Legislature(2017 - 2018)SENATE FINANCE 532
04/25/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB306 | |
| HB47 | |
| HB217 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 306 | TELECONFERENCED | |
| + | HB 47 | TELECONFERENCED | |
| + | HB 217 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 306(FIN)
"An Act relating to disbursement options under the
Public Employees' Retirement System of Alaska and the
Teachers' Retirement System of Alaska for participants
in the defined contribution plan; and providing for an
effective date."
9:30:22 AM
LESLIE RIDLE, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
conveyed that the Alaska Retirement Management (ARM) Board
asked the administration to introduce the bill. She
explained that the Defined Contribution Committee of the
ARM board worked to assure that anyone under the defined
contribution plan could retire with a good pension. She
stated that currently, all the products that a retiree
could receive through the defined contribution plan were
not listed in statute. She lamented that this limited
flexibility of what could be offered to retirees that would
allow for a lasting pension and secure financial future in
retirement. She said that those with supplemental benefits
system benefits as well as deferred compensation benefits
had retirement options that were written into regualtion
and were flexible in their product offerings. The ARM board
had asked for a bill that would allow for products to be
offered through regulation for those under the defined
contribution plan. She shared that the change would not be
of cost to the state and there would be no actuarial change
in the plan.
9:33:28 AM
Co-Chair MacKinnon asked whether it had been written into
the bill that there would be no cost to the state for the
plan.
KATHY LEA, CHIEF PENSION OFFICER, DEPARTMENT OF
ADMINISTRATION, replied that it was not in the bill
specifically, but within the plan itself, all the
disbursement options were up to the participant. She
related that any cost associated with the participant's
choices would be borne by the participant.
Co-Chair MacKinnon asked whether the administration would
oppose language that stipulated that the change in statute
would not be of cost to the state.
Ms. Lea responded that the administration would not oppose
such language.
9:34:47 AM
Senator Micciche asked for examples of payment choices that
would be different from what currently existed.
Ms. Lea detailed that current options included a lump sum
payment, a bi-annual lump sum payment, or an annuity
payment that was designed in the 1980s. She relayed that
new products under review by the ARM board included a
qualified lifetime annuity contract, which would allow for
a deferred portion of up to $125 thousand to be paid when
the retiree was 80 years old. This was a method to hedge
against longevity risk. She related that a guaranteed
lifetime withdrawal option would allow a participant to
ensure their balance; at the time the participant retired,
the highest balance they had in the plan during the time
they had been in that option, would be what their monthly
payment was based on. She added that if after retirement
the account balance grew, they would get the benefit of the
higher amount and would be protected against market cycling
risk.
9:36:27 AM
Vice-Chair Bishop considered that the bill offered options
for guaranteed lifetime income.
Ms. Lea answered in the affirmative.
Vice-Chair Bishop stated he supported the defined benefit
option. He thought if the bill became law, it would give an
individual an option to have guaranteed benefit.
Ms. Lea stated that some of the choices could mimic a
defined benefit option.
9:37:37 AM
Senator von Imhof referenced her experience in finance and
understood the products. She referenced Vice-Chair Bishop's
comments and agreed that a product could mimic the defined
benefit option but cautioned that investment cycles could
vary to a degree that it could risk a person outliving
funds. She referenced page 2, line 11 of the bill, which
provided options for people that fit their specific life
needs but felt discomfort with the suggestion that a plan
could be designed that would provide a person benefits for
the rest of their lifetime.
9:39:25 AM
Senator Micciche wanted to clarify the intent of the bill.
He stated that the bill allowed for products to be offered
in regulation. He stressed that the bill provided the
ability to list products available to retirees in
regualtion.
Commissioner Ridle agreed. She added that the bill mimicked
what was currently done with the supplemental benefit
system and deferred compensation; when a person retired,
they had different options in regualtion for those plans.
9:40:29 AM
Vice-Chair Bishop surmised that the bill would provide an
additional tool for an employee participating in the state
retirement plan.
Ms. Ridle answered in the affirmative.
Senator Stevens stated that many individuals had retired
under the defined contribution plan and could not go back
and renegotiate their retirement benefits under any new
extended benefit plan.
Ms. Lea stated that if an individual had removed their
contributions from the plan, it would not be possible to
renegotiate; however, if an individual's contributions were
still in the plan, depending on the type of option the ARM
board chose, they could be able to take advantage of the
new options.
9:41:51 AM
Ms. Lea addressed the Sectional Analysis (copy on file):
Section 1: Amends AS 14.25.420(a) to allow for
distribution options for participants in the Teachers'
Retirement System (TRS) defined contribution plan to
be authorized by regulation.
Section 2: Amends AS 39.35.820(a) to allow for
distribution options for participants in the Public
Employees' Retirement System (PERS) defined
contribution plan to be authorized by regulation.
Section 3: Adds section to the uncodified law to allow
the Department of Administration to adopt regulations
as necessary to implement this legislation.
Section 4: Establishes an immediate effective date.
9:43:00 AM
Co-Chair MacKinnon asked whether the choosing of an
immediate effective date would change the actuarial
assumptions for any of the plans.
Ms. Lea answered in the negative and reiterated that all
the costs were borne by the participants; there would be no
impact to the plan.
Co-Chair MacKinnon asked whether there was a reason that a
fiscal year was not chosen for implementation.
Ms. Lea stated that the immediate effective date was chosen
based on the deliberation schedule of the ARM board on what
type of options could be chosen and whether the current
options could be expanded. She added that regulations to
add new options would not occur until the ARM board had
gone through deliberations, had public hearings, and made
decisions on which new options to provide.
9:44:11 AM
Vice-Chair Bishop commented that even without knowing about
the potential products, he considered that the change could
help with employee retention.
Co-Chair MacKinnon directed attention to the fiscal note.
Vice-Chair Bishop addressed FN 2 from the Department of
Administration, OMB Component 64. The fiscal note carried
zero fiscal impact. He read from the analysis:
This change will allow more flexibility to the Plan
Administrator, with adoption by the Alaska Retirement
Management Board, to add new options as they become
available and are of benefit to participants. Future
disbursement options will go through the regulatory
process with public notice to all stakeholders and
interested parties.
This legislation will have no actuarial impact to the
TRS or PERS since any costs incurred when electing a
distribution option is borne by the participant.
Therefore, the agency submits a zero-fiscal note.
9:45:49 AM
Co-Chair MacKinnon OPENED public testimony.
9:46:21 AM
ROB JOHNSON, CHAIR, ALASKA RETIREMENT MANAGEMENT BOARD,
ANCHORAGE (via teleconference), thought that Vice-Chair
Bishop had summarized the intent of the bill. He thought
the bill would provide more tools and options for retirees.
He pointed out that the bill would have no additional costs
to the state. He noted that the ARM board had unanimously
supported the expansion of options as outlined in the bill.
Co-Chair MacKinnon reiterated her question concerning the
immediate effective date.
Mr. Johnson understood that the immediate effective date
would not have an immediate effect. He explained that the
effective date would allow for the process to begin
immediately.
CSHB 306(FIN) was HEARD and HELD in committee for further
consideration.
Co-Chair MacKinnon advised that proposed amendments were
due the following day at noon.
9:49:16 AM