Legislature(1999 - 2000)
03/31/1999 08:03 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 9(HES)
"An Act relating to the calculation of employee
contributions and credited service in the public
employees' retirement system for noncertificated
employees of school districts, regional educational
attendance areas, the special education service
agency, the Alaska Vocational Technical Center, and
the state boarding schools; and providing for an
effective date."
Senator Gary Wilken, sponsor of the bill, testified. He
explained this bill addressed non-certified (or classified)
school district employees. They made up the janitors,
secretaries and the support staff who kept the schools
running as they should and supported the teachers and
administrators. They were treated differently than the
teaching and professional staff as they only accrued 9
months of retirement each year while the others accrued a
full year. So at the end of thirty years working in the
school district they only had 22 1/2 of retirement.
SB 9 would change that. It would still allow them to work
nine months out of the year but they would make twelve
months worth of contribution. They were requesting the
additional three months of accrual for which they were
willing to pay. There would be no cost to the state system.
He noted the positive fiscal note of $72,400 in the first
year to set up the program. After that, there would be
zero expense to the state. This bill would recognize that
those workers were just as important as the teachers and
administrators.
He listed the school districts and other groups across the
state in support of the bill. He also pointed out that this
bill had been before the Legislature in the past.
Co-Chair John Torgerson asked if there was a retroactive
clause for employees who may be already out of the system.
Senator Gary Wilken said there was not, that the program
began on its effective date.
Co-Chair John Torgerson wanted to know how the bill would
effect to the retirement incentive plan. Senator Gary
Wilken didn't believe it would. He deferred to Guy Bell of
the Division of Retirement and Benefits to better explain.
Senator Loren Leman said it seemed to him that if someone
elected to participate in the system, they believed it
would provide some value to them. Since the state was not
putting into the system, how would it benefit the
employees, where would it come from? Senator Gary Wilken
explained that the additional value would come from the
increase in the employee contribution given today's value,
thus allow them to save more money in today's dollars.
Currently, these employees contributed 6.75 percent of
their salary across nine months. Under this bill, they
would contribute eight percent during the nine months.
GUY BELL, Director, Division of Retirement and Benefits,
Department of Administration, testified. He explained the
fiscal note saying the only change was to the division's
computer programming to accompany the increased
withholdings. The collected funds would be placed in a
trust fund.
Co-Chair John Torgerson asked if the funds for the
programming would be initially forward funded from the
trust and then recuperated based on a formula. Guy Bell
affirmed and explained the employee would be responsible
for actuarial cost of this additional benefit. The
division built in a small factor for the overhead expenses
and also for possible adverse selection. This was a ten-
percent factor in addition to the calculated cost.
Senator Pete Kelly asked for explanation of actuary rate.
Guy Bell explained that when an actuary calculated a rate,
they calculated a single rate for a whole group. It was an
average. It was desired that there be a single rate that
the employee would know they would be paying every year
until they retire. The estimate was 1.25 percent additional
that the employee would pay. They built in a factor to try
to offset the impact.
Senator Lyda Green wanted to know the involvement of the
school districts. Guy Bell replied that the division had a
computer system that was sent to the school districts.
There was a possibility they would have to also update
their systems using the provided software. The districts
would enter the information and return it to the division.
Senator Lyda Green asked if the financial impact on each
school district would be minimal. Guy Bell affirmed.
Senator Gary Wilken told her he had contacted the school
districts and was assured it would be minimal. Senator Lyda
Green wanted to make sure that school districts weren't
forced to incur a large expense to implement this program.
Co-Chair John Torgerson asked about employees who were no
longer employed in the school district but decided they
wished to contribute. Guy Bell said this would not apply
to employees no longer working in the school district. If
they came back to work they could then participate. It
would only apply to work performed after the effective date
of the bill.
Co-Chair John Torgerson asked about the effect to any
retirement incentive plan. Guy Bell couldn't see how this
would have any effect on a RIP.
Co-Chair John Torgerson wanted to know if an employee's
qualifying years would increase in a RIP program if they
bought into this program. BILL CHURCH, Retirement
Supervisor, Division of Retirement and Benefits, Department
of Revenue, said they would.
Co-Chair John Torgerson wondered if there was a risk or any
additional costs to the fund because of that. Bill Church
answered no.
CHRISTOPHER ROBINSON, Executive Director, Special Education
Service Agency and member of the Alaska Association of
School Administrators, testified. Both organizations were
in support of the bill. He detailed the benefits to the
employees. The effect would be to delay the period of work
required in order for the employee to become eligible for
retirement. The employee could put themselves on a
timeframe for retirement comparable to other employees in
the school district.
Co-Chair John Torgerson had another question of Guy Bell.
He did not see any minimum requirement of the amount of
time an employee needed to work to be eligible. Could an
employee who worked only five months buy into the program
at a higher rate? Guy Bell explained that an employee could
buy into it but he didn't know if it would be to the
employee's benefit. Bill Church added that the reason the
9-month employees were targeted for examples was because
they wanted the employee to have the option of choosing.
Co-Chair John Torgerson asked about a nine month employee
who opted to participate then was cut back to only five
months, would they be forced to continue to participate.
Guy Bell answered that they would still participate but
would still be only required to pay the same eight-
percent.
SUSAN ANNIS, Vice President, NEA-Alaska, testified. In the
years she had been involved with the school district this
item had always been a priority. She spoke about the
current situation where the employees could only accrue
retirement for 15 years when they had worked for 20, while
their teaching counterparts were eligible to retire with a
full pension. She also pointed out that even though they
were seasonal employees, they were ineligible for
collecting unemployment due to special provisions.
LINDA MCCREA, employee of the Anchorage School District,
testified. She worked ten months and wished to participate.
DON VALESKO, Business Manager, Public Employees Local 71,
representing Anchorage School District employees,
testified. He spoke about the "little people" who made the
schools run. He testified in support of the bill. He had
questions on the amount each employee would be required to
contribute based on the number of months they worked. He
pointed out that if the contributions were based only on
the nine-month factor, then the system would make money off
of the ten and eleven month employees. He felt the bill
needed a little work to fix this problem.
DARROLL HARGRAVES, Executive Director, Alaska Council of
School Administrators, testified. He brought a message from
the Alaska Association of School Administrators that they
supported the bill. It was a human thing, he said. This
addressed a group of employees who were under-appreciated
and unrecognized. He told of a time when there was no
retirement for these employees and a janitor who retired
after 23 years of service and the Legislature issued a
citation and granted the retirement benefits.
LARRY WIGGIT, Executive Director of Public Affairs,
Anchorage School District, testified. He referred to
written testimony submitted earlier. He gave examples of
employees who would be affected and worked for him. He said
this was not a matter of someone retiring at age 25 rather
than 30. It was a difference of someone being able to
retire at age 63 versus age 67.
Co-Chair John Torgerson asked if there were any employees
who worked twelve months under this same system. Larry
Wiggit said there was one and detailed.
BARBARA HUFF, Teamsters Local 959, testified via
teleconference from Anchorage. The union represented
Anchorage School District Employees and supported the bill.
Senator Randy Phillips asked Guy Bell to respond to Mr.
Valesko's concerns. Guy Bell responded that if the program
was to apply to a variable system to collect based on the
number of months worked at different times by different
employees it would be administratively complicated.
Therefore, they had chosen to go with a flat rate. He said
it would be consistent with the TRS system.
Senator Gary Wilken made a motion to move from committee CS
SB 9 (HES). Without objection, it was so ordered.
| Document Name | Date/Time | Subjects |
|---|