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HB 11: "An Act relating to retirement incentives for members of the defined benefit retirement plan of the teachers' retirement system and the defined benefit retirement plan of the Public Employees' Retirement System of Alaska; and providing for an effective date."

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).