Legislature(2007 - 2008)HOUSE FINANCE 519
04/19/2007 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB170 | |
| HB176 | |
| SB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 170 | TELECONFERENCED | |
| + | HB 176 | TELECONFERENCED | |
| + | SB 123 | TELECONFERENCED | |
| + | TELECONFERENCED |
2:49:40 PM CS FOR SENATE BILL NO. 123(FIN) An Act relating to the public employees' and teachers' defined benefit retirement plans; relating to the public employees' and teachers' defined contribution retirement plans; relating to the judicial retirement system; relating to the health reimbursement arrangement plan for certain teachers and public employees; relating to the supplemental employee benefit program; relating to the public employees' deferred compensation program; relating to group insurance for public employees and retirees; making conforming amendments; and providing for an effective date. Representative Hawker MOVED to ADOPT work draft #25- GS1004\M, Chenoweth, 4/17/07, as the version of the bill before the Committee. There being NO OBJECTION, it was adopted. ANNETTE KREITZER, COMMISSIONER DESIGNEE, DEPARTMENT OF ADMINISTRATION, introduced the retirement manager, Ms. Lea. KATHY LEA, RETIREMENT MANAGER, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, distributed a copy of the presentation, Technical Bill Overview. (Copy on File), which provides a highlight of the bill; a more in depth view can be found in the sectional analysis. Many of the provisions are currently in place. SB 123 carries many provisions from last session's, HB 475. The bill has been reviewed by the Department of Law & the Division of Retirement and Benefits. The purpose of the bill is to insure that the benefits of the Contribution Retirement Plan are provided as they were intended by the Legislature. It updates provisions of the Defined Benefit Plan (DB) for compliance with the Federal Pension Protection Act of 1986. The Division will be submitting an application for requalification of the DB Plan in 2008. Ms. Lea pointed out that the bill also amends and/or adds sections to provide for the appropriate administration of the plan. The legislation is divided into three areas. · Changes to the defined contribution retirement plan · Changes to the defined benefit plan · Administrative and accounting changes 2:54:11 PM Ms. Lea explained that the changes to the Defined Contribution Retirement Plan (DC) are: · Occupational disability and death benefit administration and funding · Employer participation · Member participation · Internal Revenue Code (IRC) contribution limits Ms. Lea noted that funding was inserted for the Teachers Retirement System (TRS) but not for the Public Employees Retirement System (PERS). She pointed out the annual inflation proofing, providing the lesser of 75% disability or a 50% survivor rate. Ms. Lea listed characteristics of the occupational death and disability: · Periods of disability and survivor benefits constitute membership service for retirement/medical eligibility · Members or survivors are not entitled to individual accounts until retirement · Medical cost share at normal retirement, regardless of age. 2:58:25 PM Ms. Lea noted that the employer participation provides participation and termination authority for new PERS employers; it establishes a time limit on conversion election period for employees; and assigns employer retiree health contributions to the Alaska Retiree Health Trust. The bill addresses member participation, adding the Governor, Lieutenant Governor & Legislators as members of the DC plan. It clarifies that DB members, hiring with a new DC-only employer, participates in the DC plan. 3:01:17 PM The bill also clarifies that a former DB member who does not reinstate service before July 1, 2010, will be a DC plan member if reemployed after that date. It specifies how the IRC & 415© limit affects payment of the conversion match for DB to DC transfers. The IRC compliance allows: · Disabled members to receive 100% vested in employer contributions · Survivor retirement benefit funded from Occupational D&D fund · USERRA Compliance · 415©, contribution limits of the contributions on behalf of the survivors and voluntary employee contributions The Defined Benefit Plan. The Pension Protection Act updates rollover provisions and includes a ROTH IRA as of January, 2008; it allows an alternate payee to rollover contributions and requires a rollover of pre/post tax contributions to be accounted for separately by the receiving plan. Ms. Lea discussed that the employer participation would be a normal cost and past service rates apply to total payroll dollars, while establishing a deadline for terminated employers to pay termination costs. It allows the plan to intercept other State funds for payments of delinquent contributions and codifies the use of forfeitures to be applied to future employer contributions. It repeals the ability to reinstate service for conditional or public service benefits as of July 2010. DB members who hire with a DC only employer, participates in the DC plan and former DB members who do not reinstate by July 2010, are DC members upon rehiring. In regard to new trusts, the Alaska retiree health trusts are: · Alaska Retirement Management Board (ARMB) Trustees · Commissioner of Administration · Receives ER health contributions · Pays retiree medical premiums The administrative language removes National Education Association (NEA) as an eligible employer and removes Social Security tax wage base cap from the employee and employer contribution. It conforms the administrator's duties across plans. Ms. Lea noted that in the administrative functions, authority is returned to the Commissioner of the Department of Administration to adopt regulations for the Supplemental Benefits System (SBS), DC & Health Reimbursement Act (HRA) plans. It provides the Office of Administrative Hearings (OAH) authority to hear appeals for the SBS, DC and HRA plans and provides OAH authority to hear PERS/TRS requests for waivers of adjustment. Ms. Lea summarized the bill: · Allows the State to administer benefits intended by the Legislature · Provides funding mechanisms for all benefits · Addresses IRC requirements · Removes administrative ambiguities 3:15:17 PM MICHAEL LAMB, (TESTIFIED VIA TELECONFERENCE), CHIEF FINANCIAL OFFICER, FAIRBANKS NORTH STAR BOROUGH, testified in opposition to Sections 1 and 24. He maintained that administrative plans would take time and funding that the State does not have. He stated that the administrator could take funds without due process. The language claims that the administrator can take other government funds without due process. He maintained that an administrator could interrupt a government's revenue stream; he asserted that the bill is too "heavy handed" & would lead to financial destabilization of local governments. Mr. Lamb addressed Sections 72-74, dealing with terminations. He encouraged scrutiny of language calling for unlimited termination costs extracted from an employer. He added that deadlines also need scrutiny, to prevent the abuse without preventing all good and bad changes to the system. He stated that the bill proposes far reaching changes & policy determinations. Mr. Lamb cautioned against pitting boroughs against the cities within its boundary. 3:20:50 PM Representative Kelly commented on the "intercept". He questioned what would happen if a single rate was accepted and someone did not pay in. He wondered about the difficulty of providing proof. Mr. Lamb noted that there are two issues, pointing to the termination sections which apply. If a rate were set at 22%, anything above the normal cost rate would not be the responsibility of the member employers. The question is, should the language be applied to all possibilities. He thought it should not, but instead, due process. He questioned justification of 22%. There are few communities that have not paid the rate put forth by the State. He noted concern that conflict will happen; the language needs to be more specific. 3:26:15 PM Commissioner Kreitzer knew that there were provisions in the legislation that the municipalities would not like such as the intercept funds. The State already does that, if an employer does not pay their unemployment insurance. She observed that the legislation is not intended to be the State going after someone's mortgage. She offered to have someone from the Department address due process. When money is due, there is a long process of letters and communication before the State takes other recourse. The State can sue the community, but the legislation does allow a payment plan. Vice Chair Stoltze appreciated the constructive "tone" voiced by the Fairbanks testimony. He commented on the unhealthy approach taken by the Alaska Municipal League. AT EASE: 3:28:40 PM RECONVENED: 3:40:03 PM PUBLIC TESTIMONY CLOSED Commissioner Kreitzer addressed the fiscal notes. She pointed out the new note request (4/13/07), FY08 for $108 thousand dollars, which will cover programming costs. It would be the same for FY09, split among PERS, TRS & the Judicial Retirement System (JRS). Representative Nelson asked if a person was on disability coverage as a Tier 4 employee, would they be eligible to receive health insurance. Ms. Lea explained that a DC employee does not have medical insurance while on disability. Representative Foster MOVED to REPORT CS SB 123 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 123 (FIN) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by the Department of Administration and a zero note #2 by Department of Administration.
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