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SB 187: "An Act creating the pension reserve fund; changing the manner in which employer contributions to the Public Employees' Retirement System of Alaska are calculated; repealing a requirement that the state make certain contributions, in addition to employer contributions, to pay the past service liabilities of the Public Employees' Retirement System of Alaska; preventing certain transfers to the Public Employees' Retirement System of Alaska from causing reductions in damage awards for wrongful or negligent conduct of third parties; adding to the duties of the Alaska Retirement Management Board; and providing for an effective date."

00                             SENATE BILL NO. 187                                                                         
01 "An Act creating the pension reserve fund; changing the manner in which employer                                        
02 contributions to the Public Employees' Retirement System of Alaska are calculated;                                      
03 repealing a requirement that the state make certain contributions, in addition to                                       
04 employer contributions, to pay the past service liabilities of the Public Employees'                                    
05 Retirement System of Alaska; preventing certain transfers to the Public Employees'                                      
06 Retirement System of Alaska from causing reductions in damage awards for wrongful                                       
07 or negligent conduct of third parties; adding to the duties of the Alaska Retirement                                    
08 Management Board; and providing for an effective date."                                                                 
09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
10    * Section 1. AS 09.17.070(f) is amended to read:                                                                   
11            (f)  Notwithstanding any other provision of this section, if the teachers'                                   
12       retirement system (AS 14.25) or the public employees' retirement system (AS 39.35)                                
01       obtains an award of damages or other recovery in compensation for harms caused by                                 
02       the wrongful or negligent conduct of a third party, the award of damages or other                                 
03       recovery is not subject to reduction under this section on account of                                             
04                 (1)  transfers under AS 37.14.920 from the pension reserve fund                                     
05       (AS 37.14.900) to the public employees' retirement system; or                                                 
06                 (2)  additional state contributions under AS 14.25.085 [OR                                          
07       AS 39.35.280].                                                                                                    
08    * Sec. 2. AS 37.10.210(a) is amended to read:                                                                      
09            (a)  The Alaska Retirement Management Board is established in the                                            
10       Department of Revenue. The board's primary mission is to serve as the trustee of the                              
11       assets of the state's retirement systems, the State of Alaska Supplemental Annuity Plan                           
12       [,] and the deferred compensation program for state employees, and the Alaska retiree                             
13       health care trusts established under AS 39.30.097 and manage the pension reserve                              
14       fund established under AS 37.14.900. Consistent with standards of prudence, the                               
15       board has the fiduciary obligation to manage and invest these assets in a manner that is                          
16       sufficient to meet the liabilities and pension obligations of the systems, plan, program,                         
17       and trusts. The board may, with the approval of the commissioner of revenue and upon                              
18       agreement with the responsible fiduciary, manage and invest other state funds so long                             
19       as the activity does not interfere with the board's primary mission. In making                                    
20       investments, the board shall exercise the powers and duties of a fiduciary of a state                             
21       fund under AS 37.10.071.                                                                                          
22    * Sec. 3. AS 37.10.220(a) is amended to read:                                                                      
23            (a)  The board shall                                                                                         
24                 (1)  hold regular and special meetings at the call of the chair or of at                                
25       least five members; meetings are open to the public, and the board shall keep a full                              
26       record of all its proceedings;                                                                                    
27                 (2)  after reviewing recommendations from the Department of                                             
28       Revenue, adopt investment policies for each of the funds entrusted to the board;                                  
29                 (3)  determine the appropriate investment objectives for the defined                                    
30       benefit plans established under the teachers' retirement system under AS 14.25 and the                            
31       public employees' retirement system under AS 39.35;                                                               
01                 (4)  assist in prescribing the policies for the proper operation of the                                 
02       systems and take other actions necessary to carry out the intent and purpose of the                               
03       systems in accordance with AS 37.10.210 - 37.10.390;                                                              
04                 (5)  provide a range of investment options and establish the rules by                                   
05       which participants can direct their investments among those options with respect to                               
06       accounts established under                                                                                        
07                      (A)  AS 14.25.340 - 14.25.350 (teachers' retirement system                                         
08            defined contribution individual accounts);                                                                   
09                      (B)  AS 39.30.150 - 39.30.180 (State of Alaska Supplementary                                       
10            Annuity Plan);                                                                                               
11                      (C)  AS 39.35.730 - 39.35.750 (public employees' retirement                                        
12            system defined contribution individual accounts); and                                                        
13                      (D)  AS 39.45.010 - 39.45.060 (public employees' deferred                                          
14            compensation program);                                                                                       
15                 (6)  establish the rate of interest that shall be annually credited to each                             
16       member's individual contribution account in accordance with AS 14.25.145 and                                      
17       AS 39.35.100 and the rate of interest that shall be annually credited to each member's                            
18       account in the health reimbursement arrangement plan under AS 39.30.300 -                                         
19       39.30.495; the rate of interest shall be adopted on the basis of the probable effective                           
20       rate of interest on a long-term basis, and the rate may be changed from time to time;                             
21                 (7)  adopt a contribution surcharge as necessary under AS 39.35.160(c);                                 
22                 (8)  coordinate with the retirement system administrator to have an                                     
23       annual actuarial valuation of each retirement system prepared to determine system                                 
24       assets, accrued liabilities, and funding ratios and to certify to the appropriate                                 
25       budgetary authority of each employer in the system                                                                
26                      (A)  an appropriate contribution rate for normal costs; [AND]                                      
27                      (B)  an appropriate contribution rate for liquidating [ANY] past                                   
28            service liability; and                                                                                   
29                      (C)  an appropriate contribution rate for both normal costs                                    
30            and liquidating past service liability, combined;                                                        
31                 (9)  review actuarial assumptions prepared and certified by a member                                    
01       of the American Academy of Actuaries and conduct experience analyses of the                                       
02       retirement systems not less than once every four years, except for health cost                                    
03       assumptions, which shall be reviewed annually; the results of all actuarial assumptions                           
04       prepared under this paragraph shall be reviewed and certified by a second member of                               
05       the American Academy of Actuaries before presentation to the board;                                               
06                 (10)  contract for an independent audit of the state's actuary not less                                 
07       than once every four years;                                                                                       
08                 (11)  contract for an independent audit of the state's performance                                      
09       consultant not less than once every four years;                                                                   
10                 (12)  obtain an external performance review to evaluate the investment                                  
11       policies of each fund entrusted to the board and report the results of the review to the                          
12       appropriate fund fiduciary;                                                                                       
13                 (13)  by the first day of each regular legislative session, report to the                               
14       governor, the legislature, and the individual employers participating in the state's                              
15       retirement systems on the financial condition of the systems in regard to                                         
16                      (A)  the results of the actuarial calculations made under (17)                                 
17            of this subsection [THE VALUATION OF TRUST FUND ASSETS AND                                               
18            LIABILITIES];                                                                                                
19                      (B)  current investment policies adopted by the board;                                             
20                      (C)  a summary of assets held in trust listed by the categories of                                 
21            investment;                                                                                                  
22                      (D)  the income and expenditures for the previous fiscal year;                                     
23                      (E)  the return projections for the next calendar year;                                            
24                      (F)  one-year, three-year, five-year, and 10-year investment                                       
25            performance for each of the funds entrusted to the board; and                                                
26                      (G)  other statistical data necessary for a proper understanding                                   
27            of the financial status of the systems;                                                                      
28                 (14)  submit quarterly updates of the investment performance reports to                                 
29       the Legislative Budget and Audit Committee;                                                                       
30                 (15)  develop an annual operating budget; [AND]                                                         
31                 (16)  administer pension forfeitures required under AS 37.10.310 using                                  
01       the procedures of AS 44.62 (Administrative Procedure Act); and                                                
02                 (17)  annually calculate, by independent actuarial assessment,                                      
03                      (A)  the value of the assets of the pension reserve fund                                       
04            (AS 37.14.900);                                                                                          
05                      (B)  the value of the assets of the Public Employees'                                          
06            Retirement System of Alaska;                                                                             
07                      (C)  the total liabilities of the Public Employees' Retirement                                 
08            System of Alaska;                                                                                        
09                      (D)  the ratio of the value of the assets of the Public                                        
10            Employees' Retirement System of Alaska to the total liabilities of the                                   
11            Public Employees' Retirement System of Alaska;                                                           
12                      (E)  the ratio of the value of the assets of the Public                                        
13            Employees' Retirement System of Alaska and the value of the assets of the                                
14            pension reserve fund, combined, to the total liabilities of the Public                                   
15            Employees' Retirement System of Alaska.                                                                
16    * Sec. 4. AS 37.14 is amended by adding new sections to read:                                                      
17                      Article 10. Pension Reserve Fund.                                                                
18            Sec. 37.14.900. Pension reserve fund established. (a) The pension reserve                                  
19       fund is established in the general fund. The fund consists of money appropriated to the                           
20       fund. Nothing in AS 37.14.900 - 37.14.950 creates a dedicated fund.                                               
21            (b)  Money appropriated to the fund may be transferred as provided in                                        
22       AS 37.14.920 without further appropriation. Money appropriated to the fund does not                               
23       lapse. The legislature may appropriate to the fund interest earned on money in the                                
24       fund.                                                                                                             
25            Sec. 37.14.910. Powers and duties of the Alaska Retirement Management                                      
26       Board. The Alaska Retirement Management Board shall manage the fund as required                                 
27       under AS 37.10.210(a), subject to AS 37.14.900 - 37.14.950.                                                       
28            Sec. 37.14.920. Use of fund. (a) If the actuarial calculation made under                                   
29       AS 37.10.220(a)(17)(D) indicates that the ratio of assets to liabilities in the Public                            
30       Employees' Retirement System of Alaska is below 50 percent, the board shall transfer                              
31       from the pension reserve fund (AS 37.14.900) to the Public Employees' Retirement                                  
01       System of Alaska an amount necessary to bring the ratio to 50 percent.                                            
02            (b)  If the actuarial calculation made under AS 37.10.220(a)(17)(A) indicates                                
03       that the assets of the Alaska pension reserve fund (AS 37.14.900) are not sufficient to                           
04       make the adjustments required under (a) of this section, the board shall                                          
05                 (1)  transfer the total assets of the fund to the Public Employees'                                     
06       Retirement System of Alaska so as to bring the ratio of assets to liabilities of each                             
07       system as close to 50 percent as possible; and                                                                    
08                 (2)  notify the commissioner of administration of amounts calculated by                                 
09       the board under AS 37.10.220(a)(8).                                                                               
10            (c)  If, based on the actuarial calculations made under AS 37.10.220(a)(17), the                             
11       board determines that the value of the assets of the Public Employees' Retirement                                 
12       System of Alaska and the pension reserve fund (AS 37.14.900), combined, exceeds 95                                
13       percent of the total liabilities of the Public Employees' Retirement System of Alaska,                            
14       the board shall transfer from the pension reserve fund (AS 37.14.900) to the general                              
15       fund an amount of money equal to the amount by which the combined total value of                                  
16       the assets of the Public Employees' Retirement System of Alaska and the pension                                   
17       reserve fund (AS 37.14.900) exceeds 95 percent of the total of the liabilities of the                             
18       Public Employees' Retirement System of Alaska, as calculated under                                                
19       AS 37.10.220(a)(17).                                                                                              
20            Sec. 37.14.950. Definitions. In AS 37.14.900 - 37.14.950, unless the context                               
21       otherwise requires,                                                                                               
22                 (1)  "board" means the Alaska Retirement Management Board;                                              
23                 (2)  "fund" means the pension reserve fund established in                                               
24       AS 37.14.900.                                                                                                     
25    * Sec. 5. AS 39.35.255(a) is amended to read:                                                                      
26            (a)  Subject to (i) of this section, each [EACH] employer shall contribute to                            
27       the system every payroll period an amount calculated by applying a rate certified by                          
28       the board under AS 37.10.220(a)(8)(C) to [OF 22 PERCENT OF] the greater of the                                
29       total of all base salaries                                                                                        
30                 (1)  paid by the employer to employees who are active members of the                                    
31       system, including any adjustments to contributions required by AS 39.35.520; or                                   
01                 (2)  paid by the employer to employees who were active members of                                       
02       the system during the corresponding payroll period for the fiscal year ending June 30,                            
03       2008.                                                                                                             
04    * Sec. 6. AS 39.35.255(d) is amended to read:                                                                      
05            (d)  Notwithstanding (i) [(a)] of this section, the annual employer contribution                         
06       rate may not be less than the rate sufficient to allow payment of the employer normal                             
07       cost and the employer contributions required under AS 39.30.370 and AS 39.35.750.                                 
08    * Sec. 7. AS 39.35.255 is amended by adding a new subsection to read:                                              
09            (i)  Notwithstanding (a) of this section, if the board determines, based on                                  
10       actuarial calculations under AS 37.10.220(a)(17), that the value of the assets of the                             
11       Public Employees' Retirement System of Alaska and the value of the assets of the                                  
12       pension reserve fund, combined, is equal to or greater than 60 percent of the total of                            
13       the system's liabilities, the employer contribution amount calculated under (a) of this                           
14       section may not exceed 22 percent.                                                                                
15    * Sec. 8. AS 39.35.282 is amended to read:                                                                         
16            Sec. 39.35.282. Contributions for medical benefits. Contributions made by                                  
17       an employer under AS 39.35.255 [AND 39.35.280] shall be separately computed for                                   
18       benefits provided by AS 39.35.535 and shall be deposited in the Alaska retiree health                             
19       care trust established under AS 39.30.097(a).                                                                     
20    * Sec. 9. AS 39.35.280 is repealed.                                                                                
21    * Sec. 10. This Act takes effect June 30, 2012.