Legislature(2015 - 2016)BILL RAY CENTER 208
06/14/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4002 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB4002 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 246 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
FOURTH SPECIAL SESSION
June 14, 2016
4:13 p.m.
4:13:36 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 4:13 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
John Boucher, Deputy Commissioner, Department of
Administration; Michele Michaud, Chief Health Officer,
Department of Administration; Representative Sam Kito;
Representative Liz Vasquez.
SUMMARY
HB 4002 INS. FOR DEPENDS. OF DECEASED FIRE/POLICE
HB 4002 was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 4002
"An Act relating to major medical insurance coverage
under the Public Employees' Retirement System of
Alaska for certain surviving spouses and dependent
children of peace officers and firefighters; and
providing for an effective date."
4:14:16 PM
Co-Chair Thompson discussed the meeting agenda.
JOHN BOUCHER, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, provided a PowerPoint presentation titled
"Alaska Department of Administration Department Overview"
dated June 14, 2016 (copy on file). He turned to slide 2:
"HB4002: What the Bill Does":
Goal: Provide premium-free medical coverage to families
of peace officers and firefighters killed in the line of
duty
· Issue 1: Surviving spouses/dependents are not eligible
to receive premium-free health benefits until survivor
becomes eligible for those benefits at retirement age.
· Solution 1: Bill allows surviving spouses/dependents
to start premium-free medical coverage upon
occupational death of peace officer /firefighter.
· Issue 2: Defined Contribution Plan (Tier IV) does not
allow access to health coverage until the time at
which the deceased member would have reached 25 years
of service. At that time, coverage may be accessed
with 100% cost to surviving spouses/dependents until
the time at which the survivor reaches Medicare age.
· Solution 2: Bill allows 100% premium subsidy for
surviving spouses/dependents of peace officers/fire
fighters upon occupational death of peace
officer/firefighter until survivor reaches Medicare
age. At Medicare age, premium subsidy and access to
health reimbursement arrangement begin.
4:17:52 PM
Representative Gattis asked what age dependents "age out."
Mr. Boucher answered that it was 23 if a person was in
college; it was 19 otherwise.
Representative Guttenberg pointed to the last line of
solution 2 on slide 2. He inquired about access to a health
reimbursement arrangement (HRA). Mr. Boucher answered that
as part of each Tier IV employee's employer contribution a
monthly payment to an account was set up with the intention
that later they could access the account to use the money
to offset the premium share or other eligible medical
costs.
Vice-Chair Saddler asked about the health reimbursement
arrangement, as he did not understand Mr. Boucher's answer.
Mr. Boucher replied that for each employee in the Public
Employees' Retirement System (PERS) Tier IV a contribution
was made by the employer to an individual account earmarked
for use by the individual. The state held the account for
the individual until they were eligible to use the funds.
For example, a retired person used a portion of their HRA
to offset the monthly premium they would have to pay. It
was a way of defraying future healthcare costs for the
retired individual.
Co-Chair Thompson surmised that if someone was 25 years
old, became a police officer, served 25 years, then
retired, they would be 50 at the time of their retirement.
He suggested that from 50 to 65 years of age the individual
would be able to access the account to offset their
premiums. He asked if he was correct. Mr. Boucher deferred
to Ms. Michaud.
MICHELE MICHAUD, CHIEF HEALTH OFFICER, DEPARTMENT OF
ADMINISTRATION, agreed with the scenario provided by Co-
Chair Thompson. She elaborated that a peace officer or
firefighter with 25 years of service was eligible to retire
from the plan but was not eligible to access a premium
subsidy until turning 65 Medicare age eligible. The
healthcare reimbursement arrangement could be used to pay
the full premium in the interim period. Similarly, someone
with 10 years of service that retired at age 65 had to pay
a portion of their premium. The healthcare reimbursement
arrangement could be used for that individual to pay for
their portion of the premium.
Vice-Chair Saddler asked if there was money put away in an
account every pay period for someone as soon as they
started working which could be accessed later in their
career or upon retirement. Mr. Boucher responded in the
affirmative.
4:22:10 PM
Mr. Boucher continued to slide 3: ""HB4002: What the Bill
Does":
· Issue 3: Current law requires DCR retirement plan
members to retire directly from PERS plan in order to
be eligible for medical benefits.
· Solution 3: HB 4002 removes this requirement, but only
for survivors of peace officers/fire fighters that
experience occupational death.
· Issue 4: Benefits not available to dependent children
of PERS plan members if member dies and there is no
surviving spouse.
· Solution 4: HB 4002 extends eligible medical care
expenses to include deceased peace officer/firefighter
member's dependents.
Mr. Boucher elaborated that in the instance where an
individual was killed in the line of duty they obviously
did not have the opportunity go through what he described
as the "retirement gate" to become eligible. The department
had to address the issue within the legislation. He noted
that there was a special exception written to resolve the
issue for those individuals that would be eligible for the
healthcare.
Co-Chair Thompson noted issue 4 and asked if children would
only be eligible until the age of 23. Mr. Boucher answered
that 23 years of age was the maximum. They would age out at
19 if they were not meeting the requirements for
eligibility.
Co-Chair Thompson suggested that going to college was a
requirement.
Mr. Boucher addressed who was covered by the legislation on
slide 4: "HB 4002 - Who is Covered":
· 3,639 members designated as peace
officers/firefighters in PERS system
· 1,916 are state employees
· 1,723 are employed by 43 political subdivisions
· Statutory-defined "peace officer" and "firefighter"
includes: police, chief of police, regional public
safety officer, correctional officers, correctional
superintendents, firefighter, fire chief
· Does NOT include VPSOs or any contracted police or
firefighter positions
Co-Chair Thompson asked for a breakdown of firefighters. He
asked if the number of employees included the Division of
Forestry. Mr. Boucher would follow up with an answer to Co-
Chair Thompson's question.
Co-Chair Thompson requested that the answers be provided to
his staff.
Representative Guttenberg asked how a regional public
safety officer differed from a Village Public Safety
Officer (VPSO). Mr. Boucher would have to find out and get
back to the committee.
4:25:39 PM
Representative Wilson wondered if the employees on slide 4
included state, borough, and other municipality employees.
She wondered if the boroughs and municipalities would be
paying for their employees or if the state was picking up
the tab for all 3,639 members. Mr. Boucher answered that
currently due to the PERS contribution rate being capped, a
change in the contributions for the individual employers
would mean an increase in the overall liability to the
system. Since the employers were currently held harmless at
22 percent and the rate was over 22 percent, it would
result in an increase in the annual state assistance
payment. However, should the rate fall below 22 percent,
the individual employers with peace and fire employees
would potentially bear the cost of increased contribution
rates. It would only be those employers who had peace and
fire employees that could experience increased
contributions.
Representative Wilson provided a scenario. She asked for
verification that the percentage would have more of an
impact on the municipalities rather than the bill itself.
Mr. Boucher responded that there would be employer
contribution increases associated with the benefit. He
continued to address slide 4. He noted that the legislation
did not apply to any VPSOs or any contracted police or fire
positions because they were contractual relationships
lacking a participation agreement in PERS.
Mr. Boucher turned to slide 5: "HB 4002 - Bill History":
· Governor Parnell worked with legislators on HB 66 and
SB 202, which included all PERS & TRS employees and
removed the DCR requirement to retire directly from
the plan, resulting in large fiscal note.
· Leg Legal revised HB 66 (version P) to expand health
insurance under AS 39.30.090 (Group Insurance), but
this statute does not apply to Troopers because they
have their own health trust and thus were not included
in this version of the bill.
· Law and Leg Legal drafted a new version of HB 66
(version S), but no hearings were held. Rep. Millet
pulled the bill and rolled it into SB 91.
· House removed HB 66 from SB 91.
4:30:07 PM
Mr. Boucher continued on slide 6: "HB 4002 - Where we are
Now":
· Governor Walker introduced HB 4002, modeled on HB 66
(version S)
· HB 4002 returns to the PERS system Occupational
Death benefit as the vehicle
· Limits application to peace officers and
firefighters, resulting in a smaller group and a
lower cost
Co-Chair Thompson assumed that volunteer firefighters would
not be included under the legislation. Mr. Boucher agreed.
He detailed that if there were no ties to PERS they would
have no vehicle to gain access to the benefits.
Co-Chair Thompson assumed volunteer firefighters were not
employees. Mr. Boucher answered, "Correct." It was an
important distinction and narrowed the scope of the bill to
those who were covered by existing PERS relationships.
Mr. Boucher addressed slide 7: "HB 4002 - Costs":
Why is this a state cost versus an employer cost?
Since the PERS employer contribution rates are capped
at 22 percent and the effective rate is projected to
be above 22 percent, any increase in total liability
or contributions by employers results in an increase
in the annual State Assistance payment, currently the
statutory responsibility of the state.
What if the PERS total contribution rate falls below
the 22 percent cap?
The increased contribution rate for PERS P/F employers
associated with this benefit would be a cost borne by
employers that have P/F employees.
Mr. Boucher reported that the total costs related to the
bill started out at about $174 thousand annually and would
increase to $226 thousand. A fiscal note was put forth with
the legislation because of the current situation with PERS.
If additional benefits were needed in the contribution
rates it essentially, in the state's current paradigm,
resulted in an increase in the state assistance payment.
However, if the paradigm changed at any point in the future
the participating employers contributing on a regular basis
to police and fire retirement would experience an increase
in their contribution.
4:34:02 PM
Representative Gattis asked what the state had done in
reference to the families since the prior administration's
initiation of the bill. Mr. Boucher answered that some of
the state troopers and the families affected by a
particular incident that occurred in 2013 had received
medical care coverage by the Department of Public Safety
(DPS) out of its budget.
Co-Chair Thompson clarified that in the operating budget
there was a $174 thousand line item that covered families
of deceased police officers. The bill aimed at getting the
insurance in statute.
Representative Gattis noted that there were peace officer
deaths going back to the 80's. She wondered if the state
had always included compensation for the families in a line
item since that time. Mr. Boucher answered that he was
unaware of individuals being covered until recently.
Representative Gattis reiterated her understanding of Mr.
Boucher's statement. Mr. Boucher agreed and elaborated that
the bill would also deal retroactively with the individuals
affected by the 2013 incident.
Representative Gattis asked for additional clarification.
Mr. Boucher responded that the effective date of the bill
was January 1, 2013.
Representative Gattis queried about the retroactive date
since the state was already paying the bill since 2013. Ms.
Michaud answered that the benefits vested were based on the
member and not their survivors. A survivor could not be
vested into a benefit. The retroactivity date was necessary
in the bill in order for the deceased individuals to be
vested.
4:37:08 PM
Mr. Boucher turned to slide 8: "HB 4002 - Potential
Expansion of the Bill":
Option: Expand scope of bill to include National
Guard, VPSOs and other contractors who do similar work
to peace officers/fire fighters
Problem: These groups are not part of PERS and do not
contribute to PERS retiree health plan
· IRS prohibits non-participants from benefiting from
pre-tax health trust funds
· Including these groups jeopardizes tax-exempt status
of PERS retiree plan
Representative Guttenberg understood the relationship
between employees and PERS. He wondered if individuals that
were in the National Guard or who were VPSOs or other
contractors had any death benefits. He wondered what the
National Guard did. Mr. Boucher was not familiar with
National Guard benefits but offered to follow up with the
information. He also offered to look into the benefits for
VPSOs.
Representative Guttenberg thought it would be interesting
to have the information. There were a variety of places
that VPSOs worked. He added that there were several
volunteer fire fighters. He was interested in knowing if
they bought insurance. Mr. Boucher presumed the individuals
would be part of state workers' compensation. He was
uncertain beyond that.
Mr. Boucher turned to slide 9: "HB 4002 - Potential
Narrowing of Bill":
Request: Limit scope of bill to only state employees,
i.e. Troopers
Problem: Definition of "peace officers/firefighters"
would have to be changed for this bill, creating two
groups:
· State employees who qualify for benefits under
PERS
· Non-state employees who qualify for benefits
under PERS
· Limiting benefit to state employees would provide
one group with enhanced benefit
· Would require substantial, potentially costly
change to existing PERS system
Mr. Boucher discussed the challenge of potentially
redefining the definition of "peace officers/firefighters."
There was a concern that it would set a precedence similar
to that of California which had trillions of benefit
packages to administer. He acknowledged that the state
already had enough programs in place to have to administer.
He was concerned about having the ability to administer the
program if it was taken to such an extreme.
4:42:16 PM
Mr. Boucher moved to slide 10: "HB 4002 - Compromise
Solution":
· Applies to existing statutorily-defined group of peace
officers and firefighters
· Consistent with existing legal distinction of this
group from other state employees
· Reduces fiscal impact compared to previous iterations
of legislation
· Provides solution to three Trooper families, after 2
years of working on issue
Mr. Boucher concluded his remarks and offered to take
questions.
Vice-Chair Saddler asked for the total number of employees
covered by the Public Employees' Retirement System (PERS).
Mr. Boucher would follow up with a precise number. He
estimated the number to be in excess of 40,000.
Vice-Chair Saddler referenced a comment Mr. Boucher had
made regarding fiscal notes showing the cost of providing
premium-free health insurance for all PERS employees. He
asked for the amount of the fiscal note. Mr. Boucher
believed it was in excess of $2.5 million to $3 million per
year and escalating.
Vice-Chair Saddler asked what DCR stood for. Mr. Boucher
answered, "Defined contribution retirees, as opposed to
defined benefit."
Vice-Chair Saddler asked if the occupations of police and
fire fighters experienced the highest occupational death
rate. Mr. Boucher replied that the state did not have
occupational related death rates. However, when the
department looked at the experience of the peace/fire group
versus the "all other" group the peace/fire group had a
higher death rate. He added that the department could see
that there could be other high hazard occupations in the
"all other' groups. They might be in a pool of occupations
that had a wide variety or very low death risk.
Vice-Chair Saddler queried about the potential for
litigation for unequal coverage. He wondered if the
department had considered the issue. Mr. Boucher responded
that the department believed that constructing the bill
along the lines of existing groups provided the best
defense going forward. To say that the state would be
impervious to a law suit would be foolish. He acknowledged
that department recognized that there might be high hazard
occupations outside of police and fire. However, when
looked at as a pool, the particular group had a lower rate
of death than the peace/fire group.
Vice-Chair Saddler asked for any information on
occupational death rates. He provided some examples of
other potentially hazardous professions and expressed
concerns about disparity in providing death benefits. Mr.
Boucher would provide the information.
4:47:16 PM
Representative Wilson referred to slide 7. She asked how
the benefit worked. Mr. Boucher provided an example. He
suggested that if an individual died prior to the 25 years
and received an occupational death benefit, they would
continue to accrue service and contributions to the HFA
until the time they would have reached retirement age. At
that time they would change to retirement status in the
system.
Representative Wilson believed the cost seemed high. She
did not have a problem with the benefit part of the bill.
She noted how high the health costs were and wondered about
them. Mr. Boucher responded that comparisons were
legitimate. However, money was also being set aside for an
anticipated future occurrence of incidents.
Representative Wilson asked for a breakdown of the $174
thousand. Mr. Boucher answered that it would be part of the
occupational death benefit, which was part of a larger
pool. There was also some retroactivity in the bill. The
state would potentially be liable for some retroactivity.
4:50:57 PM
Representative Wilson asked if the state had already been
paying $174 thousand before the bill was introduced. Mr.
Boucher answered in the negative. His understanding was the
$174 thousand was being paid from DPS' budget. In other
words, the department was taking a portion of its
allocation to cover the cost.
Co-Chair Thompson relayed that the budget showed the number
in anticipation of the passage of the bill.
Representative Wilson was dividing $174 thousand by 3 which
equaled $58,000 per family. She thought the amount was
high. She asked how much the state would be setting aside
for 3 specific families and how much was being saved in the
event of tragedy in the future. Mr. Boucher responded that
there were other eligible individuals who fell under the
umbrella of the bill.
Co-Chair Thompson announced that in about 3 minutes he
would be recessing the meeting.
Representative Gattis asked if Mr. Boucher could breakdown
the numbers and provide them to the chairs. She had more
than 3 families on a list. She asked him to provide the
related numbers. She queried what "SO" meant. Mr. Boucher
believed "SO" stood for significant other.
Co-Chair Thompson asked Mr. Boucher to provide the
information to his staff.
Representative Edgmon requested that Mr. Boucher provide
information regarding any benefits for VPSOs through non-
profits.
Co-Chair Thompson believed VPSOs were under contract. The
state provided grants to communities and tribal
organizations who then hired VPSOs.
HB 4002 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson recessed the meeting to a call of the
chair [Note: the meeting never reconvened]. He discussed
the schedule for the following meeting. He mentioned that
if there were amendments that members wanted to put forward
for HB 4002 they should be submitted to his office no later
than 5:00 p.m. the following day.
ADJOURNMENT
4:55:34 PM
The meeting was adjourned at 4:55 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| H FIN_HB 4002 Presentation_6.14.16 Final.pdf |
HFIN 6/14/2016 3:00:00 PM |
HB4002 |