Legislature(2017 - 2018)BARNES 124
02/12/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB304 | |
| HB306 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 304 | TELECONFERENCED | |
| *+ | HB 306 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 306-PERS/TERS DISTRIBUTIONS
3:57:36 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 306, "An Act relating to disbursement options
under the Public Employees' Retirement System of Alaska and the
Teachers' Retirement System of Alaska for participants in the
defined contribution plan; and providing for an effective date."
3:57:50 PM
LESLIE RIDLE, Commissioner, Department of Administration (DOA),
introduced HB 306 on behalf of the House Rules Committee by
request of the governor. She specified that the request had
originally come from the Alaska Retirement Management Board
(ARMB), which has a committee that helps state employee with
Tier IV retirement plans to prepare for retirement.
3:59:23 PM
KATHY LEA, Deputy Director, Division of Retirement and Benefits,
Department of Administration (DOA), presented HB 306 on behalf
of the House Rules Committee by request of the governor. She
presented a PowerPoint entitled, "HB 306 / SB 159. PERS/TRS
Disbursement Options," [in committee packet]:
MS. LEA spoke to slide 3, "The Issue":
The PERS/TRS DCR (Tier IV) plans use the statutes as
the plan document.
? Any changes to modernize options or to meet new
Internal Revenue requirements require a statutory
change.
? Statutory changes can take several sessions to
accomplish, if at all.
? Meanwhile, participants needs are being unmet.
? This bill would give the DCR plans the same
flexibility as the SBS and Deferred Compensation
plans.
MS. LEA went on to address slide 4, "PERS/TRS DCR Needs":
? The PERS/TRS DCR plans have vested employees who are
retiring and need help facing the challenges of
retirement.
? The ARMB Defined Contribution Subcommittee is
exploring options that will help participants:
o not outlive their retirement savings,
o address purchasing power over time, and
o protect against market uncertainty.
MS. LEA closed the presentation with slide 5, "Transparent
Process for Change":
? Discussions regarding disbursement options are done
in a public forum during the selection process.
? Participants and groups representing participants
will have input during subcommittee and ARMB committee
meetings.
? The process remains public and transparent, but
allows for faster adoption of needed change.
? All interested parties are notified of any changes
through the regulation process.
4:02:44 PM
REPRESENTATIVE JOSEPHSON asked about the terms of Tier IV
retirement.
MS. LEA answered that in the Defined Contribution Retirement
(DCR) plan, an employee is eligible to full retirement
disbursement of the state contribution after 5 years of
employment. She explained that before the 5th year there is a
staggered table for disbursement so that at 2 years the employee
receives 25 percent of the state contributions; at 3 years the
employee receives 50 percent; at 4 years receives 75 percent;
and at 5 years the employee receives 100 percent. She specified
that in the DCR plans there is no real retirement, only a
disbursement of funds. She underlined there is a tax penalty of
10 percent for early withdrawal before age 59 and a half. She
said currently a lump sum disbursement, a periodic payment, or
various annuity options are the only options available.
REPRESENTATIVE JOSEPHSON asked what the Alaska Retirement
Management Board (ARMB) might add.
MS. LEA answered that an ARMB subcommittee has tasked the
Treasury Division and the Division of Retirement and Benefits
with exploring options. She stated the group had recently
reviewed eight different providers for efficacy and retirement
security. She said the plan options fell into three categories:
a better annuity, a guaranteed lifetime withdrawal product, and
a qualified lifetime annuity that sets aside up a portion of the
money to begin to pay out at age 80.
4:07:38 PM
REPRESENTATIVE KNOPP asked what the state program can do that
free markets cannot.
MS. LEA answered the plan is not looking to make money and can
offer the plan with lower costs, so can provide members with
more money for retirement.
MS. RIDLE added there would be a private sector element
involving contracts, but the state can get better rates.
REPRESENTATIVE KNOPP said he wondered about the true savings
involved.
4:11:59 PM
REPRESENTATIVE BIRCH asked whether the state is empowered to set
up a Roth IRA.
MS. RIDLE answered that for government defined contribution
plans currently only deferred compensation plans are eligible
and the state has a Roth option in its plan.
REPRESENTATIVE SULLIVAN-LEONARD asked about a fiscal note for
changes in the program.
MS. LEA answered there is a fiscal note and there is no fiscal
impact for HB 306. She explained the option are left to the
participant to choose and therefore pay additional fees.
REPRESENTATIVE SULLIVAN-LEONARD asked for confirmation that the
costs are paid by individual who sign up for the options.
4:14:26 PM
MS. LEA answered in the affirmative.
CHAIR KITO asked about the motivation behind putting options in
statute.
MS. LEA said she could not speak to legislative intent. She
added she did work in the division at the time and the division
recommendation was not to put them in statute.
4:15:52 PM
REPRESENTATIVE JOSEPHSON asked for confirmation that the
descriptive language that would be deleted in HB 306 was not
recommended by the department but had been put in by
legislators.
MS. LEA answered in the affirmative. She added that in
discussions during the drafting process, the desire was to
pattern the plan after the SBS disbursement options. She said
the difference was that statute for SBS and for DCR only
authorized the backbone of plan, while all other provisions are
in the plan document, which is required by IRS. She stated the
difference with the DCR plans is that they use statute as the
plan document. She explained that while other plans are nimble
if changes are needed, DCR plans are not.
4:17:48 PM
ROB JOHNSON, Chair, Alaska Retirement Management Board (ARMB),
testified in support of HB 306. He stated the ARMB had heard
that greater flexibility was preferred for retirees. He
confirmed that the legislature had indeed looked to other
sources for language and utilized SBS and deferred compensation
language. He added that in time, it became clear that greater
options were available at no additional cost to the state. He
said ARMB agreed with the adoption of the proposed bill.
4:20:27 PM
REPRESENTATIVE SULLIVAN-LEONARD asked Mr. Johnson to expand on
the portability of retirement plans and whether there was a
trend of employees not staying in the state system for more than
five years.
MR. JOHNSON said he has not looked at the studies, but he had
heard that the change to the defined contribution plan had
implications for public employee and teacher retention.
4:22:07 PM
NORM WEST, Alaska Retirement Management Board, testified in
support of HB 306. He stated he had over 30 years of experience
as a trustee and administrator of employee benefit plans. He
added he had seen overseen the management of portfolios worth
over $100 million. He said he had seen many changes in
retirement plans over the years. He spoke to defined
contribution plans which do not offer a particular benefit and
pass the risk of the investment to the participants. He said
this was the major change from defined benefit plans. He stated
his support for the proposed bill. He underlined the changes in
HB 306 were only about methods of disbursement.
MR. WEST explained that the products are essentially structured
investment products which allow for periodic payment. He
underlined there was no risk to the state and that participants
would need to move their payments into a different plan to avoid
taxation of the lump sum. He surmised that the statutory
limitations had been an oversight.
4:29:29 PM
CHAIR KITO opened public testimony on HB 306. Upon ascertaining
that no one was available to testify, he said he would leave
public testimony open for HB 306.
CHAIR KITO held over HB 306.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB304 Fiscal Note-INV 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Transmittal Letter 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB306 Fiscal Note DOA RNB 1.16.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB304 ver A 1.30.18.PDF |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Sectional Analysis ver A 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Fiscal Note DCCED DED 1.22.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB306 Version A.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Governor Transmittal Letter PERS & TRS 1.29.18.PDF |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Sectional Analysis 1.29.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Presentation (H)L&C 2.14.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |