Legislature(2021 - 2022)ADAMS 519

05/14/2021 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 10 Minutes Following Session --
<Bill Hearing Canceled>
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 55(FIN) Out of Committee
Moved CSHB 132(FIN) Out of Committee
<Bill Hearing Canceled>
HOUSE BILL NO. 55                                                                                                             
     "An  Act relating  to  participation  of certain  peace                                                                    
     officers and  firefighters in  the defined  benefit and                                                                    
     defined  contribution plans  of  the Public  Employees'                                                                    
     Retirement  System of  Alaska; relating  to eligibility                                                                    
     of  peace   officers  and  firefighters   for  medical,                                                                    
     disability, and  death benefits; relating  to liability                                                                    
     of the  Public Employees' Retirement System  of Alaska;                                                                    
     and providing for an effective date."                                                                                      
3:30:48 PM                                                                                                                    
Co-Chair Merrick indicated the  committee would be taking up                                                                    
two amendments on HB 55.                                                                                                        
Representative  LeBon MOVED  to ADOPT  Amendment 1  (copy on                                                                    
     Page 10, line 2:                                                                                                           
          Delete "10"                                                                                                           
          Insert "12"                                                                                                           
Co-Chair Merrick OBJECTED for discussion.                                                                                       
Representative  LeBon explained  that Amendment  1 increased                                                                    
the  employee  contribution  rate ceiling  by  2  percentage                                                                    
points.  The new  range  for members  of  the public  safety                                                                    
defined  benefit  tier would  be  8  percent to  12  percent                                                                    
rather  than  8 percent  to  10  percent. It  increased  the                                                                    
ceiling  from   10  percent  to  12   percent.  Raising  the                                                                    
contribution  rate  ceiling  provided   an  extra  level  of                                                                    
adjustment  to   ensure  the  plan  remained   fully  funded                                                                    
adequately spreading risks between employers and employees.                                                                     
Representative LeBon continued  that the current underfunded                                                                    
liability in Public Employees'  Retirement System (PERS) and                                                                    
Teachers' Retirement System (TRS)  demonstrated the need for                                                                    
the type of headroom he  was proposing. He wanted to protect                                                                    
the defined  benefit program  long into  the future.  He had                                                                    
received reports  that the likelihood  of solvency  was very                                                                    
high. However,  if he looked  back over the history  of PERS                                                                    
and TRS,  it had not  always been the case.  The legislature                                                                    
was  forced,  two  prior administrations  ago,  to  fund  an                                                                    
additional $3 billion into  PERS and TRS, and  an effort was                                                                    
made in  the current session  to add  $1 billion to  PERS to                                                                    
bring  it into  a funded  condition. He  hoped circumstances                                                                    
would  never  require  asking employees  to  increase  their                                                                    
contribution  range.  He  thought   by  incorporating  a  12                                                                    
percent ceiling in the bill  it would allow for flexibility.                                                                    
He encouraged members to consider Amendment 1.                                                                                  
Co-Chair Merrick WITHDREW the objection.                                                                                        
Representative Josephson OBJECTED.                                                                                              
Representative  Josephson indicated  that  the  data he  had                                                                    
from   two  sources   suggested  that   the  amendment   was                                                                    
unnecessary.  His   first  source   was  Flick   Fornia  who                                                                    
represented  firefighters' interests.  He  talked about  his                                                                    
credentials    which    were   considerable.    He    showed                                                                    
Representative Josephson a  PowerPoint slide which indicated                                                                    
in  several  different  scenarios  the plan  was  above  100                                                                    
percent  solvent. There  was one  scenario where  it briefly                                                                    
dipped below 100 percent. However,  he reminded members that                                                                    
80 percent  was regarded as  a reasonably solvent  plan, and                                                                    
90 percent was regarded as  superior. His second source, Mr.                                                                    
Kirshner, who  represented the state's interest,  had looked                                                                    
a   similar  bill,   HB   79   [Legislation  introduced   by                                                                    
Representative Chuck  Kopp in 2019],  and reported  that the                                                                    
bill was in the range of 97.9 percent solvent.                                                                                  
Representative Josephson continued  that members had already                                                                    
made a  concession to move from  8 percent to 10  percent in                                                                    
the  event the  Alaska  Retirement  Management Board  (ARMB)                                                                    
called for it.  The increments would be small  - there would                                                                    
not  be a  sudden  jump from  8  to 10.  He  thought it  was                                                                    
already a concession of the  participant code. He noted that                                                                    
employees'  checks  would  be smaller  because  of  an  ARMB                                                                    
decision. He asked the committee  to respectfully reject the                                                                    
Co-Chair Merrick noted Representative  Edgmon had joined the                                                                    
3:35:57 PM                                                                                                                    
Representative  Wool questioned  whether  the amendment  was                                                                    
necessary based  on Representative Josephson's  comments. He                                                                    
wondered if moving the percentage  to 12 would pose any kind                                                                    
of threat.  He also  asked at what  point the  ceiling would                                                                    
need to go to 10 percent and 12 percent.                                                                                        
Co-Chair Merrick invited Mr. Young to comment.                                                                                  
3:37:07 PM                                                                                                                    
SCOTT   YOUNG,   HEALTH   ACTUARY,  BUCK   CONSULTING   (via                                                                    
teleconference),     introduced     himself    and     asked                                                                    
Representative Wool to repeat his question.                                                                                     
Representative Wool restated his question.                                                                                      
Mr. Young replied  that as he understood  the provisions, he                                                                    
would look  at the fund position  of the plan each  year. If                                                                    
it fell  below the threshold  of 90 percent, the  ARMB would                                                                    
determine  whether  to  apply  any  of  the  triggers  -  to                                                                    
increase the  8 percent to  some higher amount,  eliminate a                                                                    
Cost of  Living Adjustment (COLA),  or any other  impact. He                                                                    
did not  think the  percentage would  jump from  8 to  10 or                                                                    
from 10  to 12  in one increment.  It was  his understanding                                                                    
that  the  ARMB would  have  the  discretion, based  on  the                                                                    
current fund status and the  amounts of the projected future                                                                    
contributions,  to   decide  on   what  trigger   should  be                                                                    
initiated and how much to change.                                                                                               
Representative  Wool  reiterated  his understanding  of  the                                                                    
amendment and asked if he was accurate.                                                                                         
Mr. Young responded he was  correct. He indicated that every                                                                    
year he  would do  a reassessment of  the funding  status in                                                                    
the  plan.  If  it  was  below  90  percent  or  some  other                                                                    
threshold  established by  the ARMB,  he would  evaluate how                                                                    
much  to change  any of  the triggers.  An increase  from 10                                                                    
percent  to  12  percent  would  simply  provide  additional                                                                    
flexibility if needed.                                                                                                          
Representative Josephson  thought another  consideration was                                                                    
that the  states that were  mirroring the proposed  plan did                                                                    
not  have  the same  kind  of  percentage leap.  He  thought                                                                    
recruitment considerations  might come into play.  The state                                                                    
might  have  to  tell  a person  being  recruited  that  the                                                                    
percentage  could  go  from  8 percent  to  12  percent.  He                                                                    
thought it would be hurtful to recruitment efforts.                                                                             
Representative LeBon summarized that  his motivation for the                                                                    
amendment was  a result of  the unfunded liability  from the                                                                    
past. He wanted  to create additional headroom  to share the                                                                    
risk of  underfunding or underperformance  of the  fund some                                                                    
day  in the  future. Once  a defined  benefits plan  was put                                                                    
into place it would be generational.                                                                                            
3:41:29 PM                                                                                                                    
At EASE                                                                                                                         
3:43:12 PM                                                                                                                    
Representative Josephson MAINTAINED the objection.                                                                              
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Carpenter, LeBon, Thompson, Merrick, Wool                                                                             
OPPOSED: Edgmon, Josephson, Ortiz, Foster                                                                                       
The MOTION PASSED (5/4).                                                                                                        
Amendment 1 was ADOPTED.                                                                                                        
Representative Josephson  MOVED to  ADOPT Amendment  2 (copy                                                                    
on file):                                                                                                                       
     Page 12, line 7, following "service":                                                                                      
          Insert "in the system"                                                                                                
     Page 12, line 9, following "service":                                                                                      
          Insert "in the system"                                                                                                
     Page 20, line 26:                                                                                                          
          Delete "30"                                                                                                           
          Insert "60"                                                                                                           
     Page 20, line 30:                                                                                                          
          Delete "30-day"                                                                                                       
          Insert "60-day"                                                                                                       
Co-Chair Merrick OBJECTED for discussion.                                                                                       
Representative  Josephson  asked  his staff  to  review  the                                                                    
amendment which was requested by the administration.                                                                            
ELISE    SORUM-BIRK,   STAFF,    REPRESENTATIVE   JOSEPHSON,                                                                    
explained that  the amendment came  about after a  couple of                                                                    
lengthy  conversations with  the  staff at  the Division  of                                                                    
Retirement  and   Benefits  regarding   clarifications  they                                                                    
wanted in the  bill. She followed up  with Legislative Legal                                                                    
Services about what was already  taken care of in the bill's                                                                    
current  draft. The  amendment before  the  committee was  a                                                                    
result of all of those  conversations. The amendment did two                                                                    
things. First,  on Page 7, line  12, it added the  words "in                                                                    
the system" following  "service." The change had  to do with                                                                    
vesting. There  was a  concern on the  part of  the division                                                                    
that  if  someone  was  fully  vested  in  the  PERS  system                                                                    
currently, worked for 5.2 years,  but the actuarial analysis                                                                    
showed they could  only purchase 4.5 years  of service, they                                                                    
would lose  their vested status.  The request was  to insert                                                                    
the language to  indicate that vesting depended  on years in                                                                    
the PERS System.                                                                                                                
Ms.  Sorum-Birk continued  that  the second  portion of  the                                                                    
amendment had to  do with the timeframe the  division had to                                                                    
transfer money  over from Tier  IV accounts to the  new tier                                                                    
for individuals  who choose  to buy  in. The  division noted                                                                    
they were  in the middle  of an information  technology (IT)                                                                    
modernization  and their  current workload  was very  heavy.                                                                    
They asked for 60 days rather  than 30 days to complete that                                                                    
Co-Chair Merrick WITHDREW the objection.                                                                                        
There being NO OBJECTION, it was so ordered.                                                                                    
Amendment 2 was ADOPTED.                                                                                                        
Co-Chair  Foster  MOVED  to  report   CSHB  55(FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
Representative Carpenter OBJECTED and  chose not to speak to                                                                    
his objection.                                                                                                                  
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Edgmon, Josephson,  LeBon, Ortiz,  Thompson, Wool,                                                                    
Merrick, Foster                                                                                                                 
OPPOSED: Carpenter                                                                                                              
The MOTION PASSED (8/1).                                                                                                        
CSHB 55(FIN)  was REPORTED  out of  committee with  five "do                                                                    
pass"  recommendations, one  "do  not pass"  recommendation,                                                                    
and three  "no recommendation" recommendations and  with one                                                                    
new   fiscal   impact   note    from   the   Department   of                                                                    
3:47:38 PM                                                                                                                    
AT EASE                                                                                                                         
3:50:13 PM                                                                                                                    
Co-Chair  Merrick noted  Representative  Johnson had  joined                                                                    
the meeting.                                                                                                                    

Document Name Date/Time Subjects
HB 110 Public Testimony by 051421.pdf HFIN 5/14/2021 1:30:00 PM
HB 110
HB 110 Amendment 6 051221.pdf HFIN 5/14/2021 1:30:00 PM
HB 110
HB 110 Amendments 1 - 5 051221.pdf HFIN 5/14/2021 1:30:00 PM
HB 110
HB 55 Amendments 1-2 041121.pdf HFIN 5/14/2021 1:30:00 PM
HB 55
HB 132 Amendments 1-3 051121.pdf HFIN 5/14/2021 1:30:00 PM
HB 132
HB 110 Public Testimony by 051521.pdf HFIN 5/14/2021 1:30:00 PM
HB 110