Legislature(2017 - 2018)SENATE FINANCE 532

04/25/2018 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled 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                                                                    
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                                                                    
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                                                                    
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                                                                    
CSHB 306(FIN)  was HEARD and  HELD in committee  for further                                                                    
Co-Chair  MacKinnon advised  that  proposed amendments  were                                                                    
due the following day at noon.                                                                                                  
9:49:16 AM                                                                                                                    

Document Name Date/Time Subjects
CSHB217 Supporting Document - Benefits of Farmers Markets 2017.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 CS Ver J Supporting Document Farm Bureau Support 2.8.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Alaska Grown Sponsor Statement 4.5.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Supporting Document - Oceanside Farms 4-2-18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Signed waiver from Senate Resources 4.17.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Summary of Changes Version O to I 4.13.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Version I Sectional Analysis 4.13.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB217 Supporting Document - Homer Farmers Market.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB 217 Supporting letter Farm Bureau 4.14.18.pdf SFIN 4/25/2018 9:00:00 AM
HB 217
HB47 DOA Documents.pdf SFIN 4/25/2018 9:00:00 AM
HB 47
HB47 Letters of Support.pdf SFIN 4/25/2018 9:00:00 AM
HB 47
HB47 Sponsor Statement.pdf SFIN 4/25/2018 9:00:00 AM
HB 47
HB 306 01.23.18 Speaker Edgmon Transmittal Letter PERS & TRS.PDF SFIN 4/25/2018 9:00:00 AM
HB 306
HB 306 Sectional Analysis.pdf SFIN 4/25/2018 9:00:00 AM
HB 306