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.