28 the benefits the participant receives after the addition of the credit under (i) of this 29 section and the benefits the participant would have received without the credit, less the 30 amount the participant has paid on the indebtedness determined under (g) or (h) of this 31 section; and 01 (B) the employer's obligation to contribute under this section be given 02 priority over other financial obligations of the employer to the maximum extent 03 permitted by law. 04 (d) An employer that elects, under (a) of this section, to adopt a retirement incentive 05 program may request that the administrator establish one or more periods during which one or 06 more employees of the employer who are eligible under (e) of this section may apply to 07 participate in the program. A period established by the administrator under this subsection 08 may not begin earlier than 30 days after the date it is established or end later than June 30, 09 2020, and must be not less than 30 days and not more than 60 days in duration. 10 (e) The administrator may not allow an employee to participate in a retirement 11 incentive program adopted under this Act unless the employee is eligible under the program 12 for appointment to retirement not later than the earlier of 13 (1) the first day of the sixth month that follows the last day of the application 14 period established by the administrator under (d) of this section; or 15 (2) a date set by the retirement incentive program as the date employees are 16 required to be eligible for appointment to retirement. 17 (f) An employee is eligible to participate in a retirement incentive program under this 18 Act only if 19 (1) the employee is a vested member of a defined benefit retirement plan in 20 the public employees' retirement system or the teachers' retirement system; 21 (2) the employee has credit for service under AS 14.25.110 or AS 39.35.370 22 that occurred before July 1, 2006; 23 (3) the employee is at least 50 years of age, and, before application of credit 24 described in (i) of this section, has 25 (A) at least 17 years of credited service as a peace officer or firefighter, 26 as those terms are defined in AS 39.35.680; or 27 (B) at least 20 years of credited service as an employee other than an 28 employee described in (A) of this paragraph; 29 (4) the employee will be qualified to retire under AS 14.25.110 or 30 AS 39.35.370 after receipt of the credit described in (i) of this section; 31 (5) if the employer is a state agency, the employee satisfies the additional 01 requirements under sec. 3 of this Act; and 02 (6) the savings to the employer in personal services costs for the employee's 03 position will exceed the costs to the employer for that position within three years after the 04 employee is appointed to retirement. 05 (g) A member of the defined benefit retirement plan in the teachers' retirement system 06 who participates in an approved retirement incentive program under this Act is indebted to the 07 defined benefit retirement plan for an amount calculated under this subsection. The 08 indebtedness is 25.95 percent of the member's actual compensation for the school year in 09 which the member terminates employment, or the calculated school year compensation for a 10 member who works less than the entire school year, plus an appropriate share of the 11 administrative costs of the program. The member may apply annual or personal leave to the 12 indebtedness before appointment to retirement. If the indebtedness is outstanding 13 indebtedness at the time the member is appointed to retirement under the retirement incentive 14 program, the pension benefits payable to the member shall be reduced by an actuarial 15 adjustment that eliminates the indebtedness. 16 (h) A member of the defined benefit retirement plan in the public employees' 17 retirement system who participates in an approved retirement incentive program under this 18 Act is indebted to the defined benefit retirement plan for an amount calculated under this 19 subsection. The indebtedness is 22 1/2 percent for a peace officer or firefighter, and 20 1/4 20 percent for other members, of the member's actual annual compensation for the year in which 21 the member terminates employment, or the calculated annual compensation for a member 22 who works fewer than 12 months, plus an appropriate share of the administrative costs of the 23 program. The member may apply annual or personal leave to the indebtedness before 24 appointment to retirement. If the indebtedness is outstanding at the time the member is 25 appointed to retirement under the retirement incentive program, the pension benefits payable 26 to the member shall be reduced by an actuarial adjustment that eliminates the indebtedness. 27 (i) An employee who participates in an approved retirement incentive program under 28 this Act receives a credit of three years. The three years must be applied in the following 29 order of priority until exhausted: 30 (1) to meet the age or service required for eligibility for normal retirement 31 under AS 14.25.110 or AS 39.35.370, as appropriate; 01 (2) to meet the age required for early retirement under AS 14.25.110 or 02 AS 39.35.370, as appropriate; 03 (3) to reduce the actuarial adjustment required for early retirement under 04 AS 14.25.110 or AS 39.35.370, as appropriate; 05 (4) as years of credited service for calculating retirement benefits. 06  * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 AUTHORIZATION FOR STATE EMPLOYEE RETIREMENT INCENTIVE. (a) 09 Subject to (b) of this section, an employee of a state agency may participate in a retirement 10 incentive program approved under sec. 2 of this Act by the administrator if the employee is 11 eligible to participate under sec. 2 of this Act and the employee 12 (1) has been continuously employed by the state for at least one year before 13 the employee applies to participate in the program; 14 (2) is a permanent seasonal employee employed by the state in a permanent 15 seasonal position for the entire period the position was filled during the 12 months preceding 16 the employee's application to participate in the program; 17 (3) has been employed under a job-sharing agreement in which a state agency 18 allowed two or more employees to share a single position that is identified by a single 19 position control number, for the entire period in which the position was shared during the 12 20 months preceding the employee's application to participate in the program; or 21 (4) meets a combination of the requirements of this subsection. 22 (b) The governor, the lieutenant governor, and a commissioner, deputy commissioner, 23 or assistant commissioner of a principal department of the executive branch of state 24 government may not retire under a retirement incentive program adopted under this Act. 25  * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 26 read: 27 AUTHORIZATION FOR RETIREMENT INCENTIVE FOR EMPLOYEES OF THE 28 UNIVERSITY OF ALASKA. Notwithstanding AS 14.40.661 - 14.40.799, a participant in a 29 university retirement program under AS 14.40.661 - 14.40.799 who is vested in a defined 30 benefit retirement plan in the public employees' retirement system or the teachers' retirement 31 system may participate in a retirement incentive program for that defined benefit retirement 01 plan if the participant satisfies the requirements under this Act that apply to participants in 02 that retirement incentive program. 03  * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 POLITICAL SUBDIVISION OR PUBLIC ORGANIZATION EMPLOYMENT. 06 Notwithstanding AS 14.25 or AS 39.35, for purposes of determining the years of service 07 required for retirement under AS 14.25.110 or AS 39.35.370, as appropriate, an employee of a 08 state agency who has vested as a member of a defined benefit retirement plan in the teachers' 09 retirement system or the public employees' retirement system and applies to participate in a 10 retirement incentive program approved under this Act may receive credit for service while 11 employed with a political subdivision or a public organization that occurred before the 12 political subdivision or public organization elected to participate in that defined benefit 13 retirement plan. The credit may not be applied for the purpose of determining the amount of a 14 retirement benefit. 15  * Sec. 6. The uncodified law of the State of Alaska is amended by adding a new section to 16 read: 17 RECOVERY OF EMPLOYER DELINQUENCIES. To recover a delinquency owed 18 under this Act by an employer other than the state, the commissioner of administration may 19 (1) withhold an amount of money equal to the amount of the delinquency, or a 20 lesser amount, from money payable to the employer by the state, and credit it against the 21 delinquency; and 22 (2) bring an action against the employer. 23  * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 STOPPING ENROLLMENT FOR ACTUARIAL REASONS. If the administrator 26 determines after approving a retirement incentive program under this Act that an increase in 27 the number of participants in that retirement incentive program will have a significant 28 negative effect on the actuarial soundness of a defined benefit retirement plan in the teachers' 29 retirement system or the public employees' retirement system, the administrator may close the 30 program to new applicants. 31  * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 01 read: 02 REEMPLOYMENT INDEBTEDNESS; PROHIBITION ON REEMPLOYMENT. (a) 03 If an individual is reemployed as a member of the defined benefit retirement plan in the public 04 employees' retirement system under AS 39.35, the defined benefit retirement plan in the 05 teachers' retirement system under AS 14.25, the defined benefit retirement plan in the judicial 06 retirement system under AS 22.25, or the defined benefit retirement plan in the optional 07 university retirement program under AS 14.40.661 - 14.40.799 after appointment to 08 retirement under this Act, that individual forfeits incentive credit received or due under sec. 09 2(i) of this Act and incurs an indebtedness to the defined benefit retirement plan under which 10 the individual has been reemployed as a member. The indebtedness is 110 percent of the 11 amount, including health insurance premium costs, that the individual received solely as a 12 result of participation in a retirement incentive program under this Act. The administrator 13 shall apply the amount the individual has paid under sec. 2 of this Act as a requirement for 14 participation in the retirement incentive as a credit toward the member's reemployment 15 indebtedness under this subsection. Interest on the reemployment indebtedness accrues from 16 the date of reemployment until the date that the individual either is appointed to retirement 17 and accepts an actuarial adjustment to the individual's future benefits or repays the 18 indebtedness in full. The rate of interest is that established by regulation for the member's 19 defined benefit retirement plan by the Alaska Retirement Management Board. 20 (b) A state agency or the University of Alaska may not employ or contract for 21 personal services with an individual who is appointed to retirement under a retirement 22 incentive program authorized by this Act for a period of three years immediately following 23 the date of the individual's appointment to retirement, except that 24 (1) the University of Alaska may enter into a personal services contract with 25 the individual for teaching or research; 26 (2) the individual may accept employment with the legislature during a 27 legislative session if the employment is on an hourly basis and does not entitle the individual 28 to receive retirement, health, or leave benefits; 29 (3) the individual may accept employment with a school district as a substitute 30 teacher; and 31 (4) the individual may accept employment with a school district if the 01 individual participated in the defined benefit retirement plan in the teachers' retirement system 02 and the employment is on an hourly basis and does not entitle the individual to receive 03 retirement, health, or leave benefits. 04 (c) Notwithstanding the prohibition in (b) of this section, a state agency or the 05 University of Alaska may enter into a personal services contract with an individual who was 06 appointed to retirement under this Act if the administrator approves the contract. 07  * Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 08 read: 09 OFFICE OF MANAGEMENT AND BUDGET. (a) The director of the office of 10 management and budget shall review each retirement incentive program adopted by a state 11 agency, determine whether the program will result in a net reduction to the operating costs of 12 the state agency that adopted it for a five-year period beginning July 1, 2017, and report the 13 outcome of the review to the administrator. The administrator may not approve a retirement 14 incentive program adopted by a state agency under sec. 2 of this Act unless the office of 15 management and budget determines that the program's expected effect on the state agency's 16 operation costs is a net reduction. The state agency that adopts the program shall cooperate 17 with and provide information to the office of management and budget to aid with the 18 preparation of the review under this subsection and reports under (b) of this section. 19 (b) Beginning January 15, 2018, and continuing through January 15, 2021, the office 20 of management and budget shall submit to the senate secretary and the chief clerk of the 21 house of representatives an annual report on the retirement incentive programs established 22 under this Act and notify the legislature that the report is available. Each report must provide 23 the information necessary for the legislature to evaluate the retirement incentive programs, 24 including the effect of the programs on the defined benefit retirement plans of the teachers' 25 retirement system and the public employees' retirement system, and whether the programs are 26 economical for employers. The report must include, for each program, 27 (1) the designated employee categories; 28 (2) the employer's cost for each participant; 29 (3) the actual annual cost to the state; 30 (4) for state agencies, the budgeted annual cost; 31 (5) the cost paid by each participant; 01 (6) the number of positions that became vacant as a result of the program and 02 how many of those positions remain vacant; 03 (7) for the relevant three-year period, the projected net savings and the actual 04 net savings resulting from the program. 05  * Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 PROGRAM CHANGES. An individual employee does not have a vested or 08 contractual right to a benefit under this Act until an agreement is executed with the 09 administrator that authorizes the employee to participate in that retirement incentive program. 10 The legislature may change a retirement incentive program established under this Act as it 11 relates to employees for whom an agreement under this section has not been executed. 12  * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 13 read: 14 REGULATIONS. The commissioner of administration may adopt regulations under 15 AS 44.62 (Administrative Procedure Act) to implement and interpret this Act. 16  * Sec. 12. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 DEFINITIONS. (a) Unless provided otherwise in this Act, the definitions set out in 19 AS 14.25.220 apply to provisions in secs. 2 - 11 of this Act that relate to the teachers' 20 retirement system and members of the teachers' retirement system. 21 (b) Unless provided otherwise in this Act, the definitions set out in AS 39.35.680 22 apply to provisions in secs. 2 - 11 of this Act that relate to the public employees' retirement 23 system and members of the public employees' retirement system. 24 (c) In this Act, 25 (1) "administrator" means the commissioner of administration or the 26 commissioner's designee; 27 (2) "employer" has the meaning given in AS 14.25.220 and AS 39.35.680; 28 (3) "office of management and budget" means the office of management and 29 budget in the Office of the Governor; 30 (4) "public employees' retirement system" means the Public Employees' 31 Retirement System of Alaska (AS 39.35); 01 (5) "public organization" has the meaning given in AS 39.35.680; 02 (6) "state agency" means 03 (A) the legislative branch of state government; 04 (B) a principal department of the executive branch of state 05 government; 06 (C) an independent state entity that is attached to a principal 07 department of the executive branch of state government for administrative purposes 08 and is not a public organization as defined in AS 39.35.680; or 09 (D) the Office of the Governor; 10 (7) "teachers' retirement system" means the teachers' retirement system under 11 AS 14.25. 12  * Sec. 13. The uncodified law of the State of Alaska is amended by adding a new section to 13 read: 14 APPLICABILITY TO EXISTING BENEFICIARIES. Sections 1 - 12 of this Act may 15 not impair or diminish the retirement benefits of a person who is appointed to retirement 16 under a defined benefit retirement plan in the teachers' retirement system or the public 17 employees' retirement system, or receives a benefit under that plan, before the effective date 18 of this Act. 19  * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 20 read: 21 APPLICABILITY TO CONTRACTS. Sections 1 - 12 of this Act apply to contracts 22 made on or after the effective date of this Act. 23  * Sec. 15. Sections 1 - 12 of this Act are repealed July 1, 2020. 24  * Sec. 16. This Act takes effect immediately under AS 01.10.070(c).