04/13/1993 01:30 PM Senate L&C

  SENATOR KELLY announced SB 188  (MUNICIPAL PARTICIPATION ST.                 
  DEFERRED COMP) to be up for consideration.                                   
                                                                               
  JOE AMBROSE, staff to Senator  Taylor, said the City/Borough                 
  of Sitka requested this bill.                                                
                                                                               
                                                                               
  PETE HALGREN, Sitka Assembly, said he didn't think this bill                 
  would add any  employees or cause additional  expense to the                 
  state.  He said the state has much better buying power  than                 
  a city in  terms of  the investments made  for the  deferred                 
  compensation  program.      This   bill   allows   political                 
  subdivisions  that  are   participating  in  the  Supplement                 
  Benefits System (SBS)  program to go  to the state  deferred                 
  compensation program.                                                        
                                                                               
  SENATOR KELLY asked who he thought should have the liability                 
  to make sure those funds are  accurate.  MR. HALGREN said he                 
  didn't  have a problem  with the  City having  the liability                 
  that the money  the state transfers  is accurate.   However,                 
  once  the money  is  transferred,  it  goes  to  Great  West                 
  Insurance, and  neither the City  nor the state  should have                 
  liability for investment losses.                                             
                                                                               
  BOB   STALNAKER,  Director,   Division  of   Retirement  and                 
  Benefits, said they  don't support SB 188, because the state                 
  is   not  the  appropriate  entity  to  administer  deferred                 
  compensation  plans  for other  political subdivisions.   He                 
  remarked   that   there   are   private   sector   financial                 
  institutions  and  insurance  companies  that  will  provide                 
  deferred  compensation plans  for  any  employer, public  or                 
  private.                                                                     
                                                                               
  Secondly,  if  Alaska  Federal  is   eliminating  14  or  15                 
  different public employers,  he didn't think  it was a  good                 
  idea to limit  this to just  those who are participating  in                 
  the  SBS program.   There is  no tie  with the  457 deferred                 
  compensation plan and  social security,  he explained.   The                 
  fact that a public  employer may be participating in  social                 
  security   doesn't  mean   they   don't   need  a   deferred                 
  compensation plan or  that they  wouldn't like  to have  the                 
  same advantage Sitka would gain from this.  The  457 plan is                 
  a  provision in  the Internal  Revenue  Code that  allows an                 
  employer to sponsor a plan.                                                  
                                                                               
  This bill intends to allow  the Department of Administration                 
  to become a  third party  administrator for these  political                 
  subdivisions.                                                                
                                                                               
  SENATOR KELLY asked  if we were doing any of that right now.                 
  MR. STALNAKER said we weren't.   He said they have estimated                 
  it would increase their staff by two people which he thought                 
  was   a  conservative   estimate   on  what   the  interface                 
  requirements would be in accepting contributions.                            
                                                                               
  Number 435                                                                   
                                                                               
  SENATOR SALO asked him to explain  how limiting the scope of                 
  participation wasn't fair.  MR. STALNAKER explained that you                 
  cannot  participate  in  supplemental  benefits  if  you are                 
  participating in social security.                                            
                                                                               
                                                                               
  MR. STALNAKER said  the cost to the  state for administering                 
  the program is  .95 percent which is supposed  to be paid by                 
  the participants.   He admitted that there  are economies of                 
  scale with larger groups.                                                    
                                                                               
  SENATOR LINCOLN commented  that she  didn't think the  costs                 
  had been  explored fully.  She asked  if he had been working                 
  with  Senator Taylor's office to come up with some solution.                 
  He said he  had not discussed the issue with his office, but                 
  he would like to.                                                            
                                                                               
  MR. STALNAKER  said the difficulty with the  fiscal note was                 
  that it should be considered  for all political subdivisions                 
  and not  just a  few, because  if Sitka does  it this  year,                 
  Ketchikan will do it next year,  etc. They are talking about                 
  varying degrees of sophistication with different employers.                  
                                                                               
  TAPE 93-28, SIDE B                                                           
  Number 580                                                                   
                                                                               
  MR.  HALGREN  said he  wanted it  made  clear they  were not                 
  trying to  get into anything  different than what  the state                 
  already has.                                                                 
                                                                               
  SENATOR SALO  asked if  he thought  it a good  idea for  the                 
  state  to charge a 1.5 percent fee.   MR. STALNAKER said no.                 
  The Department's position is that  they shouldn't be getting                 
  into the role of a third party administrator for third party                 
  political subdivisions when those concerns can be met in the                 
  private sector.                                                              
                                                                               
  SENATOR KELLY said they would hold the bill for another time                 
  and announced a 10 minute recess.