Legislature(2017 - 2018)BARNES 124

02/12/2018 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 304 MICROLOAN REVOLVING FUND & LOANS TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HB 306 PERS/TERS DISTRIBUTIONS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       February 12, 2018                                                                                        
                           3:17 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 304                                                                                                              
"An Act relating to the Alaska microloan revolving loan fund and                                                                
loans from the fund."                                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 306                                                                                                              
"An  Act  relating  to  disbursement  options  under  the  Public                                                               
Employees'  Retirement   System  of  Alaska  and   the  Teachers'                                                               
Retirement  System  of Alaska  for  participants  in the  defined                                                               
contribution plan; and providing for an effective date."                                                                        
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 304                                                                                                                  
SHORT TITLE: MICROLOAN REVOLVING FUND & LOANS                                                                                   
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/24/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/24/18       (H)       L&C, FIN                                                                                               
02/12/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 306                                                                                                                  
SHORT TITLE: PERS/TERS DISTRIBUTIONS                                                                                            
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/24/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/24/18       (H)       L&C, FIN                                                                                               
02/12/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
BRITANY CIONI-HAYWOOD, Director,                                                                                                
Division of Economic Development (DED)                                                                                          
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 304 on behalf of House Rules                                                                
Committee by request of the governor.                                                                                           
                                                                                                                                
TIM DILLON, Executive Director                                                                                                  
Kenai Peninsula Economic Development District                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 304.                                                                          
                                                                                                                                
NOLAN KLOUDA, Director                                                                                                          
University of Alaska Center for Economic Development                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 304.                                                                          
                                                                                                                                
TRAVIS LEWIS, Vice President                                                                                                    
Alaskans for Alaska                                                                                                             
Hoonah, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 304.                                                                          
                                                                                                                                
LESLIE RIDLE, Commissioner                                                                                                      
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HB 306 on behalf of the House                                                                 
Rules Committee by request of the governor.                                                                                     
                                                                                                                                
KATHY LEA, Deputy Director                                                                                                      
Division of Retirement and Benefits                                                                                             
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 306 on behalf of the House                                                                  
Rules Committee by request of the governor with the use of a                                                                    
PowerPoint presentation.                                                                                                        
                                                                                                                                
ROB JOHNSON, Chair                                                                                                              
Alaska Retirement Management Board                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 306.                                                                          
                                                                                                                                
NORM WEST                                                                                                                       
Alaska Retirement Management Board                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 306.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:17:12 PM                                                                                                                    
                                                                                                                                
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee meeting to order at  3:17 p.m.  Representatives Stutes,                                                               
Knopp,  Josephson, Wool  and Kito  were  present at  the call  to                                                               
order.   Representatives  Birch and  Sullivan-Leonard arrived  as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
            HB 304-MICROLOAN REVOLVING FUND & LOANS                                                                         
3:18:48 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  first order of business  would be                                                               
HOUSE  BILL NO.  304, "An  Act relating  to the  Alaska microloan                                                               
revolving loan fund and loans from the fund."                                                                                   
                                                                                                                                
3:19:05 PM                                                                                                                    
                                                                                                                                
BRITANY   CIONI-HAYWOOD,    Director,   Division    of   Economic                                                               
Development (DED),  Department of Commerce, Community  & Economic                                                               
Development  (DCCED), presented  HB 304  on behalf  of the  House                                                               
Rules Committee  by request of  the governor.  She  discussed the                                                               
microloan revolving  fund and some  proposed changes.    She said                                                               
new businesses were responsible for  about 80 percent of new jobs                                                               
across the  United States.   She  underlined that  new businesses                                                               
often  have  trouble  securing  standard loans.    The  fund  was                                                               
created  by   the  legislature  in   2012  to   promote  economic                                                               
development in Alaska by helping  small businesses access capital                                                               
for Alaska residents.                                                                                                           
                                                                                                                                
MS. CIONI-HAYWOOD  continued to  describe the  loan.   She stated                                                               
the maximum amount  was $35,000 and $70,000 for two  people.  She                                                               
said loan requests of $35,000 or  more require a letter of denial                                                               
from the  bank stating reasons for  denial.  She added  loans are                                                               
for  6  years  and  interest  rates are  fixed  at  the  time  of                                                               
approval.    She said  that  other  non-state resources  must  be                                                               
committed for the  use of any project for which  the loan will be                                                               
used.   She added the  changes in  the proposed bill  correct for                                                               
the  lower tier  for the  bank  denial from  $34,999 to  $35,000,                                                               
increase  maximum  loan  term  from  6 years  to  15  years,  and                                                               
increase  interest rate  calculation by  one percentage  point to                                                               
put the  loans in line with  other state loans programs  at prime                                                               
plus 2 percent.                                                                                                                 
                                                                                                                                
3:22:28 PM                                                                                                                    
                                                                                                                                
MS.  CIONI-HAYWOOD   stated  the   current  loan  terms   do  not                                                               
incentivize  businesses  to take  risks.    The proposed  changes                                                               
would facilitate start-ups by adjusting  monthly payments and due                                                               
to the relatively low loan amount  it was expected that the loans                                                               
would  not impact  the private  banking sector.   She  shared the                                                               
hope  that growing  a  small business  sector  would create  more                                                               
viable business that  can be serviced by  private institutions in                                                               
the future.                                                                                                                     
                                                                                                                                
3:23:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked why the  state would want to invest in                                                               
something that a bank would not supply with a loan.                                                                             
                                                                                                                                
MS. CIONI-HAYWOOD  answered that  the loan  helps people  with no                                                               
established  credit.    She explained  that  the  state  examines                                                               
different  criteria.    She  specified that  all  the  loans  are                                                               
collateralized.                                                                                                                 
                                                                                                                                
REPRESENTATIVE BIRCH  asked about the  pool from which  the loans                                                               
are drawn.                                                                                                                      
                                                                                                                                
MS.  CIONI-HAYWOOD described  which people  would be  appropriate                                                               
recipients for the  loan and what kind of  businesses were likely                                                               
to be involved.                                                                                                                 
                                                                                                                                
3:27:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP asked  for  confirmation  that the  minimum                                                               
amount without a bank letter of denial was $35,000.                                                                             
                                                                                                                                
MS. CIONI-HAYWOOD  answered that was  the current minimum  and no                                                               
change was present in the proposed bill.                                                                                        
                                                                                                                                
REPRESENTATIVE  KNOPP  remarked  that  4 percent  over  15  years                                                               
stands out as  low interest rate.  He asked  about changes in the                                                               
interest rate over time.                                                                                                        
                                                                                                                                
MS.  CIONI-HAYWOOD  answered  that  interest  rates  are  set  in                                                               
statute at 2 percent plus prime.                                                                                                
                                                                                                                                
3:29:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked about the  current balance                                                               
of the fund.                                                                                                                    
                                                                                                                                
MS. CIONI-HAYWOOD answered the current  cash amount available for                                                               
lending was $2.27 million.                                                                                                      
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD said she thought  it was a lot of                                                               
risk  for the  state.   She  asked about  working  with banks  to                                                               
assist people  to transition to  a conventional loan.   She asked                                                               
whether the state loan affected borrowers' credit rating.                                                                       
                                                                                                                                
MS. CIONI-HAYWOOD  answered that the  loan did not  affect credit                                                               
ratings.   She  said  the goal  is  to grow  lenders  out of  the                                                               
program and towards private lending.                                                                                            
                                                                                                                                
3:32:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES  asked how many  loans had been  issued and                                                               
what the success rate was on the loans.                                                                                         
                                                                                                                                
MS.  CIONI-HAYWOOD answered  that currently  33 applications  had                                                               
been  received,  of  which  14  were  approved.    The  principal                                                               
outstanding was  $93 thousand.   She added the  department wanted                                                               
to see the loan fund better  utilized.  She commented that due to                                                               
the  repayment  schedule,  some borrowers  were  not  willing  to                                                               
accept the risk.                                                                                                                
                                                                                                                                
REPRESENTATIVE  STUTES  asked  about   the  rate  of  success  in                                                               
repayment.                                                                                                                      
                                                                                                                                
MS. CIONI-HAYWOOD  answered the current delinquency  rate was 6.1                                                               
percent.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  WOOL asked  how much  collateral was  required to                                                               
receive the loan.                                                                                                               
                                                                                                                                
MS.  CIONI-HAYWOOD answered  that  collateral can  vary from  the                                                               
equipment for which the loan is  being sought or an asset such as                                                               
a car or home.                                                                                                                  
                                                                                                                                
3:35:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL asked what the current maximum loan was.                                                                    
                                                                                                                                
MS. CIONI-HAYWOOD  answered the current maximum  loan was $34,999                                                               
for one person and $70,000 for two people.                                                                                      
                                                                                                                                
REPRESENTATIVE  WOOL  asked what  would  change  in the  proposed                                                               
bill.                                                                                                                           
                                                                                                                                
MS. CIONI-HAYWOOD  answered the amount would  change from $34,999                                                               
to $35,000  and the interest  rate would  change to prime  plus 2                                                               
percent rather than prime plus 1 percent.                                                                                       
                                                                                                                                
3:36:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP  asked  whether  the  interest  rate  would                                                               
fluctuate with prime.                                                                                                           
                                                                                                                                
MS. CIONI-HAYWOOD answered the interest  rate was fixed but could                                                               
fluctuate  when the  Federal Reserve  increases  the prime  rate.                                                               
She added the rates were set quarterly.                                                                                         
                                                                                                                                
REPRESENTATIVE  KNOPP  asked  whether   an  individual  could  be                                                               
eligible for more than one loan.                                                                                                
                                                                                                                                
MS. CIONI-HAYWOOD  answered they could  be eligible for  one loan                                                               
per project.                                                                                                                    
                                                                                                                                
3:37:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL asked how the program is advertised.                                                                        
                                                                                                                                
MS. CIONI-HAYWOOD  answered there is some  community outreach but                                                               
that it  is constrained by  travel limitations.  She  added there                                                               
are different  community entities that the  department works with                                                               
to reach out to potential loan participants.                                                                                    
                                                                                                                                
3:40:04 PM                                                                                                                    
                                                                                                                                
CHAIR KITO opened public testimony on HB 304.                                                                                   
                                                                                                                                
3:40:23 PM                                                                                                                    
                                                                                                                                
TIM   DILLON,  Executive   Director,  Kenai   Peninsula  Economic                                                               
Development District, testified in support  of HB 304.  He stated                                                               
his  organization was  frequently approached  for information  on                                                               
small business loans.   He spoke to the  proposed improvements to                                                               
the  current  microloan revolving  loan  program.   He  said  his                                                               
organization only  had enough in  their program for six  or seven                                                               
loans, and  the state loan  program would help them  direct small                                                               
businesses to loan opportunities.                                                                                               
                                                                                                                                
3:43:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH asked  about Mr.  Dillon's experience  with                                                               
loans, collateral, risk, and repayment.                                                                                         
                                                                                                                                
MR. DILLON  answered his organization  has had a lot  of success.                                                               
He  mentioned  the  Kenai  River Brewing  Company  and  said  his                                                               
program had made the loan for  the brewery's canning machine.  He                                                               
stated his board contains a  committee which only looks at loans.                                                               
He specified his  organization issued a maximum  loan of $25,000.                                                               
He reiterated that any additional help would be welcome.                                                                        
                                                                                                                                
3:46:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP asked whether  Mr. Dillion had ever referred                                                               
clients to the state microloan revolving loan program.                                                                          
                                                                                                                                
MR. DILLON  answered in the affirmative.   He added that  when he                                                               
was city  manager of Seldovia  he had directed two  businesses to                                                               
the loan program.                                                                                                               
                                                                                                                                
3:47:33 PM                                                                                                                    
                                                                                                                                
NOLAN KLOUDA, Director, University  of Alaska Center for Economic                                                               
Development, testified  in support of  HB 304.   He spoke  to the                                                               
importance  of  creating  new  jobs  in  Alaska.    He  said  new                                                               
businesses  are  responsible  for   nearly  100  percent  of  net                                                               
employment growth in  Alaska each year.  He  said businesses with                                                               
fewer than  5 employees create  around 3,600  jobs per year.   He                                                               
added  around  60  percent  of  new  business  owners  use  their                                                               
personal savings  to start out.   He  spoke to the  risk element.                                                               
He said  that small loans do  not tend to be  very profitable for                                                               
banks, which causes banks to "shy away" from smaller loans.                                                                     
                                                                                                                                
3:51:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  asked about concerns regarding  the success                                                               
rate of new start-up businesses.                                                                                                
                                                                                                                                
MR. KLOUDA  answered that it  is something  that has to  be taken                                                               
into account.   He stated  loans have terms and  conditions which                                                               
can mitigate major risk factors.   He said cash flow, collateral,                                                               
and other  risk factors are examined  by finance staff.   He said                                                               
the risk factor was not particularly worrisome.                                                                                 
                                                                                                                                
3:52:57 PM                                                                                                                    
                                                                                                                                
TRAVIS LEWIS,  Vice President, Alaskans for  Alaska, testified in                                                               
support of  HB 304.   He stated  his organization and  his family                                                               
and friends were  direct beneficiaries of the state  program.  He                                                               
brought up the  issue of residency and said he  thought it should                                                               
be stricter.  He spoke to  family businesses and gave the example                                                               
of inherited fishing boats or  businesses that need to be updated                                                               
in order  to comply with  new regulations.   He pointed  out that                                                               
many businesses  were the continuation  of old  businesses rather                                                               
than new  businesses.   He said small  businesses in  rural areas                                                               
were trying  to keep  winter jobs available.   He  reiterated his                                                               
concern that people were applying for  the loans who only spent a                                                               
few months a  year in the state, taking  opportunities from local                                                               
people.                                                                                                                         
                                                                                                                                
CHAIR KITO held over HB 304.                                                                                                    
                                                                                                                                
3:56:35 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:56 p.m. to 3:57 p.m.                                                                       
                                                                                                                                
                  HB 306-PERS/TERS DISTRIBUTIONS                                                                            
3:57:36 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  final order of business  would be                                                               
HOUSE  BILL NO.  306, "An  Act relating  to disbursement  options                                                               
under the Public  Employees' Retirement System of  Alaska and the                                                               
Teachers'  Retirement System  of Alaska  for participants  in the                                                               
defined contribution plan; and providing for an effective date."                                                                
                                                                                                                                
3:57:50 PM                                                                                                                    
                                                                                                                                
LESLIE RIDLE,  Commissioner, Department of  Administration (DOA),                                                               
introduced  HB 306  on behalf  of  the House  Rules Committee  by                                                               
request  of the  governor.   She specified  that the  request had                                                               
originally  come  from  the Alaska  Retirement  Management  Board                                                               
(ARMB),  which has  a committee  that helps  state employee  with                                                               
Tier IV retirement plans to prepare for retirement.                                                                             
                                                                                                                                
3:59:23 PM                                                                                                                    
                                                                                                                                
KATHY LEA, Deputy Director, Division  of Retirement and Benefits,                                                               
Department of  Administration (DOA),  presented HB 306  on behalf                                                               
of the  House Rules Committee  by request  of the governor.   She                                                               
presented  a PowerPoint  entitled, "HB  306 /  SB 159.   PERS/TRS                                                               
Disbursement Options," [in committee packet]:                                                                                   
                                                                                                                                
MS. LEA spoke to slide 3, "The Issue":                                                                                          
                                                                                                                                
       The PERS/TRS DCR (Tier  IV) plans use the statutes as                                                                    
     the plan document.                                                                                                         
     ?  Any changes  to  modernize options  or  to meet  new                                                                    
     Internal  Revenue  requirements   require  a  statutory                                                                    
     change.                                                                                                                    
     ?  Statutory  changes  can  take  several  sessions  to                                                                    
     accomplish, if at all.                                                                                                     
     ? Meanwhile, participants needs are being unmet.                                                                           
     ?  This  bill  would  give   the  DCR  plans  the  same                                                                    
     flexibility  as  the   SBS  and  Deferred  Compensation                                                                    
     plans.                                                                                                                     
                                                                                                                                
MS. LEA went on to address slide 4, "PERS/TRS DCR Needs":                                                                       
                                                                                                                                
     ? The PERS/TRS DCR plans  have vested employees who are                                                                    
     retiring  and  need  help   facing  the  challenges  of                                                                    
     retirement.                                                                                                                
     ?  The   ARMB  Defined  Contribution   Subcommittee  is                                                                    
     exploring options that will help participants:                                                                             
     o not outlive their retirement savings,                                                                                    
     o address purchasing power over time, and                                                                                  
     o protect against market uncertainty.                                                                                      
                                                                                                                                
MS. LEA closed the presentation with slide 5, "Transparent                                                                      
Process for Change":                                                                                                            
                                                                                                                                
     ? Discussions  regarding disbursement options  are done                                                                    
     in a public forum during the selection process.                                                                            
     ?  Participants  and groups  representing  participants                                                                    
     will have input during  subcommittee and ARMB committee                                                                    
     meetings.                                                                                                                  
     ?  The  process  remains public  and  transparent,  but                                                                    
     allows for faster adoption of needed change.                                                                               
     ? All  interested parties are  notified of  any changes                                                                    
     through the regulation process.                                                                                            
                                                                                                                                
4:02:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  about  the  terms  of  Tier  IV                                                               
retirement.                                                                                                                     
                                                                                                                                
MS.  LEA answered  that in  the  Defined Contribution  Retirement                                                               
(DCR)  plan,   an  employee  is   eligible  to   full  retirement                                                               
disbursement  of   the  state  contribution  after   5  years  of                                                               
employment.   She explained that before  the 5th year there  is a                                                               
staggered table for disbursement so  that at 2 years the employee                                                               
receives 25  percent of the  state contributions; at 3  years the                                                               
employee receives  50 percent;  at 4  years receives  75 percent;                                                               
and at 5 years the employee  receives 100 percent.  She specified                                                               
that  in the  DCR  plans  there is  no  real  retirement, only  a                                                               
disbursement of funds.  She underlined  there is a tax penalty of                                                               
10 percent  for early withdrawal before  age 59 and a  half.  She                                                               
said currently  a lump sum  disbursement, a periodic  payment, or                                                               
various annuity options are the only options available.                                                                         
                                                                                                                                
REPRESENTATIVE  JOSEPHSON   asked  what  the   Alaska  Retirement                                                               
Management Board (ARMB) might add.                                                                                              
                                                                                                                                
MS.  LEA  answered  that  an ARMB  subcommittee  has  tasked  the                                                               
Treasury  Division and  the Division  of Retirement  and Benefits                                                               
with  exploring  options.   She  stated  the group  had  recently                                                               
reviewed eight  different providers  for efficacy  and retirement                                                               
security.  She said the  plan options fell into three categories:                                                               
a better  annuity, a guaranteed lifetime  withdrawal product, and                                                               
a qualified lifetime annuity that sets  aside up a portion of the                                                               
money to begin to pay out at age 80.                                                                                            
                                                                                                                                
4:07:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  asked what  the state  program can  do that                                                               
free markets cannot.                                                                                                            
                                                                                                                                
MS. LEA  answered the plan is  not looking to make  money and can                                                               
offer  the plan  with lower  costs, so  can provide  members with                                                               
more money for retirement.                                                                                                      
                                                                                                                                
MS.  RIDLE  added  there  would   be  a  private  sector  element                                                               
involving contracts, but the state can get better rates.                                                                        
                                                                                                                                
REPRESENTATIVE  KNOPP said  he wondered  about  the true  savings                                                               
involved.                                                                                                                       
                                                                                                                                
4:11:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked whether the  state is empowered to set                                                               
up a Roth IRA.                                                                                                                  
                                                                                                                                
MS.  RIDLE  answered  that for  government  defined  contribution                                                               
plans  currently only  deferred compensation  plans are  eligible                                                               
and the state has a Roth option in its plan.                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD asked  about a  fiscal note  for                                                               
changes in the program.                                                                                                         
                                                                                                                                
MS. LEA  answered there is a  fiscal note and there  is no fiscal                                                               
impact for  HB 306.   She  explained the option  are left  to the                                                               
participant to choose and therefore pay additional fees.                                                                        
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked for confirmation  that the                                                               
costs are paid by individual who sign up for the options.                                                                       
                                                                                                                                
4:14:26 PM                                                                                                                    
                                                                                                                                
MS. LEA answered in the affirmative.                                                                                            
                                                                                                                                
CHAIR KITO asked  about the motivation behind  putting options in                                                               
statute.                                                                                                                        
                                                                                                                                
MS. LEA  said she  could not  speak to  legislative intent.   She                                                               
added she did  work in the division at the  time and the division                                                               
recommendation was not to put them in statute.                                                                                  
                                                                                                                                
4:15:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOSEPHSON  asked   for  confirmation   that  the                                                               
descriptive  language that  would be  deleted in  HB 306  was not                                                               
recommended  by   the  department   but  had   been  put   in  by                                                               
legislators.                                                                                                                    
                                                                                                                                
MS.  LEA  answered  in  the  affirmative.    She  added  that  in                                                               
discussions  during  the  drafting  process, the  desire  was  to                                                               
pattern the  plan after the  SBS disbursement options.   She said                                                               
the  difference  was  that  statute  for SBS  and  for  DCR  only                                                               
authorized the backbone  of plan, while all  other provisions are                                                               
in the plan  document, which is required by IRS.   She stated the                                                               
difference with  the DCR plans  is that  they use statute  as the                                                               
plan document.   She explained that while other  plans are nimble                                                               
if changes are needed, DCR plans are not.                                                                                       
                                                                                                                                
4:17:48 PM                                                                                                                    
                                                                                                                                
ROB JOHNSON,  Chair, Alaska  Retirement Management  Board (ARMB),                                                               
testified in  support of HB  306.  He  stated the ARMB  had heard                                                               
that  greater  flexibility  was   preferred  for  retirees.    He                                                               
confirmed  that  the  legislature  had  indeed  looked  to  other                                                               
sources for  language and utilized SBS  and deferred compensation                                                               
language.   He added that in  time, it became clear  that greater                                                               
options were  available at no additional  cost to the state.   He                                                               
said ARMB agreed with the adoption of the proposed bill.                                                                        
                                                                                                                                
4:20:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked Mr.  Johnson to  expand on                                                               
the  portability of  retirement  plans and  whether  there was  a                                                               
trend of employees not staying in  the state system for more than                                                               
five years.                                                                                                                     
                                                                                                                                
MR. JOHNSON  said he has  not looked at  the studies, but  he had                                                               
heard  that  the change  to  the  defined contribution  plan  had                                                               
implications for public employee and teacher retention.                                                                         
                                                                                                                                
4:22:07 PM                                                                                                                    
                                                                                                                                
NORM  WEST,  Alaska  Retirement Management  Board,  testified  in                                                               
support of HB 306.  He stated  he had over 30 years of experience                                                               
as a  trustee and  administrator of employee  benefit plans.   He                                                               
added he  had seen  overseen the  management of  portfolios worth                                                               
over  $100  million.    He  said he  had  seen  many  changes  in                                                               
retirement  plans   over  the  years.     He  spoke   to  defined                                                               
contribution plans  which do not  offer a particular  benefit and                                                               
pass the  risk of the  investment to  the participants.   He said                                                               
this was the major change from  defined benefit plans.  He stated                                                               
his support for the proposed bill.   He underlined the changes in                                                               
HB 306 were only about methods of disbursement.                                                                                 
                                                                                                                                
MR. WEST  explained that the products  are essentially structured                                                               
investment  products  which  allow  for  periodic  payment.    He                                                               
underlined there was  no risk to the state  and that participants                                                               
would need to move their payments  into a different plan to avoid                                                               
taxation  of  the lump  sum.    He  surmised that  the  statutory                                                               
limitations had been an oversight.                                                                                              
                                                                                                                                
4:29:29 PM                                                                                                                    
                                                                                                                                
CHAIR KITO opened public testimony  on HB 306.  Upon ascertaining                                                               
that no  one was  available to  testify, he  said he  would leave                                                               
public testimony open for HB 306.                                                                                               
                                                                                                                                
CHAIR KITO held over HB 306.                                                                                                    
                                                                                                                                
4:30:39 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
4:31 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB304 Fiscal Note-INV 1.30.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 304
HB304 Transmittal Letter 1.30.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 304
HB306 Fiscal Note DOA RNB 1.16.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 306
HB304 ver A 1.30.18.PDF HL&C 2/12/2018 3:15:00 PM
HB 304
HB304 Sectional Analysis ver A 1.30.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 304
HB304 Fiscal Note DCCED DED 1.22.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 304
HB306 Version A.pdf HL&C 2/12/2018 3:15:00 PM
HB 306
HB306 Governor Transmittal Letter PERS & TRS 1.29.18.PDF HL&C 2/12/2018 3:15:00 PM
HB 306
HB306 Sectional Analysis 1.29.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 306
HB306 Presentation (H)L&C 2.14.18.pdf HL&C 2/12/2018 3:15:00 PM
HB 306