Legislature(2019 - 2020)BARNES 124

03/20/2019 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 79 PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 44 AUTOMATED TELLER MACHINES: FEES TELECONFERENCED
Moved HB 44 Out of Committee
+= HB 48 TEMP STATE EMPLOYEES IN PART EXEMPT SVCE TELECONFERENCED
Moved HB 48 Out of Committee
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 20, 2019                                                                                         
                            3:19 PM                                                                                             
                                                                                                                                
                             DRAFT                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Adam Wool, Co-Chair                                                                                              
Representative Gabrielle LeDoux, Co-Chair                                                                                       
Representative Zack Fields                                                                                                      
Representative Sara Hannan                                                                                                      
Representative Josh Revak                                                                                                       
Representative Dave Talerico                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Louise Stutes                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 79                                                                                                               
"An Act relating  to participation of certain  peace officers and                                                               
firefighters  in the  defined  benefit  and defined  contribution                                                               
plans  of  the Public  Employees'  Retirement  System of  Alaska;                                                               
relating to  eligibility of peace  officers and  firefighters for                                                               
medical, disability,  and death  benefits; relating  to liability                                                               
of  the  Public  Employees'  Retirement  System  of  Alaska;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 44                                                                                                               
"An Act relating  to fees for using an  automated teller machine;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - MOVED HB 44 OUT OF COMMITTEE                                                                                             
                                                                                                                                
HOUSE BILL NO. 48                                                                                                               
"An Act  removing from  the exempt service  of the  state persons                                                               
who are employed  in a professional capacity to  make a temporary                                                               
or special  inquiry, study, or  examination as authorized  by the                                                               
governor  and including  those persons  in  the partially  exempt                                                               
service of the state."                                                                                                          
                                                                                                                                
     - MOVED HB 48 OUT OF COMMITTEE                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB  79                                                                                                                  
SHORT TITLE: PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS                                                                          
SPONSOR(s): REPRESENTATIVE(s) KOPP                                                                                              
                                                                                                                                
03/06/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/06/19       (H)       L&C, FIN                                                                                               
03/20/19       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB  44                                                                                                                  
SHORT TITLE: AUTOMATED TELLER MACHINES: FEES                                                                                    
SPONSOR(s): REPRESENTATIVE(s) ORTIZ                                                                                             
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       L&C                                                                                                    
03/18/19       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/18/19       (H)       Heard & Held                                                                                           
03/18/19       (H)       MINUTE(L&C)                                                                                            
03/20/19       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB  48                                                                                                                  
SHORT TITLE: TEMP STATE EMPLOYEES IN PART EXEMPT SVCE                                                                           
SPONSOR(s): REPRESENTATIVE(s) WILSON                                                                                            
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       L&C, FIN                                                                                               
03/18/19       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/18/19       (H)       Heard & Held                                                                                           
03/18/19       (H)       MINUTE(L&C)                                                                                            
03/20/19       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE CHUCK KOPP                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As prime sponsor, introduced HB 79.                                                                      
                                                                                                                                
TOM WESCOTT, President                                                                                                          
Alaska Professional Firefighters Association                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:                                                                                                           
                                                                                                                                
WILLIAM FORNIA, President/Consultant                                                                                            
Pension Trustee Advisers (PTA)                                                                                                  
Greenwood Village, Colorado                                                                                                     
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled,  "Alaska  Public  Safety  Pension Fix;  HB  79,"  dated                                                               
3/20/19, during the hearing on HB 79, and answered questions.                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:19:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR ADAM WOOL  called the House Labor  and Commerce Standing                                                             
Committee meeting to order at  3:19 p.m.  Representatives Hannan,                                                               
Talerico, Fields,  Revak, LeDoux,  and Wool  were present  at the                                                               
call to order.                                                                                                                  
                                                                                                                                
        HB  79-PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS                                                                    
                                                                                                                                
3:19:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  announced that the  first order of  business would                                                               
be  HOUSE BILL  NO.  79,  "An Act  relating  to participation  of                                                               
certain peace  officers and firefighters  in the  defined benefit                                                               
and  defined   contribution  plans   of  the   Public  Employees'                                                               
Retirement  System of  Alaska; relating  to eligibility  of peace                                                               
officers  and firefighters  for  medical,  disability, and  death                                                               
benefits;  relating   to  liability  of  the   Public  Employees'                                                               
Retirement  System  of Alaska;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
3:20:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHUCK  KOPP, Alaska State  Legislature, introduced                                                               
HB 79, as prime sponsor.  He stated  that he served 23 years as a                                                               
police  officer in  Alaska,  adding that  the  best and  toughest                                                               
experiences of his life  were on the job.  On  this job, he said,                                                               
you  save peoples  lives,  you solve  terrible  crimes, you  help                                                               
people put  their lives  back together,  and, hopefully,  you can                                                               
keep  people's  lives  from  ever   coming  apart.    Police  and                                                               
firefighters do all  of this together he noted.   He reflected on                                                               
an  experience he  had,  in which  both  police and  firefighters                                                               
worked together  to recover the body  of an officer who  was shot                                                               
and killed on the job.  The job  is harder now, he said, there is                                                               
less political support,  less public support at  times, and there                                                               
is  heavy  media  scrutiny  on   the  public  safety  profession.                                                               
There's   increased    liability   for   police    officers   and                                                               
firefighters,  both  personally  and for  their  municipal  state                                                               
employers.  He  explained that, currently, Alaska has  one of the                                                               
greatest recruiting and retention  challenges that the profession                                                               
has  ever  seen.    Across  the state,  millions  of  dollars  in                                                               
training  are  being  lost  every  year  when  new  officers  and                                                               
firefighters leave  shortly after being trained  and certified to                                                               
other  agencies  that  have  a  defined  benefit  and  retirement                                                               
[plan].   He  stated  that  HB 79  takes  the  lessons that  were                                                               
learned  from  tier  3,  which  was  unfunded  liability  due  to                                                               
unaffordable  benefits, and  tier  4, losing  employees to  other                                                               
agencies,  and it  brings  something brand  new  that avoids  the                                                               
pitfalls of  earlier plans.   It provides  a sure  foundation for                                                               
employee  retirement planning  and employer  cost stability  into                                                               
the future.                                                                                                                     
                                                                                                                                
3:24:31 PM                                                                                                                    
                                                                                                                                
TOM   WESCOTT,   President,  Alaska   Professional   Firefighters                                                               
Association, stated  that the recruitment and  retention problems                                                               
created by tier 4 are one of  the driving factors, as well as the                                                               
benefits provided under tier 4,  especially for the unique nature                                                               
of the  public safety career.   With  these problems in  mind, he                                                               
said, they  set out to  find a  workable solution that  took into                                                               
consideration  the concerns  of the  state, other  employers, and                                                               
the  desire  to  provide  benefits  more  in  line  with  outside                                                               
agencies  and what  they're offering.   To  create a  sustainable                                                               
plan  and  avoid repeating  the  mistakes  of  the past,  it  was                                                               
important to  understand how  the old system  fell short  and how                                                               
the  most  successful plans  managed  to  stay well-funded.    He                                                               
pointed  out that  it  is a  mistake to  think  that all  Defined                                                               
Benefits (DB) plans  are the same.  He stated  that they reviewed                                                               
what got them into trouble and  what the best plans did and found                                                               
some common themes  threaded through both reviews.   The new plan                                                               
must be built off more  conservative assumptions; have reasonable                                                               
costs;  share risks  between employers,  employees and  retirees;                                                               
offer conservative benefits and  have steady, consistent funding.                                                               
He remarked that  these traits were found in the  all of the best                                                               
plans  in the  country  and can  also  be  found in  HB  79.   He                                                               
concluded by  stating that  they worked  to incorporate  the best                                                               
practices into  a plan with  reasonable costs and benefits.   The                                                               
current plan  also removes  healthcare and  replaced it  with the                                                               
defined contribution  healthcare from tier  4, which is  a Health                                                               
Retirement Account  (HRA).   The old systems,  he said,  had Pre-                                                               
Medicare  coverage, while  this plan  does not.   It  is replaced                                                               
with the HRA.  The employee's  rates are adjustable between 8 and                                                               
10  percent and  cannot go  below 8  percent.   They installed  a                                                               
minimum age  of 55  to begin  collecting retirement,  whereas the                                                               
old  plan had  a  20-year requirement.    The inflation  proofing                                                               
that's awarded  to retirees  is optional and  the ARM  board will                                                               
decide if  they can  afford it or  not.  If  the funding  were to                                                               
fall below  90 percent that would  not be granted, he  added that                                                               
it's  another  way to  save  money.    He  stated that  the  COLA                                                               
benefit,  which is  a  10  percent benefit  that  the old  system                                                               
provided,  was also  removed.   HB  79, he  said,  is the  smart,                                                               
reasonable  solution   to  Alaska's  recruitment   and  retention                                                               
problems.   The  benefits have  been reduced  and tools  to share                                                               
risk and deal with adverse experience  have been added.  He noted                                                               
that  the  current  plan  also   allows  Alaska's  public  safety                                                               
agencies  to  compete for  those  highly  skilled and  in  demand                                                               
employees.   In  closing,  he  asked that  as  members weigh  the                                                               
merits  of  this legislation,  they  also  consider the  risk  of                                                               
maintaining the status  quo as there has been  an acceleration in                                                               
departures as the percentage of tier 4 participants has grown.                                                                  
                                                                                                                                
3:29:28 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:29 to 3:31 p.m.                                                                            
                                                                                                                                
3:32:06 PM                                                                                                                    
                                                                                                                                
WILLIAM  FORNIA, President/Consultant,  Pension Trustee  Advisers                                                               
(PTA),  provided  a  PowerPoint  presentation  entitled,  "Alaska                                                               
Public  Safety Pension  Fix; HB  79."   Mr.  Fornia informed  the                                                               
committee  of  his  credentials,  adding  that  he  has  all  the                                                               
appropriate qualifications  for pensions.   He stated that  he is                                                               
very  active in  national  organizations, a  frequent author  and                                                               
speaker on the  subject, and a regular expert  witness (slide 2).                                                               
He remarked  that he was the  corporate actuary for Boeing  for 4                                                               
years and  has had a  decent history  of work experience  here in                                                               
Alaska.  In 2005 he was  hired for Alaska's first review actuary.                                                               
In 2009  he audited Alaska's Public  Employees' Retirement System                                                               
(PERS)/TRS,  and  since 2011  he  has  worked for  various  labor                                                               
groups in Alaska  on this very issue (slide 3).   Mr. Fornia went                                                               
on  to address  why  change  is necessary,  stating  that tier  3                                                               
provided adequate  benefits while tier  4 does not, which  is why                                                               
retention of public safety workers  has become an issue (slides 5                                                               
and 6).                                                                                                                         
                                                                                                                                
3:37:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  asked if firefighters  in Alaska  receive social                                                               
security.                                                                                                                       
                                                                                                                                
3:37:36 PM                                                                                                                    
                                                                                                                                
MR.  FORNIA  stated  that  firefighters  do  not  receive  social                                                               
security  unless they  held  a  different job  in  which they  do                                                               
receive it from.   However, if a firefighter  is receiving social                                                               
security from  another job it  is reduced because  they currently                                                               
have a job that qualifies for PERS.   He explained that even if a                                                               
private sector  employee, who has  a similar earnings  profile to                                                               
public  safety employees,  only paid  their social  security then                                                               
they would  have a benefit almost  as good as what  public safety                                                               
workers receive from  tier 4.  He asked  Representative LeDoux if                                                               
this answered her question.                                                                                                     
                                                                                                                                
3:38:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX answered yes.                                                                                                   
                                                                                                                                
3:38:34 PM                                                                                                                    
                                                                                                                                
MR.  FORNIA   returned  attention  to  key   considerations  with                                                               
Alaska's Public  Safety Pension Fix  (PSF).  He pointed  out that                                                               
tier  3  is   Defined  Benefits  (DB)  and  tier   4  is  Defined                                                               
Contributions (DC).   He  explained that DB  plans are  more cost                                                               
effective  at providing  retirement  benefits;  however, with  DC                                                               
plans there  is no risk  of unfunded liabilities to  the employer                                                               
(slide 7).   For this  reason, the goal was  to design a  DB plan                                                               
that doesn't have  much likelihood of an  unfunded liability that                                                               
grows.   He added that  he thinks they've  done that with  HB 79.                                                               
He further  described how the  current bill strikes  a compromise                                                               
between  a DB  and a  DC.   It  starts  with a  12 percent  fixed                                                               
employer  contribution and  manages the  plan within  that target                                                               
range.   The benefits have been  designed to be a  slightly lower                                                               
than current level and adjustment  mechanisms have been built in.                                                               
The current plan  also utilizes a lower discount  rate to provide                                                               
a cushion against adverse experience  (slide 8). Changes from the                                                               
old  DB system  include  removal of  full  medical coverage,  the                                                               
funding  level built  on a  more conservative  7 percent  rate of                                                               
return versus the current 8 percent  that the ARM board uses, the                                                               
employee  contribution can  adjust upward  from 8  percent to  10                                                               
percent, the COLA  benefit was eliminated, PPRA  is not automatic                                                               
and can  be withheld if  the funding  level is below  90 percent,                                                               
the retirement age is 55 years  old, and the final average salary                                                               
is based on  high 5 year instead  of high 3 years  (slides 9, 10,                                                               
and 11).                                                                                                                        
                                                                                                                                
3:43:21 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  turned attention to the  way in which tier  4 members                                                               
would  transfer  into  the  current   plan  without  creating  an                                                               
unfunded  liability; the  ARM board  will  create an  actuarially                                                               
equivalent formula for purchasing  time, the individual will have                                                               
90 days  from implementation  to decide on  joining the  plan and                                                               
can use  their tier 4  DC account  to purchase service  credit or                                                               
start  from 0  (slide 12).  He further  described the  safeguards                                                               
that  were created  to help  prevent unfunded  liabilities.   The                                                               
first being lowered  benefits in tier 3 compared to  tier 5.  The                                                               
second safeguard is "actuarial  methods," which involved building                                                               
a  margin into  actuarial  assumptions and  building reserves  in                                                               
good times to provide added  funding during bad times (slides 15,                                                               
16, and  17).  The third  and final safeguard is  that the entire                                                               
plan was built using a  reduced discount rate, otherwise known as                                                               
a reduced assumed rate of return,  which is 7 percent rather than                                                               
8  percent.    The  idea   is,  going  forward,  to  monitor  the                                                               
experience and  adjust the benefits  and/or the  contributions if                                                               
necessary (slide 18).   Mr. Fornia highlighted  a simulation that                                                               
analyzed  an assumed  investment return  of 6.6  percent annually                                                               
for the next 10 years and  7.38 thereafter, which resulted in the                                                               
plan starting at 100 percent  funded and gradually growing to 110                                                               
percent  without  ever  decreasing  (slide 19).    More  advanced                                                               
simulations are in  the works that would  better reflect reality,                                                               
which will inevitably have good years  as well as bad ones (slide                                                               
20).                                                                                                                            
                                                                                                                                
3:50:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  asked why 6.6  percent was chosen for  the first                                                               
10 years and 7.38 percent thereafter.                                                                                           
                                                                                                                                
MR.  FORNIA  explained  that  those numbers  were  chosen  to  be                                                               
conservative as  well as consistent  with what  other consultants                                                               
believe.  He  pointed out that they were reasonable  based on the                                                               
current bond market.                                                                                                            
                                                                                                                                
3:53:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN referenced  Mr. Fornia's  work history  in                                                               
2006, asking  how, if at all,  he was involved with  the decision                                                               
to do  away with  the public employees  DB retirement  system and                                                               
if, at  the time,  he supported  the decision to  switch to  a DC                                                               
system without social security backup.                                                                                          
                                                                                                                                
3:53:58 PM                                                                                                                    
                                                                                                                                
MR. FORNIA replied that he was  not involved with the decision to                                                               
switch plans and  he was pleased that they were  coming up with a                                                               
compromise program  that provides  reasonable levels  of benefits                                                               
with a  low risk of  unfunded liabilities.   He also  pointed out                                                               
that, although  Alaska may  have lost  some good  workers because                                                               
they wanted to move to a state  with a pension, it's not too late                                                               
to fix the benefits program.                                                                                                    
                                                                                                                                
3:55:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN   asked  whether   the  entirety   of  the                                                               
contributions made  to HRA are  accrued during the  working years                                                               
of the  employee or  if they are  annually contributed  to during                                                               
retirement.                                                                                                                     
                                                                                                                                
3:56:00 PM                                                                                                                    
                                                                                                                                
MR. FORNIA explained  that it is accrued while  working and then,                                                               
while  in retirement,  individuals use  that account  to pay  the                                                               
premiums for their pre-65 healthcare.                                                                                           
                                                                                                                                
3:56:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  established a  scenario in which  a public                                                               
safety worker has worked for 20  years and wants to retire at age                                                               
45.   She inquired as  to whether  that individual would  have to                                                               
wait for  their HRA to  be available to them  at age 55  and what                                                               
they might do for healthcare during that 10-year gap.                                                                           
                                                                                                                                
3:57:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP  acknowledged  that,  under  that  scenario,                                                               
public  safety   workers  would  need  to   find  an  alternative                                                               
healthcare plan during the gap years.                                                                                           
                                                                                                                                
MR. WESCOTT  offered his understanding  that if an  individual is                                                               
invested in  the HRA  there may not  be an age  limit to  use it,                                                               
whereas one must be  55 years old to draw the  pension.  He added                                                               
that it  would be ideal to  have a system that  could provide for                                                               
anyone  who put  in their  20  years, but  due to  cost and  risk                                                               
associated  with the  plans adding  the  55-year age  requirement                                                               
made sense.   He noted that  55 was a common  age requirement for                                                               
public safety  retirement plans and  that it would be  unusual to                                                               
see  an  individual  retire  at  age  45  without  finding  other                                                               
employment thereafter.                                                                                                          
                                                                                                                                
REPRESENTATIVE HANNAN  stated that she  is a strong  advocate for                                                               
all  public employees  having a  defined benefits  system, noting                                                               
that  she herself  is a  retiree with  that benefit.   She  asked                                                               
about  a  scenario in  which  a  firefighter  retires at  age  45                                                               
because their  knees gave out  and, therefore, would not  be able                                                               
to  use their  health retirement  account for  another 10  years.                                                               
That individual  would not be  eligible for public support  for a                                                               
private  sector health  contribution unless  they don't  have any                                                               
assets; however, they  have spent the last 20  years saving their                                                               
assets in  order to  have a health  retirement account  that they                                                               
would be  able to access at  age 55.  She  expressed concern that                                                               
many public service employees are  forced to retire because their                                                               
bodies give out  and, under the current bill, would  have to wait                                                               
in pain for 10 years until they could access their benefits.                                                                    
                                                                                                                                
4:00:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE    KOPP    expressed    his    appreciation    for                                                               
Representative  Hannan's   passion  regarding  healthcare.     He                                                               
acknowledged  that public  service  is "a  young person's  game,"                                                               
explaining that the work is physically demanding.                                                                               
                                                                                                                                
4:01:08 PM                                                                                                                    
                                                                                                                                
MR.  WESCOTT   agreed  that  the   issues  being   discussed  are                                                               
legitimate ones.  He opined that  the HRA will not be sufficient,                                                               
in  that  the  amount  an individual  acquires  throughout  their                                                               
career   will  only   provide  minimal   coverage  during   their                                                               
retirement.   The  expense of  healthcare and  what it's  done to                                                               
pension  systems, because  it's grown  at  such a  rate that  has                                                               
outpaced inflation,  has caused  problems for pension  systems to                                                               
keep up  with that growth.   Therefore, while finding  a solution                                                               
to this  issue would be  ideal, the priority  is to avoid  a plan                                                               
that establishes another unfunded liability.                                                                                    
                                                                                                                                
CO-CHAIR WOOL noted  that healthcare is a big driver  for many of                                                               
these discussions, especially when it comes to retirement.                                                                      
                                                                                                                                
4:02:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FIELDS  asked the  actuary  if  he could  address                                                               
whether relationship exists  between the size of  the group being                                                               
covered and the stability of the plan.                                                                                          
                                                                                                                                
4:03:22 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  replied that a  bigger group is more  stable, however                                                               
the current group of several thousand is large enough.                                                                          
                                                                                                                                
4:03:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS asked why it is that a larger pool better.                                                                
                                                                                                                                
4:04:10 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  replied that there  are two major reasons;  one being                                                               
that the actuaries have  a very good idea of how  long a group of                                                               
1,000 retirees  will live versus  one single person with  a 401k.                                                               
The second reason is that, on  the investment side, a larger pool                                                               
of assets has lower fees.                                                                                                       
                                                                                                                                
4:05:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL asked if it was  fair to say that by combining with                                                               
the  ARM board  funds that  it would  reach that  threshold of  a                                                               
large enough fund to get a good deal on fees.                                                                                   
                                                                                                                                
4:05:21 PM                                                                                                                    
                                                                                                                                
MR. FORNIA answered yes.                                                                                                        
                                                                                                                                
4:05:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  asked for clarification  on whether  the problem                                                               
that was articulate  by Representative Hannan exists  in both the                                                               
present system and the current bill's plan.                                                                                     
                                                                                                                                
4:06:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP  answered yes,  adding that the  current bill                                                               
makes  no  changes   to  the  present  system's   Tier  4  health                                                               
retirement  account  system.   He  offered  his belief  that  the                                                               
average public  safety worker  would be looking  at a  5-year gap                                                               
between retirement and when they  would be eligible to draw their                                                               
health  and  cash   benefit.    That  5-year   window,  he  said,                                                               
incentives employees to plan ahead  and prepare to take advantage                                                               
of other  options offered by  the state and  local municipalities                                                               
during that window of time.                                                                                                     
                                                                                                                                
4:07:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  questioned whether individuals use  their HRA to                                                               
pay medical bills or fund insurance.                                                                                            
                                                                                                                                
4:07:27 PM                                                                                                                    
                                                                                                                                
MR. WESCOTT  offered his belief  that it can  be used for  an IRS                                                               
qualifying  medical expense,  for example  a premium  payment for                                                               
insurance or a  medical bill from a doctor's  appointment; it can                                                               
be used for either.                                                                                                             
                                                                                                                                
4:08:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN  inquired  as   to  how  many  people  are                                                               
predicted to be in  the size of the group covered  by the bill as                                                               
it's currently constructed.                                                                                                     
                                                                                                                                
4:08:18 PM                                                                                                                    
                                                                                                                                
MR. WESCOTT replied that it should start at around 1,800 people.                                                                
                                                                                                                                
4:08:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN sought  clarification  as  to whether  the                                                               
current  bill   was  written  to   include  all   municipal  fire                                                               
departments,  police departments,  state  troopers, and  wildland                                                               
firefighters.                                                                                                                   
                                                                                                                                
4:09:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP  replied  that wildland  firefighters  would                                                               
only be covered  if they worked fulltime.  He  mentioned that the                                                               
current bill also includes police  and fire for the Anchorage and                                                               
Fairbanks airport systems.                                                                                                      
                                                                                                                                
4:10:12 PM                                                                                                                    
                                                                                                                                
MR  FORNIA returned  attention  to  the presentation,  discussing                                                               
other  states  that  have operated  with  similar  public  safety                                                               
workers' retirement  and benefit  plans.   Wisconsin has  a well-                                                               
funded  plan that  is  similar in  terms of  the  Cost of  Living                                                               
Adjustment  (page   22).    Colorado  Fire   and  Police  Pension                                                               
Association  created a  new  statewide plan  in  1980 with  fixed                                                               
contributions that  are sufficient for  a core DB plan  and board                                                               
discretion over  COLA (page  23).   Very similarly,  South Dakota                                                               
has triggers  that require  corrective actions  in terms  of COLA                                                               
(page 24).   Ohio,  like Alaska,  includes retiree  healthcare as                                                               
part of  the pension fund (page  25).  He concluded  by reminding                                                               
the  committee that  Alaska is  largely concerned  with potential                                                               
future unfunded liabilities  and that HB 79 is  a solid potential                                                               
solution (page 27).                                                                                                             
                                                                                                                                
4:12:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS asked if there  was any reason why a hybrid                                                               
plan  of  this structure  wouldn't  be  a  sound approach  for  a                                                               
broader group  of employees beyond  public safety employees.   He                                                               
further noted  that he was in  full support of the  current bill,                                                               
adding that "we have to start somewhere."                                                                                       
                                                                                                                                
4:13:17 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  stated that the  approach would need to  be finetuned                                                               
as  there were  very specific  public safety  features that  were                                                               
modified  such as  the "25  year with  no age  requirement."   He                                                               
suggested that  it could work by  adding a new Tier  for teachers                                                               
or other  PERS that's  not as  good as  the old  DB Tier  and has                                                               
similar triggers and safeguards.                                                                                                
                                                                                                                                
4:13:48 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL observed that the  proposed plan eliminates risk by                                                               
increasing  employee  contributions  if  returns  are  less  than                                                               
expected; accordingly,  he asked if  there is a mechanism  in the                                                               
current bill that  increases benefits if returns  are better than                                                               
expected.                                                                                                                       
                                                                                                                                
4:14:28 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  explained that  the increased  employee contributions                                                               
would   be  reversed.     If   returns  are   low  the   employee                                                               
contributions  would  go up  from  8  to  9 percent,  whereas  if                                                               
several  years  later  returns   are  better  than  expected  the                                                               
contributions would go back down to  8 percent.  He further noted                                                               
that  there  is  no  mechanism that  retroactively  restores  the                                                               
suspended  COLA.   He cautioned  the  legislature from  restoring                                                               
features  15  years  later  even   if  returns  were  prosperous,                                                               
referencing   California  in   particular,  who   made  excessive                                                               
increases to  their police  and fire  plans while  increases were                                                               
"booming" in the late 1990s and are still paying for it today.                                                                  
                                                                                                                                
4:15:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN shared her  understanding that most pension                                                               
plans fund  at 80 to  85 percent,  which is the  "industry norm."                                                               
She asked  if this  was true,  and if so,  why the  proposed plan                                                               
seeks to be 100 to 110 percent funded.                                                                                          
                                                                                                                                
4:16:28 PM                                                                                                                    
                                                                                                                                
MR. FORNIA  explained that all  plans target 100  percent because                                                               
that means  taxpayers are  paying the current  cost of  the plan.                                                               
The goal, he said,  is to be 100 percent funded  so that the cost                                                               
is not being  transferred to future generations.   He added that,                                                               
although  many  plans  are  only  80  percent  funded,  very  few                                                               
actuaries would  call that sufficient because  at that percentage                                                               
costs are continually being shifted to future generations.                                                                      
                                                                                                                                
4:18:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL announced that HB 79 was held over.                                                                               
                                                                                                                                
4:18:25 PM                                                                                                                    
                                                                                                                                
The  committee  took an  at-ease  from  4:18  p.m. to  4:20  p.m.                                                               
[During the at-ease,  Co-Chair Wool handed the  gavel to Co-Chair                                                               
LeDoux.]                                                                                                                        
                                                                                                                                
             HB  44-AUTOMATED TELLER MACHINES: FEES                                                                         
                                                                                                                                
4:20:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX announced  that the next order  of business would                                                               
be  HOUSE BILL  NO. 44,  "An Act  relating to  fees for  using an                                                               
automated teller machine; and providing for an effective date."                                                                 
                                                                                                                                
4:21:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  WOOL  moved to  report  HB  44  out of  committee  with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being  no objection, HB  44 was  reported out of  the House                                                               
Labor and Commerce Standing Committee.                                                                                          
                                                                                                                                
        HB  48- TEMP STATE EMPLOYEES IN PART EXEMPT SVCE                                                                    
                                                                                                                                
4:21:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX announced that the  final order of business would                                                               
be HOUSE  BILL NO. 48, "An  Act removing from the  exempt service                                                               
of the state persons who  are employed in a professional capacity                                                               
to make a temporary or  special inquiry, study, or examination as                                                               
authorized by  the governor  and including  those persons  in the                                                               
partially exempt service of the state."                                                                                         
                                                                                                                                
4:22:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX opened public testimony on HB 48.  After                                                                        
ascertaining that no one wished to testify, she closed public                                                                   
testimony.                                                                                                                      
                                                                                                                                
4:22:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  WOOL  moved to  report  HB  48  out of  committee  with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being  no objection, HB  48 was  reported out of  the House                                                               
Labor and Commerce Standing Committee.                                                                                          
                                                                                                                                
4:23:26 PM                                                                                                                    
                                                                                                                                
 ADJOURNMENT                                                                                                                  
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
4:23 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB79 version U.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HL&C 4/1/2019 3:15:00 PM
HB 79
HB79 Sponser Statement ver U.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HB 79
HB79 Sectional Analysis ver U 3.12.2019.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HL&C 4/1/2019 3:15:00 PM
HB 79
HB79 Additional Information APFO Recruitment Retention Report 3.11.2019.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HB 79
HB79 Additional Information DPS Commissioned Employee Engagement Survey Results Overview December 2017 3.11.2019.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HL&C 4/1/2019 3:15:00 PM
HB 79
HB79 PERS Tier Comparisons for Bill 3.18.2019.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HL&C 4/1/2019 3:15:00 PM
HB 79
HB 79. Backup. Letter of Opposition.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HL&C 4/1/2019 3:15:00 PM
HB 79
HB 79. Backup. Letters of Support.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HL&C 3/25/2019 3:15:00 PM
HB 79
HB79 Additional Information DPS Recruitment-Retention Plan Overview 3.11.2019.pdf HL&C 3/20/2019 3:15:00 PM
HL&C 3/22/2019 3:15:00 PM
HB 79
HB79 W.Fornia PSF-Presentation to House LaborCommerce 3.18.2019.pptx HL&C 3/20/2019 3:15:00 PM
HB 79
HB79 L&C Rep Kopp Introduction Presentation 3.18.2019.pptx HL&C 3/20/2019 3:15:00 PM
HB 79
HB044 Sectional Analysis 2.26.19.pdf HL&C 3/18/2019 3:15:00 PM
HL&C 3/20/2019 3:15:00 PM
HB 44
HB044 Supporting Document-Support Letter National ATM Council 3.15.19.pdf HL&C 3/18/2019 3:15:00 PM
HL&C 3/20/2019 3:15:00 PM
HB 44
HB044 Supporting Document-Support Letters 2.26.19.pdf HL&C 3/18/2019 3:15:00 PM
HL&C 3/20/2019 3:15:00 PM
HB 44
2019.HB 44.Backup Support Letters.pdf HL&C 3/18/2019 3:15:00 PM
HL&C 3/20/2019 3:15:00 PM
HB 44
2019.HB 48.Sponsor Statement.pdf HL&C 3/20/2019 3:15:00 PM
HB 48
2019.HB 48.Bill Version M.PDF HL&C 3/20/2019 3:15:00 PM
HB 48
HB 48 Fiscal Note.pdf HL&C 3/18/2019 3:15:00 PM
HL&C 3/20/2019 3:15:00 PM
HB 48