Legislature(2001 - 2002)
05/12/2002 01:50 PM Senate RLS
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
The committee took up CSSSHB 254(FIN)-STATE RETIREMENT SYSTEMS/WARRANTS. MS. BARBARA COTTING, staff to Representative James, sponsor of SSHB 254, informed members that a proposed Senate Rules Committee substitute was before the committee. She asked that Mr. Bell explain the changes made in the new version. MR. GUY BELL, Director of the Division of Retirement and Benefits, Department of Administration, told members that several new sections have been added to the proposed committee substitute that make minor modifications to public employee and teacher retirement statutes. Sections 7 and 8 (page 7) make a small change to the conditional service benefit that is available to retired public employees if they enter the teaching profession by allowing them to work one year rather than the minimum two years to receive a supplemental retirement benefit under the Teachers Retirement System (TRS). It is designed as an incentive to bring retired public employees into teaching. SENATOR HALFORD moved to adopt the proposed committee substitute as the working document of the committee. CHAIRMAN PHILLIPS announced that without objection, the Senate Rules Committee substitute was adopted as the working document of the committee. SENATOR THERRIAULT asked Mr. Bell to elaborate on Section 7. MR. BELL explained that the TRS contains a benefit called the "conditional service benefit." Currently a Public Employee Retirement System (PERS) retiree is allowed to enter the TRS as a teacher and after serving for two years, is entitled to a conditional retirement benefit based on the two years of service. The proposed committee substitute will provide the conditional retirement benefit after one year of teaching. The conditional retirement benefit amounts to 2 percent of the person's salary. Each year of service in the TRS equals 2 percent. SENATOR THERRIAULT asked if that is based only on the time spent in the teaching profession. MR. BELL said that is correct. It is based on the actual number of years in the TRS. CHAIRMAN PHILLIPS announced that no objections to adopt the proposed committee substitute as the working document of the committee were heard. MR. BELL continued. Language on page 26, Section 34, addresses an issue related to temporary employees of the legislature in the 1970s. During that time, legislative employees were not in PERS. In 1980, those employees were allowed to claim service for time worked in the 1970s but unfortunately some did not. This provision will allow them to claim that service in order to obtain eligibility for retirement benefits, including the Tier 1 health benefit, but they will be required to pay the full actuarial cost of the pension and health benefits. SENATOR COWDERY asked how many people fall in that category. MR. BELL said the division does not have an exact count, but only five or six people have contacted the division over the past couple of years. SENATOR THERRIAULT asked what actuarial costs they will have to pay. MR. BELL said the division has not done any calculations yet. However, if this provision enables those employees to have Tier 1 rather than Tier 2 status, the division would take the net present value of five years worth of health benefits and charge that cost. He then explained that Section 38 was added on page 30; it relates to peace officers and firefighters in the PERS. Currently, when a person on disability reaches normal retirement age, their benefits are converted to a normal retirement benefit. This provision allows a person to elect to continue to receive the disability benefit when he or she reaches normal retirement age. Often the normal retirement benefit is lower than the disability benefit. MR. BELL said that Sections 39 and 40 on page 39 again relate to peace officers and firefighters only. They adjust the benefit for occupational death for the survivor from 40 percent to 50 percent of the person's salary at death or 75 percent of the normal retirement benefit they would have accrued. The division has done some calculations and a person would have to have many years of service to get to the equivalent of a 50 percent benefit or the 75 percent survivor benefit. He noted the final section that has been added is Section 45 on page 32. It applies to peace officers and firefighters and affects Tier 2 and 3 employees. It adjusts the number of years for the calculation of final average salary for the pension benefit from five years to three years. It will increase the benefit by a modest amount. These sections were designed to improve recruitment and retention of peace officers. The cost of that change will amount to .005 percent and it will take effect on the state's system in FY05. The division has drafted a fiscal note that reflects no cost for FY 03 and FY 04 and then $344,000 in FY 05. The general fund cost will be about half that amount. CHAIRMAN PHILLIPS asked Mr. Bell to provide a copy of the fiscal note to members. MR. BELL said the remainder of the bill is for the purpose of complying with the Internal Revenue Code and with existing practice. The bill was designed to bring the retirement system up-to-date with the provisions of the Internal Revenue Code. CHAIRMAN PHILLIPS clarified that the committee was reviewing Version B. SENATOR COWDERY asked how the changes in Section 46 will affect divorced couples. MR. BELL replied that the qualified domestic order language is unchanged. SENATOR THERRIAULT commented that he heard concern expressed that the Anchorage Police Department has hired away Alaska State Troopers. He noted the language in this bill applies to all employees in that job classification and that he has not heard testimony that these changes will attract employees to state jobs. MR. BELL said the initial proposal that came from Anchorage had a "cafeteria plan" and a local option. It included the three new sections in this bill and two additional items, which were significantly more expensive from an actuarial cost perspective. Rather than go down that path, the division suggested keeping a level playing field between all public employees - state and local government - in terms of recruiting peace officers and firefighters. The division came up with the lowest cost option it could find to do that. He has heard people testify that employees are attracted by other jurisdictions and by the federal government, not necessarily by municipalities or the state. He indicated that this legislation makes a minor effort because it is low cost yet improves benefits. CHAIRMAN PHILLIPS asked if DOA supports Version B. MR. BELL said it does. CHAIRMAN PHILLIPS asked if Representative James supports Version B. MS. COTTING said she does. SENATOR THERRIAULT asked Mr. Bell if these changes will produce an increased annual cost to the state of $344,000. MR. BELL said the cost will amount to .005 percent of salary. SENATOR THERRIAULT stated, "Well, we're still taking a bill that really didn't cost us anything and [turning] it into a cost." MR. BELL verified that there will be a cost in the future. SENATOR HALFORD moved to calendar SCS SSHB 254(RLS) [Version 853\B] and its accompanying fiscal note. CHAIRMAN PHILLIPS announced that without objection, the motion carried.
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