Legislature(2005 - 2006)
05/02/2005 02:33 PM House FIN
Audio | Topic |
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Start | |
SB141 | |
SB147 | |
SB16 | |
SB139 | |
SJR11 | |
SB141 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 141(FIN) "An Act relating to the teachers' and public employees' retirement systems and creating defined contribution and health reimbursement plans for members of the teachers' retirement system and the public employees' retirement system who are first hired after July 1, 2005; relating to university retirement programs; establishing the Alaska Retirement Management Board to replace the Alaska State Pension Investment Board, the Alaska Teachers' Retirement Board, and the Public Employees' Retirement Board; adding appeals of the decisions of the administrator of the teachers' and public employees' retirement systems to the jurisdiction of the office of administrative hearings; providing for nonvested members of the teachers' retirement system defined benefit plans to transfer into the teachers' retirement system defined contribution plan and for nonvested members of the public employees' retirement system defined benefit plans to transfer into the public employees' retirement system defined contribution plan; providing for political subdivisions and public organizations to request to participate in the public employees' defined contribution retirement plan; and providing for an effective date." Co-Chair Meyer noted that the Committee would discuss the fiscal impact of the amendments to SB 141 later in the meeting. Representative Croft asked for an analysis of the Committee's previous action and suggested that the Committee check to be sure that the pensions are not over or under- funded. SB 141 was held till later in the meeting. CS FOR SENATE BILL NO. 141(FIN) "An Act relating to the teachers' and public employees' retirement systems and creating defined contribution and health reimbursement plans for members of the teachers' retirement system and the public employees' retirement system who are first hired after July 1, 2005; relating to university retirement programs; establishing the Alaska Retirement Management Board to replace the Alaska State Pension Investment Board, the Alaska Teachers' Retirement Board, and the Public Employees' Retirement Board; adding appeals of the decisions of the administrator of the teachers' and public employees' retirement systems to the jurisdiction of the office of administrative hearings; providing for nonvested members of the teachers' retirement system defined benefit plans to transfer into the teachers' retirement system defined contribution plan and for nonvested members of the public employees' retirement system defined benefit plans to transfer into the public employees' retirement system defined contribution plan; providing for political subdivisions and public organizations to request to participate in the public employees' defined contribution retirement plan; and providing for an effective date." CO-CHAIR CHENAULT MOVED to ADOPT revised fiscal note #10. Representative Joule OBJECTED for discussion purposes. 5:16:27 PM MELANIE MILLHORN, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, explained that the fiscal note represents the fiscal costs that the division anticipates will accompany the new defined contribution plan. The state of Alaska's tax attorney indicated that all costs associated with the defined contribution plan must be separated and accounted for in various funds, according to their components. Assets and accounting must be separated. She explained that the fiscal note separates the start-up costs. 5:18:03 PM Representative Croft asked if the statutory required backup for SB 141 was being compiled. Co-Chair Meyer confirmed. 5:18:42 PM Representative Croft asked if the 5 percent being set aside for the defined contribution plan would be sufficient for individuals to retire on. Ms. Millhorn referred to modeling in the plan contained in slide 74. Slide 74 shows the accrual of non-medical benefits. The modeling is based on an individual that comes into the system at age 40. The design looked at a defined benefit component with an employer contribution of 3.5 percent. The current version is at 5 percent. An individual, who enters the system at age 40 under alternative 2, which was based on was a DB component of 3.5 percent, would have a higher benefit the the current Tier 2 TRS component until age 55 compared. Graphing for a 5 percent contribution was not available. Mercer would have to run the caluculations. The average years of service for TRS is 10 years. She maintained that for 80 percent of the population the benefit would be a higher under TRS. 5:23:06 PM Representative Croft asked how the wages are broken down for low paid employees vs. high. Ms. Millhorn replied that the 5 percent is based on their salaries. She explained that the graph is based on one individual at age 40 based on a salary of $35,000, which is lower than the average salary for PERS. 5:25:31 PM Representative Croft asked the cost and funding source for the disability benefit allowance. Ms. Millhorn noted that the benefit is currently unfunded. The contribution would be placed in the medical component, with an employer contribution of between 2.5 and 3.75 percent. The added death and disability benefit would be included on top of the medical costs. Ms. Millhorn had not had a chance to get the cost estimates from Mercer. 5:28:29 PM Representative Croft asked about the death and disability benefit. He gave an example of firefighters and asked who would pay the benefit, the state or the city. Ms. Millhorn noted that the proposal by Representative Kelly would have been a fixed amount paid by the employer. Representative Croft noted that the proposed amendment in the House Finance Committee version would also be paid by the employer. Ms. Millhorn agreed and added that the funding source and costs were unknown. 5:31:30 PM Representative Joule WITHDREW his objection to ADOPT the fiscal note. There being NO further OBJECTION, it was so ordered. Co-Chair Chenault MOVED to report HCSSB 141 out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Croft OBJECTED. He argued that the Committee cannot estimate within a million dollars the obligation to the state or the funding mechanism. 5:34:27 PM Representative Holm pointed out that the Committee deals daily with issues that are unknown. 5:35:17 PM Co-Chair Meyer noted that bills are often passed out with indeterminate fiscal notes. 5:35:35 PM Representative Kelly explained that the current version maintains the status quo [in relation to death and disability benefits for certain employees]. He argued that the Mercer letter clarifies that under the DC plan the action is positive and it puts the amendment in context. 5:36:40 PM Representative Croft emphasized that no one would be paying into the DB system for the death and disability benefit. He questioned how it would be funded. He opined that there would be an additional fiscal impact. He suggested that the law is being violated. 5:38:28 PM Representative Hawker expressed concern that the Committee's action was out of compliance with AS 24.08.036. He spoke against the legislation. 5:39:40 PM Representative Kelly related that the dying rate and the costs are known and can be managed. He felt that the Committee responded to the actuarial request. Representative Croft MAINTAINED his OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Holm, Kelly, Moses, Stoltze, Foster, Hawker, Meyer, Chenault OPPOSED: Joule, Croft The MOTION PASSED (8-2). HCSSB 141 (FIN) was REPORTED out of Committee with a "no recommendation" with the following fiscal impact notes: #1 ADM, #3 REV, #4 REV, #5 REV, #6 REV, #7 REV, #9 FIN.
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