Legislature(2003 - 2004)
04/06/2004 08:01 AM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 331-RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES CHAIR WEYHRAUCH announced that the last order of business would be HOUSE BILL NO. 331, "An Act relating to federal requirements for governmental plan and other qualifications for the teachers' retirement system, the public employees' retirement system, and the judicial retirement system; and providing for an effective date." Number 0840 REPRESENTATIVE GRUENBERG moved [to adopt the committee substitute (CS) for HB 331, Version 23-GH1009\D, Craver, 4/1/04, as a work draft]. There being no objection, Version D was before the committee. Number 0865 ANSELM STAACK, Chief Financial Officer, Division of Retirement & Benefits, Department of Administration (DOA), told the committee that the division takes care of the Public Employees Retirement System (PERS), the Teachers Retirement System (TRS), the Judicial Retirement System, the Supplemental Benefit System (SBS), and Deferred Compensation. He offered a history of "how we got here," and stated that PERS, TRS, the Judicial Retirement System, and SBS are all qualified plans. He explained that there are positive aspects to a plan remaining qualified, even for a tax-exempt agency like the State of Alaska. It means that members of the retirement system can "pay their contributions in free tax." He said that's a tremendous benefit, which lowers the cost of the system itself. CHAIR WEYHRAUCH asked, "Is that the state deferred comp program?" MR. STAACK answered: "No, that is all of them. For instance, any contributions you make to the public employees', teachers' retirement system, judicial retirement system, and the supplemental benefit system are all pre-tax, in terms of their contribution." He said the SBS is what is called the defined contribution plan, while the PERS, TRS, and the Judicial Retirement System are what are called defined benefit plans. In response to questions from Chair Weyhrauch, he clarified that the basic difference between those types of plans is that in a defined contribution plan, the employer puts in money and the employee makes a match, and the employee directs his/her own investments and walks off with whatever amount is there when he/she terminates. The employer is not responsible for any residual or for paying any money in the future. For the [PERS, TRS, and the Judicial Retirement System], on the other hand, it is required by law that the employee gets paid irrespective of whether the system earns enough money to do it; it is the responsibility of the state to make up the balance. Number 1029 MR. STAACK, in response to a question from Representative Holm, noted who falls under which systems: Under the PERS, there is the State of Alaska, plus 154 other employers, including municipalities and school districts; under the TRS, there are 62 school districts; under the Judicial Retirement System, there are judges and certain members of the court system; and under SBS, there is the State of Alaska employees and 14 other political subdivisions that are no longer in social security. In response to a follow-up question, he said the University of Alaska has its own separate plan. Number 1085 CHAIR WEYHRAUCH stated that he would like to have an overview of the PRS and TRS. He noted that the legislature is "funding the shortfalls as a separate line item in the state." He related his understanding of an issue that was brought to his attention regarding why there is a huge debt owed for PERS/TRS. He explained that it is a result of some assumptions of projected contributions during a "bear" market. Now that the market has rebounded, he said, whoever is responsible for making those assumptions that the legislature has to fund it has not met to revisit what the legislature needs to do to fund the program; therefore, the legislature is acting on improper data in planning [the state's] financial future. Chair Weyhrauch said it seems to him that the legislature may be in a position of requiring that the PRS/TRS people who make the estimates meet more often to provide better information to the legislature. MR. STAACK responded that he could bring information to Chair Weyhrauch and the committee that "we went through with the PERS/TRS board," including an actuarial evaluation and the projections that were done, and including all the earnings up through January 2004 and any projections that were made for the next 25 years that assumed what would happen with "a very rosy scenario." Number 1203 CHAIR WEYHRAUCH indicated that the committee members needed more information. MR. STAACK indicated a willingness to help the committee in that regard. REPRESENTATIVE GRUENBERG mentioned technical problems in the field of family law with respect to the pension plans, and offered an example. Number 1286 REPRESENTATIVE SEATON asked Mr. Staack to provide scenarios based on the 2004 mortality tables. MR. STAACK replied that what will be used are the 1994 mortality tables. He explained that those are the mortality tables that are used for the PRS and TRS. He noted that there is a newer mortality table called "RP2000," which will update the mortality [table] that's used in the retirement systems. [HB 331, Version D, was held over.]
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