Legislature(2005 - 2006)SENATE FINANCE 532
05/01/2005 01:00 PM Senate FINANCE
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 24 | TELECONFERENCED | |
| += | SB 156 | TELECONFERENCED | |
| += | HB 182 | TELECONFERENCED | |
| += | HB 91 | TELECONFERENCED | |
| += | HB 119 | TELECONFERENCED | |
| + | HB 136 | TELECONFERENCED | |
| + | SB 135 | TELECONFERENCED | |
| += | SB 108 | TELECONFERENCED | |
| + | SB 121 | TELECONFERENCED | |
| + | SB 122 | TELECONFERENCED | |
| + | HB 35 | TELECONFERENCED | |
| + | HB 75 | TELECONFERENCED | |
| + | HB 132 | TELECONFERENCED | |
| + | HB 156 | TELECONFERENCED | |
| + | HB 230 | TELECONFERENCED | |
| += | SB 46 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 19 | ||
| = | HB 15 | ||
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 24(STA)
"An Act relating to reemployment of and benefits for retired
teachers and public employees and to teachers or employees who
participated in retirement incentive programs and are
subsequently reemployed as a commissioner; and providing for
an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
MIKE TIBBLES, Deputy Commissioner, Department of Administration,
testified in support of the bill.
Co-Chair Wilken moved to adopt CS SS SB 24(FIN), Version 24-
LS0211\X as the working document.
Co-Chair Green objected for explanation.
1:10:56 PM
Mr. Tibbles informed the Committee that this bill would address
concerns that have been raised in the past regarding the State's
rehiring of retirees practices. The Version "X" committee
substitute would address "perceived abuses in the past and offer a
solid management tool going forward for the State, school
districts, and municipalities".
Mr. Tibbles communicated that the practice of rehiring retirees
could be attributed to the difficulty the State has had in
recruiting "specific job classifications" such as Nurse III
positions in the Department of Health and Social Services Pioneer
Homes. One such position was advertised for 34 days without success
of attracting a qualified candidate. The "tool" being addressed in
this legislation was utilized to rehire a retired nurse for that
position. Another example of a difficult position to fill is the
Children Services Manager position which requires a masters degree
and four years of professional "social work experience providing
programs or services focused on serving children at risk". This
Range 21 position was advertised for 21 days and "neither of the
two applicants met the minimum qualifications". A retired
individual was rehired to fill this position as well. Retirees have
also been successfully rehired to fill engineer and biologist
positions.
1:13:05 PM
Mr. Tibbles stated that "the two primary concerns" regarding the
rehiring of retirees are the "cost to the system" and that hiring
retirees prevents "other employees from moving up into higher level
positions".
Mr. Tibbles communicated that the work draft before the Committee
would allow "a program going forward that meets the original
intent" and addresses these two concerns.
Mr. Tibbles stated that this bill would address the question
regarding "the potential liability of what the State had told these
individuals coming back from retirement", as the bill is "very very
clear … that the program ends, the period of reemployment ends, at
the point that the program sunsets". Intent Language and State
Statutes would also further clarify the program.
Mr. Tibbles continued that Sec. 2 of Version "X" would require
rehired retirees "to be covered by their employer's active health
plan". In the past, employment contracts were negotiated that
allowed the rehired retiree to be covered by their retirement
health plans. This action was contrary to the intent of
experiencing cost savings in the retirement health plan systems.
Therefore, Sec. 2, which is specific to the Teachers Retirement
System (TRS), would clarify that a rehired retiree would be
offered, and must accept, the active health insurance offered to
other full time employees within that school district.
1:14:54 PM
Co-Chair Green asked the reason that the continuance of retirement
health benefits for rehired retirees was preferred to including
them on the active health insurance benefit.
Mr. Tibbles explained that an employer would experience an expense
of approximately $830 per month for each employee eligible for
active health insurance. Therefore, allowing a rehired retiree to
continue to be covered by the retirement health plan "would shift"
that expense from the employer and save them money. This
legislation would prevent that from occurring going forward.
Mr. Tibbles also conveyed the understanding that many of the active
health plans have higher co-pays and deductibles than the
retirement health plans. While the existing retirement plan
benefits would continue to be available upon retirement, they would
be suspended during the time of reemployment and the rehired
employee would be subject to the conditions of the active health
plan provided to their co-workers.
1:16:09 PM
Co-Chair Green characterized this as being "an integral part" of
the proposed language in that neither the employer nor the employee
would view the rehiring "as a great thing". The employer would be
unable "to shift the cost" to the retirement medical plan and the
employee would be subject to the conditions of the active health
coverage "which might have less generous benefits".
1:16:52 PM
Mr. Tibbles noted that Sec. 4 of the proposed work draft would
implement a change that is "consistent with Sec. 2, although it
does specify that teachers coming back on a part time basis could
continue to receive the retired medical benefit coverage". To that
point, he expressed the Department's desire that all part-time
rehired retirees would "be offered the same health benefits" as
other active employees in that any employee working part-time hours
of between 15 and 30 hours a week would be provided health
insurance but could be required to pay half of the premium. Rehired
retirees working less than 15 hours per week who might not be
eligible for any health benefits would continue to be covered by
their retirement benefit.
1:17:45 PM
Mr. Tibbles communicated that rehired retirees working less than
full-time would be assured of having access to health coverage.
1:18:00 PM
Co-Chair Green asked whether the part-time provisions specified in
Sec. 4 could be utilized as "a loophole … to avoid the
participation of the employer".
Mr. Tibbles shared that a situation in which an employer might hire
two part-time retirees rather than one fulltime one had been
considered. The conclusion was that recruiting for a part-time
position would be more difficult that recruiting for a full-time
position. Furthermore, the hiring of a part-time rehired retiree
would allow for the upward progression of another individual, as
was previously mentioned as a concern. In addition, the employer
would be required receive approval of the position and to adhere to
the "tough standards" included in the bill prior to being able to
rehire a retiree.
1:19:07 PM
Co-Chair Green asked whether language should be included in the
bill regarding how the rehiring of a less than full time retired
employee would "recoup the costs to the system".
1:19:30 PM
Mr. Tibbles viewed the costs to the system "in terms of the
unfunded liability and how we're paying off that through the
employees' wage base. There's a provision in the bill that requires
an employer to contribute the same past service rate for the rehire
as they do for all other employees."
Co-Chair Green asked for confirmation that that provision would
include those employees working less than full-time.
1:20:04 PM
Mr. Tibbles expressed that the language in Version "X" would
require employers who are currently contributing for their half-
time employees to do likewise for any rehired retirees working
halftime. He was unsure of the scale of those obligations.
Co-Chair Green understood therefore that the bill would make
employers' actions regarding rehired retired halftime employees
consistent with the current hiring and rehiring practices.
Mr. Tibbles affirmed.
1:20:34 PM
Senator Stedman asked whether the Department of Fish and Game has
developed a plan through which to address its "extensive number of
rehires", were this bill not to advance or were a shorter
termination date of the current practice implemented.
Mr. Tibbles replied that he has not seen such a plan; however, he
noted that the Division of Personnel, Department of Administration,
would be assisting departments in the development of business
rules, hiring practices and recruitment efforts. The Version "X"
committee substitute would provide sufficient time for this
activity to occur.
Mr. Tibbles continued that any rehired retirees who had a waiver
prior to the November 3, 2004 notification that the current program
would terminate would be allowed to continue their waiver until
December 2006. Sufficient time would be provided in which to
develop such things as transfer plans and to identify "the critical
components of a job" in regards to "what is so specific about that
position" that makes it difficult to recruit for and to transfer
some of those responsibilities to other employees.
1:21:53 PM
Senator Dyson asked whether the Alaska State Troopers have
developed a plan to address its rehiring of retirees practice.
Mr. Tibbles stated that his response to the question about the
Department of Fish and Game would apply here as well.
1:22:10 PM
Mr. Tibbles stated that Sec. 5 of Version "X" would provide
conformity and consistency language pertaining to the rehiring of
both the TRS and Public Employee Retirement System (PERS) retired
employees, specifically commissioners.
Mr. Tibbles continued that Sec. 6 would require all employers to
contribute the same unfunded liability rate for rehired retirees as
contributed for other employees.
Mr. Tibbles communicated that Sec. 7 is the transition point at
which the language in the bill moves from the TRS system to the
PERS system. Language in Sec. 7(b), page four, beginning on line
27, would affirm that any current rehired retiree's employment
would terminate when the current program is repealed. "This would
eliminate any question in the future of whether or not there is an
entitlement for the employee beyond the sunset date of the bill …
Individuals on the program" must decide by the termination date of
the current program as to "whether they want to continue to stay
employed and stop their retirement benefits or to separate from
service to continue to receive those retirement benefits".
1:23:12 PM
Co-Chair Green asked for further information regarding the time
frame periods pertinent to the differing groups of rehired
retirees.
Mr. Tibbles clarified that the rehired retirees could be separated
into three groups. The first group would consist of those rehired
prior to November 3, 2004 who might have been hired with the
condition that they could remain in the program as long as they
were continuously employed. That liability issue was addressed by
notifying those individuals that, while the program would be
terminated, their "window" would be extended until December 2006.
Mr. Tibbles stated that the second group of individuals would
consist of those rehired retirees hired between November 4, 2004
and July 1, 2005. Those individuals were hired knowing that the
program would terminate on July 1, 2005. The liability issue that
applies to the first group would not apply to this group. This
group must make a decision by July 1, 2005 as to whether they would
"continue with State service" and pay in "and defer their
retirement benefits or separate from service".
Co-Chair Green asked that the dates pertinent to the second group
to be restated.
Mr. Tibbles clarified that these individuals must have been rehired
between November 4, 2004 and July 1, 2005.
Mr. Tibbles continued that the third group of individuals would
consist of those "brought back from retirement" after July 1, 2005,
which is the effective date of this Act.
Co-Chair Green understood therefore that the third group of
individuals would not include anyone who is currently rehired and
in the system.
Mr. Tibbles concurred.
Co-Chair Green concluded therefore that the third group would
consist of "anyone hired after July 1, '05 not currently under
rehire".
1:25:01 PM
Senator Stedman asked for further discussion in regards to the
conditions applicable to retirees hired after July 1, 2005.
Mr. Tibbles communicated that any retiree rehired after July 1,
2005 would be required to "sign a waiver to come back after
retirement". They would "continue to receive their retirement
benefit, and they would be allowed to stay in as long as they
remained continuously employed, or the sunset date of this Act,
which would be July 1, 2009".
Senator Stedman asked the reason for incorporating this scenario.
1:25:47 PM
Mr. Tibbles explained that, "the purpose of extending the window to
allow new individuals to come in … is that" there are many jobs
that the State is unable to fill. This "management tool" has been
used successfully in the past to fill difficult to recruit for
positions. The provisions would insure that the individuals coming
back would not "be costing the system". It would allow the program
to continue forward "in a consistent and controlled manner".
1:26:24 PM
Senator Stedman understood therefore that were a retiree to be
rehired in August 2005, for example, that individual would "stop
receiving all his retirement benefits, and go right back on the
payroll, and start paying back into the system".
Mr. Tibbles responded that a retired person rehired in August 2005,
for example, would be offered "two options": one would be to come
back and "pay into the system, accrue additional benefits, and
defer their retirement benefit. That exists now outside this bill".
This bill would allow that individual the option "to continue to
receive their pension benefit, have the active health coverage from
their employer, and not accrue any additional benefits and not pay
the Normal Cost Rate going forward".
1:27:25 PM
Mr. Tibbles continued that Sec. 8 would primarily apply to
municipalities. It would require, in a manner similar to that
required of the TRS system, that a municipality must adopt a
resolution demonstrating their recruitment problem in certain job
classifications. Policy issues that must be adhered to include such
things as that the person being rehired must have been separated
from service for a minimum of 30-days and that the position must
have been recruited for a minimum of 30-days.
1:28:44 PM
Co-Chair Green understood that the administrator of the plan must
approve the rehire.
1:28:56 PM
Mr. Tibbles affirmed. The director of the Division of Retirement
and Benefits, Department of Administration would be required to
review the qualifying policy and Resolution. It would be a
coordinated activity to which the administrator would have the
ultimate authority.
Co-Chair Green asked whether this scenario would also apply to TRS
positions.
Mr. Tibbles affirmed.
1:29:21 PM
Mr. Tibbles stated that Sec. 9 would address the unfunded
liability. It would require PERS employers to contribute the same
past service rate for the rehired retirees as they do for other
active employees.
Senator Stedman referred to language in Sec. 8, and asked whether
provisions in the bill would address a situation in which an
employee retired with the intention of being rehired and who
communicated that intention to other possible candidates.
1:30:14 PM
Mr. Tibbles responded that, currently, there is a minimum
recruitment period of ten days. The effort could also be limited to
internal recruitment. This has occurred in the past, with the
outcome being that no qualified candidate emerged. This legislation
would require a statewide recruitment for a minimum of 30 days and
"tough standards" would be applied. Therefore, an individual who
retired with the intent to be rehired would be taking "a gamble"
that no other qualified candidates would emerge. Another qualified
candidate could fill the position.
Senator Stedman communicated awareness of such an event having
occurred. He opined that the scenario he presented would be
difficult to control in a small area. Perhaps the requirement that
a Statewide recruitment effort must occur might address the issue.
Mr. Tibbles stated that Sec. 10 would specify the various effective
dates of the bill's provisions.
1:31:50 PM
Mr. Tibbles noted the Sec. 11 would add a PERS report to the
reporting requirements. In addition, it would require the
Administration to report the efforts being undertaken to address
difficult to recruit for job classifications. Measures to address
those jobs might include changing business rules to allow, for
instance, for fewer Engineer V positions and more Engineer II, III,
and IV positions as Engineer V positions are more difficult to
recruit for. Allowing for more Engineer II, III, and IV positions
would allow more people to become qualified for advancement over
time. Rather than focusing on filling the current positions,
efforts could be undertaken "to fill the need".
Mr. Tibbles stated that Secs. 14 and 15 outline the date
determinations regarding the three aforementioned groups of retired
rehires. He read the Sec. 15 language as depicted on page seven,
line 27 through page eight line seven as follows.
Sec. 15. The uncodified law of the State of Alaska is amended
by adding a new section to read:
WAIVER OF APPLICABILITY OF SEC. 7 OF THIS ACT FOR RETIRED
EMPLOYEES WHO MADE AN ELECTION UNDER AS 39.35.150(B) OR (E)
BEFORE NOVEMBER 3, 2004, AND CONDITIONS APPLICABLE TO SERVICE
FROM JULY 1, 2005 THROUGH DECEMBER 31, 2006. From July 1,
2005, through December 31, 2006, the amendment made to AS
39.35.150(b) by sec. 7 of this Act does not apply to a retired
employee who was rehired and made an election under AS
39.35.150(b) or (e) before November 4, 2004, if that person
continues to serve in the same position. However, this section
does not apply to employees who are required to provide health
and medical benefits under AS 39.35.150(b), as amended by sec.
7 of this Act, regardless of whether a member receives
retirement medical benefits under this section.
Mr. Tibbles stated that this language would allow retirees rehired
prior to November 3, 2004, before the notice went out regarding the
program's ending, and who were told they could continue their
employment, to continue their employment through December 2006.
Those being paid solely out of the retirement health account would
be the exception, as that aspect would be discontinued and their
employer would be required to cover them through the active health
plan.
Co-Chair Green understood therefore that that coverage would occur
"in the meantime".
Mr. Tibbles concurred.
1:34:27 PM
Mr. Tibbles stated that Sec. 17 would change the termination date
from July 1, 2005 to July 1, 2009.
Co-Chair Green understood that some amendments would be
forthcoming.
Mr. Tibbles affirmed that some clarifying language pertaining to
the termination dates and the continuing employment terms for the
three different rehired retirees groups, specified in Sec. 14 and
Sec. 15, is being developed.
1:35:33 PM
Co-Chair Wilken noted that a fiscal note pertinent to Version "X"
would also be forthcoming. To that point, he asked whether the
fiscal note would reflect the provisions being considered in SB
141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS and how that
legislation might impact the PERS and TRS systems.
Mr. Tibbles responded that that impact was detailed in the analysis
section of the previous Department of Administration fiscal note #1
dated March 7, 2005. That analysis anticipated a $106,000 a year
impact in regards to the TRS component. No impact was anticipated
on the PERS side until the point at which the program had 500
participants. There are currently 211 participants in the PERS
program. There is an expectation that the PERS participant level
would decrease under the new sideboards specified in this bill.
Co-Chair Wilken asked that a fiscal note specific to Version "X" be
developed that specifically addresses the impact to the PERS and
TRS systems. Those expenses should be considered.
Co-Chair Wilken noted that while he supports the bill, he would not
care to add to PERS/TRS expenses.
1:38:10 PM
Co-Chair Green agreed. Continuing, she voiced the understanding
that following the signing of the Governor's Administrative Order
concerning the rehire of retired employees and the implementation
of the Department of Administration's review, the rehiring of
retirees scenario "really changed".
Mr. Tibbles stated that since the Governor's Administrative Order
was released on March 8, 2005, not a single rehire has been
approved for the State of Alaska. The first question asked by the
Department's Administrator when a department submits a request is
"how many qualified individuals did you receive through your
recruitment process". It has been demonstrated in every case to
date that there has been a qualified pool of applicants to choose
from, and therefore, all requests have been denied.
Co-Chair Green understood that in the State of Alaska situation,
the Administrator's "word would be final"; however, she asked
whether this would be the case in regards to municipalities or
school districts "that really had their mind set on hiring a
certain retired person". To that point, she asked whether the
Administrator's decision could be challenged.
Mr. Tibbles specified that the Statute would provide the
administrator "the proper authority to deny somebody coming back
and continuing their retirement benefits if they don't meet the new
requirements laid out in the bill". He was uncertain to the steps
that could be taken were someone to challenge the administrator's
position in Court.
Co-Chair Green requested that clarification as to the proper
authority in this regard be provided.
Co-Chair Green removed her objection to Version "X".
There being no other objection, Version "X" was ADOPTED as the
working document.
The bill was HELD in Committee in order to consider forthcoming
amendments.
1:41:09 PM
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