Legislature(2011 - 2012)BUTROVICH 205
02/09/2012 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB121 | |
| SJR16 | |
| SB129 | |
| SB179 | |
| SCR18 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 16 | TELECONFERENCED | |
| *+ | SB 179 | TELECONFERENCED | |
| *+ | SB 129 | TELECONFERENCED | |
| *+ | SCR 18 | TELECONFERENCED | |
| = | SB 121 | ||
SB 121-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS
9:03:25 AM
CHAIR WIELECHOWSKI noted the first order of business would be SB
121.
SENATOR PASKVAN moved to adopt Amendment R.1 for CSSB 121 (STA):
27-LS0281\R.1
Wayne
AMENDMENT 1
OFFERED IN THE SENATE
TO: CSSB 121(STA), Draft Version "R"
Page 6, line 21:
Delete "contribution"
Insert "benefit"
Page 6, line 23:
Delete "board"
Insert "administrator"
Page 13, line 17:
Delete "contribution"
Insert "benefit"
Page 13, line 19:
Delete "board"
Insert "administrator"
CHAIR WIELECHOWSKI objected.
JESSE KIEHL, staff, Senator Dennis Egan, explained that
Amendment R.1 is a technical cleanup of a drafting error.
CHAIR WIELECHOWSKI requested the opinion of the Department of
Administration.
9:05:06 AM
MIKE BARNHILL, Deputy Commissioner, Department of
Administration, agreed that the amendment was a technical
correction.
CHAIR WIELECHOWSKI withdrew his objection. Seeing no further
objection, Amendment 1 was adopted.
SENATOR PASKVAN moved to adopt Amendment 2:
27-LS0281\R.2
Wayne
AMENDMENT 2
OFFERED IN THE SENATE
TO: CSSB 121(STA), Draft Version "R"
Page 4, line 10:
Delete "a new subsection"
Insert "new subsections"
Page 4, line 30, following "more":
Insert ", but less than 30,"
Page 5, following line 3:
Insert new subsections to read:
"(h) On or after July 1, 2018, and every five
years thereafter, the administrator shall adjust the
percentages under (g)(2) and (3) of this section as
needed to maintain, but not to exceed, over the
succeeding five years, an employer normal cost rate
for the members and survivors who first became members
after June 30, 2006, that does not exceed the combined
total of the rates under AS 14.25.350(a), (b), (d),
and (e) minus the employer normal cost rate
attributable to the members who first became members
after June 30, 2006, for benefits under AS 14.25.009 -
14.25.167. An adjustment made under this subsection
shall remain in effect for five years. In making an
adjustment under this subsection, the administrator
shall maintain the five percent differences between
(g)(2)(A), (B), and (C) of this section and the five
percent differences between (g)(3)(A) and (B) of this
section.
(i) When a member is appointed to retirement,
the member obtains a vested right to the applicable
percentage under (g)(2) or (3) of this section, as
adjusted under (h) of this section, that is in effect
when the member is appointed to retirement. A member
does not obtain a vested right to a percentage under
(g)(2) or (3) of this section, as adjusted under (h)
of this section, before the member is appointed to
retirement."
Page 11, line 10, following "retirement":
Insert ";
(6) on or after July 1, 2018, and every
five years thereafter, the administrator shall adjust
the percentages under (3) and (4) of this subsection
as needed to maintain, but not to exceed, over the
succeeding five years, an employer normal cost rate
for the members and survivors who first became members
after June 30, 2006, that does not exceed the combined
total of the rates under AS 39.35.750(a), (b), (d),
and (e) minus the employer normal cost rate
attributable to the members who first became members
after June 30, 2006, for benefits under AS 39.35.095 -
39.35.530; an adjustment made under this paragraph
shall remain in effect for five years; in making an
adjustment under this paragraph, the administrator
shall maintain the five percent differences between
(3)(A), (B), (C), and (D) of this subsection and the
five percent differences between (4)(A) and (B) of
this subsection;
(7) when a member is appointed to
retirement, the member obtains a vested right to the
applicable percentage under (3) or (4) of this
subsection, as adjusted under (6) of this subsection,
that is in effect when the member is appointed to
retirement; a member does not obtain a vested right to
a percentage under (3) or (4) of this subsection, as
adjusted under (6) of this subsection, before
appointment to retirement."
CHAIR WIELECHOWSKI objected.
MR. KIEHL explained Amendment 2 begins with a cleanup item. The
substantive portion of the amendment deals with the sponsor's
commitment to make this retirement choice bill "cost neutral"
when compared to the defined contribution systems. He pointed
out that the R version of the bill showed a savings to the
state, as compared to the defined contribution system, but only
for a period of time. In the combined PERS systems, the savings
was for about 7 years; in the TRS systems, the savings was for
about 12 years. Accelerating costs of pre-funding health care
benefits overtook the savings in both cases.
CHAIR WIELECHOWSKI noticed that money is saved on pensions under
PERS, but health care costs are higher. He asked for information
about health care costs if they increase by 10 percent a year.
MR. KIEHL replied that in the combined PERS system, both numbers
are higher.
CHAIR WIELECHOWSKI asked if the assumption is that health care
costs would increase by 10 percent a year.
MR. KIEHL did not recall if the increase is 9.5 percent or 10
percent.
CHAIR WIELECHOWSKI shared his calculations regarding health care
costs increasing.
9:10:12 AM
MR. BARNHILL discussed the FY 10 PERS valuation for Alaska
health care costs. In 1978 the monthly premium was $57; in 2011
it is $1,176. This illustrates a 9 percent trend for over 30
years. Actuaries had projected a 9 percent cost growth up until
1990. If the gross domestic product (GDP) in the U.S. is growing
at 3 to 4 percent a year, and health care is growing at 9
percent a year, eventually health care costs would use up the
total economy. The actuaries determined that health care costs
needed to be decreased and projections needed to be stepped down
to about 4.5 percent per year in TRS. There was a tension
between theory and actual experience.
MR. BARNHILL stressed that the U.S. economy and Alaska's economy
should not be compared because the U.S. economy is mature and
has little room for growth. Alaska economy, on the other hand,
has room for GDP growth, which would allow health care to grow
at a sustained, higher rate for a longer period of time. He
stated that the health care growth rate that the state paid in
the last 10 years was 9.4 percent.
CHAIR WIELECHOWSKI understood that the calculation going forward
through 2042 was at 10 percent.
MR. BARNHILL said the Alaska Retirement Management Board (ARMB)
assumptions were used, which start at 9 percent and grade down
at a very slow rate over the course of a century.
CHAIR WIELECHOWSKI asked if by 2042, it would cost roughly
$100,000 per employee in health care costs.
MR. BARNHILL did not know, but thought costs would double every
ten years.
MR. KIEHL discussed how the amendment "handles the question." He
recalled the history of how decisions were made for the Defined
Contribution (DC) system. He talked about the safeguards of
having a neutral ARM Board and an annual actuarial review. Those
safeguards have led to today's projections. The amendment asks
employees to share the risk through a premium share percentage
that matches the premium share percentage in the DC plan. It
takes note of the cost growth assumptions and has actuaries
evaluate every 5 years what it would cost to prefund health care
benefits, thereby shifting the schedule based on actual
experience. It would ensure that the state does not pay more for
the new system than the old one.
CHAIR WIELECHOWSKI simplified the content of the amendment: it
will keep the cost at or below the current system.
MR. KEIEHL agreed. He added that the department expressed an
interest in clarifying the five-year adjustment to make sure
that it is forward looking, which is agreeable to the sponsor.
He noted that the premium share percentages may fluctuate during
an employee's career, but benefits can be adjusted until the
employee retires. At retirement the premium is fixed.
9:18:55 AM
CHAIR WIELECHOWSKI said it seems like a good solution.
MR. BARNHILL related that the numerical analysis is being worked
on. He voiced a concern about what happens at retirement.
CHAIR WIELECHOWSKI withdrew his objection to adopt Amendment 2.
Seeing no further objection, Amendment 2 was adopted.
CHAIR WIELECHOWSKI said that SB 121 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1 SCR 18 SPONSOR STATEMENT.pdf |
SSTA 2/9/2012 9:00:00 AM |
SCR 18 |
| SCR18A.pdf |
SSTA 2/9/2012 9:00:00 AM |
SCR 18 |
| 3 SCR H.R. 3001 112th Congress - Raoul Wallenberg Centennial Celebration Act.pdf |
SSTA 2/9/2012 9:00:00 AM |
SCR 18 |
| 4 SCR 18 Honorary Citizen USA.pdf |
SSTA 2/9/2012 9:00:00 AM |
SCR 18 |
| SJR 16.Modernizing the Military Retirement System.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |
| SJR016A.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |
| SJR16.Letter from VoteVets.Org.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |
| SJR 16 Military Pension Fact Sheet.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |
| SJR16.Articles on Military Pension Cuts.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |
| SJR 16. Text of HR3520.Keeping Our Promises Act of 2011.pdf |
SSTA 2/9/2012 9:00:00 AM |
SJR 16 |