02/16/2018 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB303 | |
| HB110 | |
| HB83 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 303 | TELECONFERENCED | |
| += | HB 110 | TELECONFERENCED | |
| += | HB 83 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 16, 2018
3:15 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Colleen Sullivan-Leonard
Representative Mike Chenault (alternate)
MEMBERS ABSENT
Representative Chris Birch
Representative Gary Knopp
Representative Bryce Edgmon (alternate)
OTHER LEGISLATOR PRESENT
Representative Justin Parish
COMMITTEE CALENDAR
HOUSE BILL NO. 303
"An Act relating to workers' compensation benefits for the
rehabilitation and reemployment of injured employees."
- HEARD & HELD
HOUSE BILL NO. 110
"An Act relating to the practice of massage therapy; relating to
the Board of Massage Therapists; and providing for an effective
date."
- MOVED CSHB 110(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 83
"An Act relating to new defined benefit tiers in the public
employees' retirement system and the teachers' retirement
system; providing certain employees an opportunity to choose
between the defined benefit and defined contribution plans of
the public employees' retirement system and the teachers'
retirement system; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 303
SHORT TITLE: WORKERS' COMP; REHAB/REEMPLOYMENT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/24/18 (H) READ THE FIRST TIME - REFERRALS
01/24/18 (H) L&C, FIN
02/16/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 110
SHORT TITLE: MASSAGE THERAPY LICENSING; EXEMPTIONS
SPONSOR(s): KITO
02/08/17 (H) READ THE FIRST TIME - REFERRALS
02/08/17 (H) L&C, FIN
02/15/17 (H) L&C AT 3:15 PM BARNES 124
02/15/17 (H) Heard & Held
02/15/17 (H) MINUTE(L&C)
02/17/17 (H) L&C AT 3:15 PM BARNES 124
02/17/17 (H) Heard & Held
02/17/17 (H) MINUTE(L&C)
02/16/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 83
SHORT TITLE: TEACHERS & PUB EMPLOYEE RETIREMENT PLANS
SPONSOR(s): KITO
01/27/17 (H) READ THE FIRST TIME - REFERRALS
01/27/17 (H) L&C, STA, FIN
03/25/17 (H) L&C AT 1:00 PM BARNES 124
03/25/17 (H) Heard & Held
03/25/17 (H) MINUTE(L&C)
04/12/17 (H) L&C AT 3:15 PM BARNES 124
04/12/17 (H) Scheduled but Not Heard
04/14/17 (H) L&C AT 3:15 PM BARNES 124
04/14/17 (H) Scheduled but Not Heard
04/19/17 (H) L&C AT 3:15 PM BARNES 124
04/19/17 (H) <Bill Hearing Canceled>
02/16/18 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
GREG CASHEN, Acting Commissioner
Office of the Commissioner
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
MARIE MARX, Director
Central Office
Division of Workers' Compensation
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
BARBARA WILLIAMS
Alaska Injured Workers Alliance
Wasilla, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
THERESA TOLBERT
Anchorage, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
KAREN DAVIS, Vocational Rehabilitation Specialist
Davis Vocational Services
Soldotna, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
SANDY TRAVIS
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 303.
MICHAEL JENSEN, Attorney
Law Offices of Michael J. Jensen
Anchorage, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
KAYA T. KADE, LPC, CDMS, TEP;
Disability Management Specialist
Kade and Associates
Anchorage, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
GREG WEAVER
Wasilla, Alaska
POSITION STATEMENT: Testified during discussion of HB 303.
CRYSTAL KOENEMAN, Staff
Representative Sam Kito
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the changes in the committee
substitute (CS)for HB 110, for the sponsor of the bill,
Representative Sam Kito.
GRETCHEN GRAEFF
Nikiski, Alaska
POSITION STATEMENT: Testified during discussion of HB 110.
TRACI GILMOUR, Owner, TLC Massage Therapy; Member
Board of Massage Therapists
Division of Corporations, Business and Professional Licensing
(DCBPL)
Department of Commerce, Community and Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 110.
VOLKER HRUBY, President
American Massage Therapy Association (AMTA), Alaska Chapter
Anchorage, Alaska
POSITION STATEMENT: Testified during discussion of HB 110.
LAUREN PAAP, President
American Organization for Bodywork Therapy of Asia (AOBTA)
Cambridge, Massachusetts
POSITION STATEMENT: Testified during discussion of HB 110.
EDRIC CARRILLO, Staff
Representative Sam Kito
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 83 on behalf of the bill
sponsor, Representative Sam Kito.
DIANE OAKLEY, Executive Director
National Institute on Retirement Security
Washington, DC
POSITION STATEMENT: Testified during discussion HB 83.
JESSE KIEHL, Staff
Senator Dennis Egan
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a section-by-section analysis of
HB 83 on behalf of the sponsor, Representative Sam Kito.
JACOB BERA, Public School Teacher
Eagle River, Alaska
POSITION STATEMENT: Testified during discussion of HB 83.
ACTION NARRATIVE
3:15:33 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:15 p.m. Representatives Kito,
Wool, Chenault (alternate), and Josephson were present at the
call to order. Representatives Stutes and Sullivan-Leonard
arrived as the meeting was in progress. Also in attendance was
Representative Parish.
HB 303-WORKERS' COMP; REHAB/REEMPLOYMENT
3:16:31 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 303, "An Act relating to workers' compensation
benefits for the rehabilitation and reemployment of injured
employees."
3:16:59 PM
GREG CASHEN, Acting Commissioner, Office of the Commissioner,
Department of Labor & Workforce Development, stated that HB 303
would improve the process of determining eligibility in
developing reemployment plans for workers who cannot return to
their former jobs as the result of a work-related injury. The
bill proposes services to support injured workers, so these
injured workers can return to work quickly.
ACTING COMMISSIONER CASHEN stated the reemployment process is
meant to provide severely injured workers with new skills to
return to work. However, developing workable reemployment plans
within the statutory constraints has grown increasingly
difficult, he said, noting the reemployment process was last
reformed over ten years ago. This bill would update an outdated
process with new approaches to provide adequate benefits while
controlling costs, and to enhance the system's efficiency and
fairness.
3:18:29 PM
MARIE MARX, Director, Central Office, Division of Workers'
Compensation, Department of Labor & Workforce Development, began
her power point presentation titled, "Workers' Compensation
Reemployment Benefits: HB 303," and stated that workers'
compensation is a social contract [slide 1].
MS. MARX directed attention to slide 2, titled "What is Workers
Compensation, which read as follows [original punctuation
provided]:
A system of insurance that protects workers and
employers from some of the losses from on-the-job
accidents and job-related illnesses.
MS. MARX directed attention to slide 3, titled "The Grand
Bargain," which read as follows [original punctuation provided]:
An employer provides prompt, necessary medical and
wage loss benefits to an injured worker for a work-
related injury.
In exchange, the injured worker receives limited
benefits and gives up the right to sue the employer
3:18:50 PM
MS. MARX elaborated that the employer provides limited benefits,
but not compensation for pain and suffering or punitive damages.
The benefits employers provide include medical and wage loss
benefits, retraining benefits, if eligible and death benefits,
in the case of a work-related death. Highlighting the injured
workers part of the compromise, she said that the injured worker
cannot sue the employer. She explained that workers'
compensation programs began during the industrial revolution
when large lawsuits would put employers out of business and
injured workers either were made whole or got nothing.
MS. MARX turned to slide 4, titled "MISSION," which read, in
part [original punctuation provided]:
To ensure the quick, efficient, fair and predictable
delivery of indemnity, medical, and vocational
rehabilitation benefits to injured workers at a
reasonable cost to employers
MS. MARX added that the balancing the five pillars: quick,
efficient, fair, predictable, and reasonable cost is what guides
the administration of the Workers' Compensation Act [slide 4].
3:19:54 PM
MS. MARX referred to slide 5, titled "Benefits Provided," which
read as follows [original punctuation provided]:
? Medical Care
? Indemnity (Wage Loss) Benefits
? Death Benefits
? Reemployment (Retraining) Benefits
MS. MARX, referred to slide 6, titled "Reemployment Benefits,"
which read as follows [original punctuation provided]:
Intended to return an injured worker to work when the
worker cannot return to the job of injury or to jobs
for which the worker has relevant training or
experience.
MS. MARX turned to slide 7, titled "Current Challenges," which
read as follows [original punctuation provided]:
?Mandatory reemployment benefits eligibility
evaluations
?Maximum plan cost of $13,300
?Retraining plans focus on quickest return to work
option, regardless of worker's interest in that
vocational goal
?Declining pool of rehabilitation specialists
?No rehabilitation specialist fee schedule
MS. MARX highlighted that there has long been a call for reform.
She explained that after being off work for 90 days, injured
workers are forced into the reemployment system, whether they
are interested in retraining, whether they are ready for
retraining, or whether they return to work on the 91st day. She
characterized these requirements as a waste of time and
resources. Further, forcing workers into reemployment training
when some do not want to be there often does not lead to good or
successful outcomes.
MS. MARX elaborating on another challenge, said that the the
maximum plan cost of $13,300 was established in 2000 and has not
been adjusted since then. This amount is often insufficient to
retrain someone. With respect to another challenge, she stated
that the retraining plans focus on the quickest return to work
option, which, if the employee is not interested, leads to
outcomes that are not successful. She pointed out the declining
pool of reemployment specialists results in some delays,
especially in areas such as Anchorage where demand is high. She
said the lack of a specialist fee schedule combined with the
declining pool of rehabilitation specialists really limits the
effectiveness of the system.
3:22:05 PM
MS. MARX directed attention to slide 8, titled "HB 303," which
read as follows [original punctuation provided]:
? Improves the delivery of reemployment benefits to
injured workers
? Provides eligible employees with more choices in
reemployment goals and plans
? Encourages injured employees' early return to work
? Helps employers control costs
MS. MARX offered her belief that proposed HB 303 would address
these challenges. Recently, the Workers' Compensation Board
issued a resolution, signed by members of both labor and
industry that supported reemployment system changes and
specified general areas needing to be addressed. The resolution
is listed as a supporting document in members' packets, she
stated. In developing the bill, the department met with many
stakeholders, including industry, labor, and workers'
compensation attorneys. In addition, the department met with
specialists and received significant input on crafting changes
to the reemployment benefit system. Early in the process, the
administration considered the policy of whether to cash out
injured workers or to retrain them. She emphasized that the
administration decided it wanted to retrain them.
3:23:14 PM
REPRESENTATIVE STUTES asked if they met with the injured
employees.
MS. MARX answered that the department met with labor
organization representatives, who often represent the interests
of injured workers.
3:23:48 PM
REPRESENTATIVE WOOL asked whether anyone represented non-union
workers.
MS. MARX answered that the department met with the workers'
compensation claimants bar, and the claimants' attorneys raised
a lot of issues that were aligned with injured workers, as well.
MS. MARX, in response to a question for clarification, said she
was not aware of an organization of injured workers to meet
with, but the department met with the workers' compensation
claimants bar, who often represent injured workers and are
familiar with the challenges they face. This group brought many
concerns and the department incorporated many of the suggestions
offered.
MS. MARX emphasized that reemployment benefits are meant to
provide retraining skills and provide an opportunity for the
injured worker to become employable.
3:25:29 PM
MS. MARX continued with the section-by-section analysis of HB
303, stating that Sections 1 and 2 [included in members'
packets], which read as follows [original punctuation provided]:
Section 1 amends AS 23.30.005(h), by allowing
implementation of a fee schedule for rehabilitation
specialist services.
Section 2 amends AS 23.30.012(a), by no longer
permitting employees to settle reemployment benefits
with their employers.
MS. MARX clarified Section 1, noting that the currently fees are
unregulated. Under the change, fees would be adopted as per
regulation and this change would help control costs.
3:26:01 PM
MS. MARX reiterated the department's goal to retrain for
reemployment. She said that in instances when the injured
workers have opted for a lump sum, the injured worker will often
not use the funds for retraining. For example, injured workers
may use the settlement funds to pay their home mortgages and
deplete their funds. Once that happens the injured workers
often ask the division for retraining; however, the division
will advise them that they waived their right to reemployment
benefits and nothing further can be done. Currently, injured
workers also have an option for job dislocation benefits instead
of the reemployment benefit for retraining. She advised that
the department is retaining the dislocation benefit but is
raising the amount; however, the settlement offers will no
longer be an option since only eight percent of injured workers
are retrained.
3:28:19 PM
REPRESENTATIVE WOOL offered his belief that most of the injured
workers take time to heal and return to their jobs. He asked
whether the department has statistics for those who return to
their jobs and for those who are retrained.
MS. MARX answered that to be eligible for the reemployment
retraining program, the injured workers must unable to return to
their jobs. If the injured workers can return to their jobs,
they are not eligible for retraining. She remarked that it is
great when injured workers can return to their jobs, but if they
cannot, reemployment retraining is available.
REPRESENTATIVE WOOL asked for clarification for workers who
voluntarily choose not to go back to their old jobs. He related
a scenario in which a worker fell off a ladder and was injured.
That worker might decide he/she wants a desk job instead.
MS. MARX answered that the injured worker would not be eligible
to learn a new skill set, but the determination is based on the
doctor's recommendation and is not a voluntary decision. She
emphasized that parties generally agree to an amount greater
than the minimum plan costs, which are $13,300. The proposed
bill raises that amount to $19,300 to adjust for inflation. She
emphasized that this bill did not limit the parties' flexibility
to pay more. They can agree to pay more than the minimum
amount; however, the maximum amount covers instances where the
parties are not in agreement.
3:30:54 PM
REPRESENTATIVE JOSEPHSON asked for clarification that an
employer might pay more than the amount listed.
MS. MARX answered that the insurance companies are the ones who
pay the benefits and it is quite common for them to pay more
since insurance companies are invested in workers getting back
to work. She noted that the bill did not change this.
3:32:19 PM
MS. MARX then referred to Section 3, which read as follows
[original punctuation provided]:
Section 3 amends AS 23.30.041(b), by allowing the
reemployment benefit administrator (RBA) to offer
consultation services for employers on early return-
to-work policies and programs and providing the RBA
greater flexibility to assign and manage specialists
and their services.
MS. MARX said that Section 3 provides for the "early return-to-
work" program. The division would add a position to run a
program, based on a pilot program in New Mexico, to create
return-to-work materials for employers and offer consultation
services for injured workers to help them figure out how to get
back to work earlier. In fact, studies have shown the longer
injured workers are out of work, the less likely they will ever
return. In instances in which employers already have great
programs in place, such as the State of Alaska, the program
would not interfere with their programs. In fact, the division
might turn to some of these larger employers for assistance to
work with smaller employers who do not have the resources to
implement a solid return-to-work program.
3:33:31 PM
MS. MARX turned to Section 4, which read as follows [original
punctuation provided]:
Section 4 amends AS 23.30.041(c), by making
eligibility evaluations voluntary instead of mandatory
and establishing a deadline for an injured worker to
request reemployment benefits.
MS. MARX added that Section 4 would also establish a deadline
for injured workers to request reemployment benefits. The state
tried voluntary system years ago and it did not work, she said.
The difference in this voluntary system is that it would
establish a deadline by which injured workers must request
reemployment benefits. Injured workers must apply 90 days after
the temporary disability ends. The second piece, which is new,
is that this section establishes a mandatory meeting between the
reemployment benefits office and the injured workers to provide
them information about their rights and duties and options for
retraining.
3:34:32 PM
MS. MARX turned to Section 5, which read as follows [original
punctuation provided]:
Section 5 amends AS 23.30.041(d), by extending the
deadline for specialists to complete eligibility
evaluations to 60 days and allowing reconsideration or
modification of the RBA's decision.
3:34:42 PM
MS. MARX referred to Section 6, which read as follows [original
punctuation provided]:
Section 6 amends AS 23.30.041(e), by requiring an
injured worker's post injury job meet the worker's
remunerative wage to be considered in the evaluation
for eligibility.
MS. MARX explained that currently injured workers are not
eligible for reemployment benefits if the workers can return to
a job the workers have previously held in the past ten years or
any job the injured workers have held after the injury. If an
injured worker takes a new job after the injury, the division
adds language that requires the job must meet a minimum
threshold of 60 percent of their gross wages. She emphasized
that 60 percent represents the standard. She reiterated that
the division's goal is to incentivize injured workers to return
to work; however, not to use a low-paying job against them for
reemployment retraining. She related a scenario in which a
worker falls off a roof and suffers an injury, and when healed
enough to work, takes a desk job and answer phones as an interim
job. Since that job would not return the person to the same
skilled job level prior to the injury, the injured worker would
not be penalized. She reiterated the goal is to incentivize
injured workers to return to work.
3:36:08 PM
MS. MARX referred to Section 7, which read as follows [original
punctuation provided]:
Section 7 repeals and reenacts AS 23.30.041(f),
removing "previously rehabilitated" language and
replacing it with more specific language.
MS. MARX said this provides language to clarify what it means to
be "previously rehabilitated" such that the injured worker
accepted a job dislocation benefit, completed a relocation plan,
or completed a retraining plan.
MS. MARX referred to Section 8, which read as follows [original
punctuation provided]:
Section 8 repeals and reenacts AS 23.30.041(g),
allowing injured workers more time to choose the job
dislocation benefit over continuing to participate in
the reemployment process.
MS. MARX explained that right now, an injured worker has 30 days
to decide whether to accept a small lump sum or move forward
with retraining; however, the injured worker often does not know
what an eligibility plan would look like. Thus, this bill would
extend that to 150 days from eligibility to decide. That would
allow injured workers to take classes at a university and still
decide that the new field is not for them. Under the bill, the
injured workers would have an option. Under current law, after
30 days these injured workers would not have a choice, she said.
3:37:13 PM
MS. MARX referred to Section 9, which read as follows [original
punctuation provided]:
Section 9 amends AS 23.30.041(h), by requiring a
rehabilitation specialist progress report at 60 days
and allowing an employee in some circumstances to
select a desired occupational goal that might result
in wages lower than what the law usually allows.
MS. MARX explained that Section 9 would allow the division to
check in on the process. She stated that a specialist has 90
days to create a plan, but if the plan is not moving forward at
60 days, the reemployment benefit administrator can check in and
figure out how to proceed.
MS. MARX referred to Section 10, which read as follows [original
punctuation provided]:
Section 10 repeals and reenacts AS 23.30.041(j),
requiring the employee and employer within 30 days to
either approve and sign a reemployment plan, or deny
the plan by providing a specific reason for the
denial, and allowing reconsideration or modification
of the RBA's decision approving, denying, or changing
the plan.
MS. MARX explained that Section 10 would require the parties to
act on a plan. Currently, a specialist can come with a plan,
but the parties may not agree to it. If neither party asks for
the administrator to approve or deny it, it remains stagnant,
sometimes for years, while stipend benefits are being paid.
This proposed change would require some action to be taken
within 30 days, either agree or disagree. This provision would
also allow parties to ask for reconsideration or modification of
the reemployment benefit.
3:38:43 PM
MS. MARX referred to Section 11, which read as follows [original
punctuation provided]:
Section 11 amends AS 23.30.041(k), by limiting payment
of stipend benefits to not more than one year before a
plan is approved and not more than two years after a
plan is approved.
MS. MARX explained that the two-year limit already exists in
statute; however, before a plan is developed the stipend benefit
continues. There currently is not any incentive to move forward
with a plan. This proposed change would help employers know the
amount of the liability and help keep costs reasonable, she
said.
3:39:35 PM
REPRESENTATIVE JOSEPHSON pointed out that he did not see the
cost savings for the "rebalancing" reflected in the fiscal note.
MS. MARX deferred to Division of Risk Management, Department of
Administration to respond. She agreed that the Division of Risk
Management's fiscal note was zero.
3:40:19 PM
MS. MARX referred to Section 12, which read as follows [original
punctuation provided]:
Section 12 amends AS 23.30.041(l), by increasing the
maximum cost for a reemployment plan to $19,300 and
providing an annual adjustment based on the consumer
price index.
MS. MARX reiterated that nothing would prevent parties from
paying more than the maximum amount. The amount was increased
to adjust for inflation.
MS. MARX referred to Section 13, which read as follows [original
punctuation provided]:
Section 13 amends AS 23.30.041(n), by allowing an
employer to controvert benefits if an injured worker
does not cooperate with the reemployment process.
MS. MARX referred to Section 14, which read as follows [original
punctuation provided]:
Section 14 amends AS 23.30.041(o), by allowing
reconsideration or modification of the RBA's decision
on noncooperation.
MS. MARX highlighted that currently, if the administrator missed
something or if new evidence or a new doctor's opinion arose,
the only option is to go before the board for a full hearing
instead of sending it back to the reemployment benefit
administrator for review.
3:41:35 PM
MS. MARX referred to Section 15, Section 16, and Section 17,
which read as follows [original punctuation provided]:
Section 15 repeals and reenacts AS 23.30.041(q), no
longer permitting employees to settle reemployment
benefits with their employers.
Section 16 amends AS 23.30.041(r)(6), by providing the
RBA greater flexibility to assign and manage
specialists and their services.
Section 17 adds new subsections to AS 23.30.041,
allowing an injured worker 150 days after eligibility
to choose the job dislocation benefit over continuing
to participate in the reemployment process, increasing
the job dislocation benefit amount, allowing the RBA
to suspend the reemployment process under certain
circumstances, allowing parties to request plan
modification based on a change in conditions or a
factual mistake, permitting an injured worker to
voluntarily exit the reemployment process at any time,
allowing parties to request reconsideration of certain
RBA decisions, and establishing a process for
reconsideration.
MS. MARX briefly read the sectional analysis and added, as she
previously mentioned, that Section 17 would extend the deadline
to accept the job relocation benefit amount. It would give the
injured worker 150 days after eligibility to choose whether to
accept the job dislocation benefit. As previously discussed,
the plan needs to be in place within the 90-day period, so this
language would provide injured workers additional time to
develop a plan or try one out for a few months.
3:42:28 PM
MS. MARX referred to Sections 18 and 19, which read as follows
[original punctuation provided]:
Section 18 adds a new subsection to AS 23.30.130,
allowing parties to request modification based on a
change in conditions or a factual mistake, and
establishing a process for modification.
Section 19 repeals AS 23.30.041(i), because the
language was moved to Section 9.
MS. MARX explained that the language in Section 19 was
reorganized and was moved to a new section. In addition, the
requirement that plans be the shortest amount of time was
removed and allows other factors to be considered.
3:43:01 PM
MS. MARX referred to Section 20, which read as follows [original
punctuation provided]:
Section 20 amends the uncodified law of the State of
Alaska, by adding applicability language.
3:43:15 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether the Division of
Workers' Compensation currently has reemployment administrator
positions on staff.
MS. MARX answered that the reemployment benefit administrator
position exists in statute. The division seeks to add a
position specifically to manage and create materials for the
early to work return program. The proposed bill would not add a
reemployment benefit administrator.
REPRESENTATIVE SULLIVAN-LEONARD further asked whether there was
a fiscal note for the new position.
MS. MARX directed attention to the fiscal note from the Division
of Workers' Compensation, which is $57,852 for salary and with
benefits a total of $95,322. The position would coordinate the
early return-to-work program [added in Section 3]. In response
to Representative Sullivan-Leonard, she answered that the
position is in the attached fiscal note from the Division of
Risk Management. In further response, she offered to provide
the fiscal note.
MS. MARX restated the salary is $57,852 and the total cost with
benefits is $95,322. She indicated this person would be
responsible for running the early return-to-work program, which
is like New Mexico's pilot program. The Workers' Compensation
Board requested this position. In fact, many of the
stakeholders advised that states which have been successful have
had an early-to-work program, a program that is proactive in
getting injured workers back to work with their employer. She
remarked that it benefits everyone.
3:46:28 PM
CHAIR KITO opened public testimony on HB 303.
3:46:57 PM
BARBARA WILLIAMS, Certified ADA Advocate, Alaska Injured Workers
Alliance, Research and Development Corporation, stated that she
has been helping injured workers for the past years with
educational information. She offered her belief that none of
the injured workers have been contacted.
MS. WILLIAMS said that it has been 17 years since she has seen
an increase in the benefits for rehabilitation. She offered her
belief that the bill does not provide adequate funding for
injured workers to retrain. Further, vocational reemployment
and stipend benefits were eliminated. In addition, injured
workers would receive a voucher based on an impairment rating,
yet $19,000 was not enough compensation for workers to retrain;
instead, it should start it around $30,000. Under proposed HB
303, workers would be forced to cover costs while out of work,
she said.
MS. WILLIAMS stated that current reemployment retraining only
offers 60 percent of the remunerative wage, which does not
include overtime some workers regularly receive. She
characterized the bill as unfair to injured workers, who would
receive cuts to their benefits and not enough money to support
their families. She emphasized the reason for reemployment
training is to support injured workers while they are retraining
so they have a chance to successfully return to the workplace.
Many workers would not receive a voucher for retraining, unless
they have a permanent, partial impairment (PPI) rating of at
least five percent or more. Under the current guidelines for
permanent disability, there are many conditions rated less than
five percent. The reemployment process often commences the
impairment is even determined, she said. Some payments in the
proposed bill would not be allowed, but injured workers often
use these monies to retrain on their own, start businesses, and
complete their degree. Employers would not have incentives to
hire disabled workers, she said. Washington and Oregon offer
more options for workers who need to be rehabilitated or
retrained. Injured workers need support, rehabilitation, and
retraining when these workers cannot return to the jobs that
they held at the time of injuries.
MS. WILLIAMS said the proposed bill, HB 303, is not only an
oppressive plan, but it is unfair. She did not believe the
premise of cost savings at the expense of injured workers was
the legislature's intent. Other states that have made drastic
changes to programs like this have failed, and she reported that
these states have subsequently reversed their changes. Injured
workers need support and retraining to successfully make it back
to the workplace after being injured. Many injured workers do
not belong to labor organizations and it is difficult to obtain
and interpret the information, particularly for those who lack
education. In closing, she said the rehabilitation specialists
need to work more closely with the injured workers to obtain
input on the current reemployment rehabilitation process instead
of making it a more adversarial process.
3:50:35 PM
THERESA TOLBERT stated that she is an unemployed injured worker
on workers' compensation and her case has not been resolved in
four years. She has not been given the tools necessary to
return to work, she said. She reported that she has been to two
IME's [insurance medical exams]; yet, she is currently being
sent out of state for another one. She has animals she cannot
leave while she goes out of state, but she cannot obtain
reimbursement for pet housing. The board does not want to pay
for injured workers' education, but many injured workers who
want to work cannot obtain the tools to do so.
3:52:59 PM
KAREN DAVIS, Vocational Rehabilitation Specialist, Davis
Vocational Services, stated she is currently performing
eligibility evaluations to determine whether injured workers are
eligible for workers' compensation reemployment benefits. She
said she shares concerns raised by a previous testifier, Ms.
Williams, about injured workers with PPI [permanent partial
impairment] ratings of less than five percent. She remarked
that the proposed bill, HB 303, does not seem to provide much
protection for those injured workers. Numerous injured workers
have PPI ratings less than five percent. She liked some of the
changes, she said, but overall the bill has room for
improvement.
3:54:02 PM
SANDY TRAVIS stated that she is an injured worker who is
representing injured workers. In response to Chair Kito's
request that she not impugn any testifier, Ms. Travis agreed
that everyone including injured workers should be respected.
She voiced her opposition to HB 303 because she does not think
the voucher system or settlements would work. Further, she did
not believe that stripping stipend benefits would work. She
offered her belief what would work is to listen to someone who
would provide facts; however, she could not give the facts in
less than two minutes. She characterized HB 303 as a very bad
bill. She emphasized that taking away from injured workers
would not get them back to work or provide rehabilitation. She
said that when she first started the rehabilitation process,
injured workers had more than 90 days to determine whether the
injured worker could go back to work. She characterized the new
limits as ridiculous as they would not help the injured worker.
Instead, she suggested that if the division wants to get injured
workers back to work they need to provide them with benefits to
do so, not take away benefits or not listen to them. In closing
she characterized the bill as a "very bad bill" that should be
thrown in the trash and not be considered.
CHAIR KITO offered to accept additional written comments by
letter or email.
3:57:18 PM
MICHAEL J. JENSEN, Attorney, Law Offices of Michael J. Jensen,
said he has been representing workers since 1984. In 1995, he
opened the Law Offices of Michael J. Jensen. As a sole
proprietor, he has continued to predominantly handle claims for
benefits under the Alaska Workers' Compensation Act, he stated.
Although he has also worked on some longshore and social
security cases, his primary effort is on workers' compensation
cases. He commented that significant changes have been made to
the Workers' Compensation Act since 1984. His intent was not to
condemn this bill, HB 303, but he pointed out that it did not
give any incentives to hire disabled workers, unlike Oregon and
Washington. Instead this bill seeks to further restrict
benefits to injured workers, he said. He referred to Section
11, noting the stipend is limited to one year from the date the
temporary and permanent benefits end until the start of the
plan. Frequently, this is not enough since the plan development
may take much longer depending on the circumstances of the
injured worker, he explained. Temporary benefits are limited
until the injured worker reaches stability. It does not mean
the worker is cured, just that the doctor does not believe the
patient will get any better. Under the current system, the
permanent benefits are very limited with low ratings considering
the nature of the injury. Thus, he recommended two years
instead of the one year in this provision.
3:59:08 PM
MR. JENSEN referred to Section 12, offering that it was a good
start to increase the rehabilitation cost maximum from $13,300
to $19,300; however, even that number is insufficient. For
example, that does not include modifications for injured
workers, such as an ergonomic chair, desk, computer, or tools.
Further, $19,300 is insufficient to cover tuition, books, lab
fees or other equipment to allow injured workers to return to
work. He suggested the figure be increased to reflect realistic
costs for retraining and to include additional modifications
necessary for them to return to work. He turned to the
remunerative wage, stating his belief this is the main reason
the rehabilitation process does not work. The remunerative wage
goal was too low, he stated, since it represents 60 percent of
the gross hourly wage at the time of injury. He highlighted
that firemen, policemen, and oil field workers make the bulk of
their income in overtime wages, which is not reflected in the
remunerative wage goal. For example, he calculated 60 percent
of a $20 per hour job equals $12 per hour, which would be much
less than the injured workers earned at the time of their
injuries.
4:00:47 PM
MR. JENSEN directed attention to Section 15, which prevents
workers from receiving a lump sum settlement. Thus, if injured
workers discover their plans are not suitable, and will not
allow them to support their families, they are prohibited from
settling the value of their plans. They cannot use the funds to
pay off their debts for a fresh start, or for additional
education, or to add other funds to obtain additional training,
or start their own businesses. He emphasized he has mentioned
only a few motivations that exist for injured workers to settle
their stipends in a lump sum. He suggested one way to improve
the lump sum settlements of their stipends would be for the
board to predetermine whether injured workers have good cause to
settle and if it is in their best interest to do so.
4:01:59 PM
MR. JENSEN directed attention to Section 17, which would
increase the job dislocation benefits by $1,000 to $6,500, which
is not a significant change or much of an improvement over the
current system. Further, the dislocation benefits would only
apply to anyone rated at 15 percent or less PPI; however, he has
represented workers with 5 percent impairment who cannot go back
in construction, oil field work, or work as firemen and in law
enforcement. If those injured workers opt out of the vocational
rehabilitation system, they would be limited to $6,500 in total
settlements, he said. He suggested that provision could be
improved by increasing the amount.
4:02:58 PM
REPRESENTATIVE JOSEPHSON asked for clarification of when the
proposed $6,500 figure for dislocation was last adjusted.
MR. JENSEN offered his belief that the current amount of $5,000
figure was last updated during the Murkowski administration.
4:03:52 PM
KAYA T. KADE, LPC, CDMS, TEP, Disability Management Specialist,
Kade and Associates, stated she is a vocational rehabilitation
specialist. She began her testimony by relating an anecdote
about an injured worker. She stated that during the IME process
the injured worker was withheld surgery for almost a year until
he finally obtained a secondary medical evaluation that allowed
him to have surgery. She advised members that because surgery
was delayed, the injured worker had suffered additional damage.
She said she wrote his reemployment benefits plan. She said he
was very upset at his treatment by the insurance company. He
finished his plan a year ago and worked for a year yet could not
continue to work with his insurance company, so he settled for a
lump sum. She considered this plan to be a failure, due to the
insurance company's negativity, noting the injured worker needed
to be out from under the insurance company.
MS. KADE offered her belief that many people settle because they
think they are strong enough to proceed on their own. Said has
had numerous clients finish their plans, and some who settle
because she cannot write a plan to meet the regulations. For
example, she currently has an injured worker who is considering
settling, that the person has been attending a university to
seek a double major; however, a double major fell outside the
regulations, she said.
MS. KADE said she did not understand why the department wanted
to adopt regulations to set fees and establish fines. She could
understand establishing qualifications; however, she said the
administration does not understand her business and expensive
costs, including insurance coverage, and medical coverage. She
recalled 20 years ago when the eligibility evaluation process
was voluntary, which did not work. She reminded members that
injured workers face surgeries, are on pain medications, and are
trying to get their lives back together. She did not believe
the deadline was appropriate, that 90 days was too soon. She
suggested that injured workers with injuries such as broken arms
or having surgeries also need physical therapy, that four to six
months would be better for reemployment eligibility evaluations.
At that point, most injured workers would be better able to
determine whether they would need more services. She applauded
the increase to $19,300, since the provision allows for annual
increases, which would be better.
MS. KADE pointed out that many of her clients lack formal
education. She emphasized that many peer review articles
indicate the importance of vocational rehabilitation, as key
aspects for returning workers to the workplace. She stated that
the division director met with vocational rehabilitation
specialists; however, it was after the Workers' Compensation
Board's (WCB) decisions were made. She lamented that the WCB
does not have any representation of either vocational
rehabilitation specialists or injured workers to provide input.
In closing, she reiterated that many injured workers have
obtained significant benefit from vocational rehabilitation, she
said. She offered her belief that those finishing their plans
without insurance company involvement exceeded 80 percent.
4:11:26 PM
GREG WEAVER stated that as a disabled worker he has been one of
many workers let down by the workers' compensation system in
Alaska. Further, he is a disabled U.S. Marine Corps veteran and
a second-generation Alaska construction worker. He remarked
that workers like him supply all Alaskans with the goods and
services they use, perform rig-ups on the North Slope, log,
fish, and extract Alaska's natural resources.
MR. WEAVER provided chronological details of his injury and
subsequent workers' compensation case number, 201320030. At the
time, he worked for the Arctic Slope Regional Corporation (ASRC)
as a construction worker and had worked for them for five or six
years. In 2013, which was a particularly strenuous year for him
and his co-worker, he became injured. They had been flying
throughout the state, working at remote U.S. Air Force, FAA
radar sites, performing maintenance and upgrades to these sites.
While working in Kaktovik, he realized he could barely walk and
was flown to Anchorage for treatment and his doctor referred to
Algone Pain Management in the Matanuska-Susitna Valley (Mat-Su).
At that time, he opened a workers' compensation claim and his
case was initially handled by a senior workers' compensation
adjuster at ASRC, who subsequently assigned a nurse case manager
to guide him through the health care and workers' compensation
system. After an independent medical examination (IME) his case
was controverted, which means he was taken off his workers'
compensation claim, and the Division of Workers' Compensation
(DWC) did not object.
MR. WEAVER asked to "fast forward" a bit. He expressed his
gratitude for his Veterans' Administration benefits. After
having several other IMEs, he was referred to a leading
neurological surgeon, [Louis L.] Kralick, M.D. [Anchorage
Neurosurgical Association] at Providence Hospital, who
eventually performed surgery, fusing three of his vertebrae
together and completely replacing two discs in his lower back.
After three years of taking opioid pain medication, he has
recently been able to wean off opioids, he said. He could not
understand why the Workers' Compensation Board denied his claim,
he said. His attorney, Mr. Jensen, filed a claim for
reconsideration on appeal where he cited over 20 instances where
the board erred in its judgment; however, those errors were
completely ignored in his workers' compensation case. He said
that the workers' compensation system is broken and needs to be
completely rebuilt. Further, he would like Ms. Marx to review
his case. In addition, he has recently spoken to the
Ombudsman's office about his case who also agreed the workers'
compensation system is broken, he said. He remarked that he has
lost everything. He advised members that he has subsequently
been awarded disability by the Social Security Administration
(SSA), who recognized the 2013 date as the initial date of
injury. In closing, he reiterated that he would like Ms. Marx
to look at his claim. He thanked members for allowing him to
describe his workers' compensation case.
4:18:18 PM
[HB 303 was held over.]
HB 110-MASSAGE THERAPY LICENSING; EXEMPTIONS
4:18:35 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 110, "An Act relating to the practice of massage
therapy; relating to the Board of Massage Therapists; and
providing for an effective date."
4:19:00 PM
The committee took a brief at-ease.
4:19:21 PM
REPRESENTATIVE WOOL moved to adopt the proposed committee
substitute (CS) for HB 110, labeled 30-LS0157\U, Radford,
2/9/18, as the working draft.
CHAIR KITO objected for discussion purposes.
4:19:36 PM
CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State
Legislature, reviewed the changes contained in Version U of HB
110. First, on page 1, a new section was inserted that modifies
the language regarding the qualifications of the public member
for the Board of Massage Therapists by removing the restriction
of being a former member of another occupational licensing
board. This recommendation was also mentioned in the state's
Legislative Audit Division, [Audit 08-20109-17], Audit
Recommendation three, she said.
MS. KOENEMAN reported the second change, noting that Version U
removes all language regarding an application for exemption for
those currently in the exception category under Alaska Statute
(AS) 08.61.080, which relates to energy workers, reflexologists,
and structural integrators. She said with that change Version U
would only apply to licensure of massage therapists under AS
08.61]. The final change is in Section 4 of Version U, which
amends the standards of license renewal by changing the annual
fingerprint requirement from every renewal cycle to once every
six years or every three licensing cycles.
4:21:19 PM
CHAIR KITO removed his objection. There being no further
objection, Version U was adopted as the working document.
4:22:43 PM
GRETCHEN GRAEFF, Massage Therapist and Rolfer, shared her
concerns with the proposed bill. She said she was unclear why
the board has been slow to require infection control in its
safety education requirements. She previously testified on this
last year, noting this change was recommended at previous board
meetings. She expressed concern that the board refers to last
century's recommendations instead of more current ones. An
additional concern was that the issue of massage therapy
establishments has distracted the board from regulating the
practice of massage therapy. She added that the current Code of
Ethics and Standards of Practice are ambiguous and confusing.
The interpretation by licensed massage therapists of the Health
Insurance Privacy and Portability Act (HIPPA) and the Centers
for Disease Control and Prevention (CDC) are broad, occasionally
inaccurate, and quite varied throughout the state.
MS. GRAEFF added that at the board's December 2017 meeting, the
board had stated, "The standards of practice are currently a
recommendation and do not have a disciplinary matrix." It was
time that was put in place, although it may be possible that it
already is, she said. That was problematic, she said, given the
letter from David Edward Smith, who advised that massage
therapists must adhere to the standards of practice and code of
ethics in our state. She said that the biggest concern was for
the licensing of businesses in the state. The implication of
the board needing to help law enforcement by having a massage
therapy establishment indicates that currently, unless a
business in Alaska is under the regulation of a professional
board, that business may sell illegal services. She was unsure
if that is true.
MS. GRAEFF said that if the board is going to recognize the
Board of Massage's jurisdiction to the regulation of massage
establishments to help law enforcement with trafficking, sexual
assault, and exploitation, she would like this committee to
recognize these potential crimes are more extensive than the
nefarious use of her profession as a front. She lauded the work
by the board for regulations for governing the licensing of
massage therapists. Since the massage therapists are in their
third year of licensure, the standards should be clear, she
said. She offered her belief that the law enforcement issues
are large enough to be concerned at the business licensing
level, she said. She was unsure why law enforcement could not
stop prostitution advertising as massage services when the
licensing requirement governing massage therapists is in place.
4:28:47 PM
TRACI GILMOUR, Owner, TLC Massage Therapy; Member, Board of
Massage Therapists, Division of Corporations, Business and
Professional Licensing (DCBPL), Department of Commerce,
Community & Economic Development (DCCED), as a licensee, stated
her support for the proposed committee substitute for HB 110.
She emphasized that increased continuing education hours and
licensure has created better consumer expectations for massage.
Therapists can coordinate better with medical professionals to
serve clients and provide a better course of treatment for
clients. Massage therapists are learning to network with
outside agencies and better represent their professions in
working with state, local, and federal law enforcement. She
added that licensure for massage therapists, as well as
requiring fingerprinting for background checks can help stop
human trafficking. She fully supported the decrease in
continuing education for the bloodborne pathogens since it has
been difficult to find providers for a four-hour course. She
added that reducing the burden of fingerprinting to once every
third renewal period reduces costs to licensees. She offered
her support for the proposed CS for HB 110.
4:31:42 PM
REPRESENTATIVE WOOL asked about board regulation of
establishments. He said it was difficult to understand previous
testimony; however, he recalled that some businesses engaging in
illegal activity would be easier to identify and monitor if the
[legitimate] massage therapy businesses had physical licenses on
their premises.
MS. GILMOUR agreed. She identified a professional massage
business in Anchorage that has been cited four times for illegal
activity. Since businesses are not licensed, it is difficult to
determine if the business is providing legitimate services.
Although not required to do so, she posts her professional
license and puts her license number on all correspondence.
Without investigations, the [illegal] businesses can operate.
She said she supports professional business licenses for massage
therapists; however, she would like to keep licensure costs low.
4:33:37 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether bloodborne
pathogen training is available at hospitals or the [American]
Red Cross.
MS. GILMOUR said that the new exam would be administered through
massage therapist schools, but continuing education could be
online or available as part of a first aid course. She
explained that it has been difficult to obtain four-hour online
courses in bloodborne pathogens. In further response to
Representative Sullivan-Leonard, she said it was difficult to
find the four-hour courses.
CHAIR KITO stated that the initial training was available to
massage therapists; however, for renewal purposes, two-hour
courses were available in first aid courses, but it was more
difficult to find four-hour courses.
4:35:33 PM
VOLKER HRUBY, President, American Massage Therapy Association
(AMTA), Alaska Chapter, stated that he is a life-long Alaskan
who has been a massage therapist for 13 years in the spa
industry, medical massage, and in private practice. The AMTA,
Alaska Chapter, represents many massage therapists in Alaska.
and offers its support of the proposed committee substitute (CS)
for HB 110. The new version of the bill [Version U] requires
massage boards to adopt regulations governing massage therapy
establishments in addition to individual therapists. He offered
his belief that this would give the state the authority to shut
down operations of human trafficking and prostitution activities
by those who use massage therapy as a front. In addition, the
proposed bill would increase the minimum course of study for
licensure from 500 to 625 hours, which represents the current
national minimum standard. It would also reduce the requirement
of safety education for bloodborne pathogens from four to two
hours as recommended by the national standard. Finally, the
proposed bill would change the requirement for fingerprinting
every six years instead of every two years. The enabling
legislation established the Board of Massage Therapists,
statutes, and requirements for licensure of massage therapists
almost four years ago. Thus, the need for minor adjustments to
licensure has arisen. He urged members to move this bill from
committee.
4:37:50 PM
LAUREN PAAP, President, American Organization for Bodywork
Therapy of Asia (AOBTA), stated that she represents Asian
Bodywork therapists, such as shiatsu, acupressure, amma or
qigong. She asked for clarification on whether her members, if
not exempted would have been required to pay a fee. She further
asked if her group was required to be licensed under the
proposed CS for HB 110.
CHAIR KITO said that portion of the bill was removed and is not
in the current CSHB 110, {Version U].
MS. PAAP referenced whether there was an intent to include Asian
bodywork members in the future. If so, she had specific
questions.
CHAIR KITO assured Ms. Papp that the only bill before the
committee was the current committee substitute for HB 110,
[Version U], that includes three changes to licensing of massage
therapists.
MS. PAAP directed attention to the provision that requires 625
hours.
CHAIR KITO asked her to limit questions to the bill version
before the committee and to contact his staff for discussion
questions.
MS. PAAP offered to do so.
4:40:25 PM
CHAIR KITO closed public testimony on HB 110.
4:40:44 PM
REPRESENTATIVE WOOL moved to report the proposed committee
substitute (CS) for HB 110, Version 30-LS0157\U, Radford,
2/9/18, out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, the CSHB
110(L&C) was reported from the House Labor and Commerce Standing
Committee.
4:41:10 PM
The committee took an at-ease from 4:41 p.m. to 4:42 p.m.
HB 83-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS
4:42:08 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 83, "An Act relating to new defined benefit tiers
in the public employees' retirement system and the teachers'
retirement system; providing certain employees an opportunity to
choose between the defined benefit and defined contribution
plans of the public employees' retirement system and the
teachers' retirement system; and providing for an effective
date."
4:42:48 PM
EDRIC CARRILLO, Staff, Representative Sam Kito, Alaska State
Legislature, presented the bill. He stated that HB 83 would
allow public employees to choose one of two state retirement
systems, the defined contribution (DC) or defined benefit (DB)
pension. Alaska's teachers and public employees do not earn
social security benefits, and many lose their social security
benefits earned under previous employment. This bill would also
allow newly-hired public servants in Alaska to choose the
benefit plan that best serves them, he said. For most, the DB
pension makes sense; however, other choose the DC plan that
allows flexibility, portability, and control. This bill would
keep smart reforms to retirement benefits made several years ago
and makes Alaska's pensions stronger than ever, he said. This
bill would create a more stable, predictable, and DB pension
tier. Since the DB pensions include sharing the risk of rising
health costs, the employees would never cost employers more than
the DC system, saving money for schools, cities, and the state.
He thanked members for their support.
4:44:07 PM
DIANE OAKLEY, Executive Director, National Institute on
Retirement Security the (NIRS), stated the NIRS is a not for
profit, non-partisan, research organization based in Washington
D.C. She directed attention to a Power Point presentation in
members' packets. She turned to slide 2, titled "DB Pension are
Cost Efficient: Still a Better Bang for the Buck," which read
as follows [original punctuation provided]:
Cost Comparison
NIRS looked at the cost to replace 53% of final income
under three retirement plan structures.
The DB pension cost 48% less than using Individual
Accounts in a DC Savings Plan to provide the same
amount of income.
MS. OAKLEY explained that the DB plan cost 16 percent of pay,
which is designed to provide the same amount of income from a DC
plan; alternatively, for the same cost retirees will receive
more income per the actuaries.
MS. OAKLEY directed attention to the next slide, titled "3 Key
Reasons Why Defined Benefit Pension (DB) Plans Cost Less than
Defined Contribution (DC) Plans," which read as follows
[original punctuation provided]:
1. Pool the longevity risks.
2. Maintain optimally balanced investment portfolio
compared to down-shifting to a lower risk/return asset
allocation in DC plan.
3. DB plan have higher investment returns and lower
fees compared to individual investors in DC accounts.
4:47:19 PM
The committee took a brief at-ease from 4:47 p.m. to 4:49 p.m.
4:49:23 PM
JESSE KIEHL, Staff, Senator Dennis Egan, Alaska State
Legislature, paraphrased the section-by-section analysis HB 83,
Sections 1-8, which read as follows [original punctuation
provided]:
Sections 1 and 2 Clarify that the Teachers Retirement
System (TRS) defined benefit (DB) statutes apply only
to employees who participate in the DB plan and did
not convert to defined contribution (DC). No employee
can participate in both the DB and DC plans. Sec. 1
also puts all TRS employers on an equal footing by
requiring them to offer new employees the choice
between DB and DC systems.
Sections 3 and 4 Set employee contributions for the
new DB tier at eight percent of pay, while leaving
prior tier employees' contributions unchanged.
Sections 5 and 6 Require a person receiving disability
benefits under the DB tiers to seek work and receive a
medical examination. Sets limits on the frequency of
the exams.
Section 7 Closes the Tier II DB health plan to new
hires and those DC members who choose to convert to
the new TRS DB tier.
Section 8 Establishes the eligibility standard for
retiree medical benefits in the new TRS DB tier. In
the new DB tier, a member with 25 years of service may
receive medical benefits partially paid by the system
at any age. A member without 25 years must have at
least eight years of service and be eligible for
Medicare. Disabled members also get system-paid
medical benefits.
A TRS DB retiree who does not meet those
qualifications can buy health care coverage from the
system, but must pay the full cost of premiums.
Establishes a premium share schedule for retirees to
pay a portion of their health insurance and requires
actuarial adjustments to keep the pre-funding rate of
the new DB tier no higher than the cost of the DC
plan.
Sets vesting rules for the premium share percentages
so that the schedule can change during an employee's
working life, but is fixed at the date of retirement.
4:51:24 PM
MR. KIEHL elaborated that Section 8 is one of the significant
cost savings provisions in this bill compared to previous tiers
since all retirees will pay a portion of their monthly health
premium based on their years of service. This provision sets up
that schedule. One safety mechanism in this bill to ensure that
the new pension tier does not cost the school districts or the
state more than the DC tier is a periodic five-year review by
the actuaries. During an employee's working life those shares
of the premium at retirement can vary. Thus, it sets vesting
rules for the premium share percentages so that the schedule can
change during an employee's working life, but it is fixed at the
date of retirement. He reiterated that this refers to the
percentage of the health premium, not the dollar amount since
health premiums may rise and this is a risk shared by all.
4:52:44 PM
MR. KIEHL continued the section-by-section analysis of HB 83,
Sections 9-11, which read as follows [original punctuation
provided]:
Section 9 Clarifies that the TRS DC statutes apply
only to employees who participate in the DC plan and
did not convert to DB. No employees can participate in
both the DB and DC plans.
Section 10 Puts all TRS employers on an equal footing
by requiring them to offer new employees the choice
between DB and DC.
Section 11 Gives a newly hired teacher the choice
between DB and DC systems. This is a one-time
irrevocable choice. Sets timeframes and rules for the
process.
MR. KIEHL emphasized that it is noteworthy to emphasize that
this provides a one-time irrevocable choice. He said that this
decision requires an employee must receive some education prior
to making the choice so that no one makes the irrevocable choice
blind.
4:53:36 PM
MR. KIEHL continued the section-by-section analysis of HB 83,
Sections 12-13, which read as follows [original punctuation
provided]:
Section 12 Clarifies that the Public Employee
Retirement System (PERS) DB statutes apply only to
employees who participate in the DB plan and did not
convert to DC. No employee can participate in both the
DB and DC plans. This section also puts all PERS
employers on an equal footing by requiring them to
offer new employees the choice between DB and DC
systems.
Section 13 Sets the same minimum wage threshold for
elected officials in the new DB tier as the 2004
reforms implemented for prior tiers.
4:54:02 PM
MR. KIEHL said that Section 13 is unique to PERS and it matches
the DC system by setting a minimum wage threshold for elected
officials in the new DB tier. This is one of the safety net
features that Mr. Carrillo mentioned earlier, noting that
elected officials who only make an honorarium now would have a
minimum salary if they were to be employed as full PERS members,
he said. There would need to be an adequate contribution to the
system to fund that. He turned to Section 14-18 of the
Sectional Analysis of HB 83, which read as follows [original
punctuation provided]:
Sections 14 and 15 Set employee contributions for the
new PERS DB tier at eight percent of pay, while
leaving prior tier employees' contributions unchanged.
Sections 16 and 17 Require a person receiving
disability benefits under the PERS DB tiers to seek
work and receive a medical examination. Sets limits on
the frequency of the exams.
Section 18 Establishes an eligibility standard for
retiree medical benefits in the new PERS DB tier. In
the new DB tier, a peace officer or firefighter with
25 years of service may receive medical benefits
partially paid by the system at any age. A peace
officer or firefighter who does not have 25 years of
service must be eligible for Medicare and have at
least 10 years. Other PERS employees require 30 years
of service to get medical benefits partially paid by
the system unless they are Medicare eligible, in which
case they require a minimum of 10 years. Disabled
members also get system-paid medical benefits.
A PERS DB retiree who does not meet those
qualifications can buy health care coverage from the
system, but must pay the full cost of premiums.
Establishes a premium share schedule for retirees to
pay a portion of their health insurance and requires
actuarial adjustments to keep the pre-funding rate of
the new DB tier no higher than the cost of the DC
plan.
Sets vesting rules for the premium share percentages
so that the schedule can change during an employee's
working life, but is fixed at the date of retirement.
MR. KIEHL emphasized that Section 18 sets up the eligibility
standards for retiree medical benefits, which is comparable to
the TRS and will provide a significant cost savings in the new
pension system as compared to the old system. Every retiree
pays a share of his/her monthly premium which provides for risk
sharing for those retiree health insurance costs.
4:55:29 PM
MR KIEHL continued the section-by-section analysis of HB 83,
Sections 19-24, which read as follows [original punctuation
provided]:
Sections 19 and 20 Put all PERS employers on an equal
footing by allowing employers that return to PERS
after terminating participation to hire employees the
same way other PERS employers do, and allows employees
to earn service credits in the appropriate tier when
working for those employers.
Section 21 Clarifies that the PERS DC statutes apply
only to employees who participate in the DC plan and
did not convert to DB. No employees can participate in
both the DB and DC plans.
Section 22 Puts all PERS employers on an equal footing
by requiring them to offer new employees the choice
between DB and DC systems.
Section 23 Gives a newly hired public employee the
choice between DB and DC systems. This is a one-time
irrevocable choice. Sets timeframes and rules for the
process.
Section 24 Repeals sections that let non-vested
employees convert from DB to DC and required employers
to match the funds transferred dollar for dollar.
Repeals sections related to political subdivisions
that participate only in the DC plan. Repeals a
requirement that DB employees who refunded
contributions from the system and return to work after
July 1, 2010 participate only in the DC plan. (Such
employees will thus be treated as new hires.)
MR. KIEHL added that Section 24 would allow non-vested employees
convert from DB to DC and take employer funds along, which is no
longer necessary because the window is closed and under the bill
new hires have a choice.
4:56:42 PM
MR KIEHL continued the section-by-section analysis of HB 83,
Sections 25, which read as follows [original punctuation
provided]:
Section 25 Gives employees hired into the TRS and PERS
DC plans who have not refunded out of those plans a
90-day period from the effective date of the bill to
irrevocably convert into the new DB tier.
Contributions move from the DC plan to the DB plan
trust if they make the switch.
MR. KIEHL clarified that Section 25 is the first of the
conversion options. This would allow employees who are working
in the DC system a one-time option to make irrevocable
conversion into the new DB tier. He directed attention to
Section 26, which read as follows [original punctuation
provided]:
Section 26 Sets the procedure for the conversion
election in Sec. 25 and allows the administrator to
adopt regulations related to the conversion. The
choice to convert is irrevocable, and certain
information must be provided to the employee. An
employee who transfers receives credited service in
the defined benefit plan equal to the value of the
employee's DC account. If that amount is insufficient
to 'buy' the employee's actual service time, the
employee may create an indebtedness to purchase the
difference. If the employee's individual account has
an excess, the difference is transferred into the
Supplemental Benefits System or a comparable account,
in keeping with federal tax law.
4:57:05 PM
MR. KIEHL explained that Section 26 lays out the rules of the
conversion. He highlighted that if an employee wants to earn a
pension instead, the value of the employee's account, including
employer contributions, is actuarily calculated and buys up to
the employee's actual years of service time. If insufficient
funds exist to purchase the employee's actual years of service,
the employee may create an indebtedness to purchase the
difference, but the employee is not entitled to it as a matter
of right. The state or municipality would not "kick in" extra
funds to buy the time. He offered his belief that in rare
instances in which an employee had more money in his/her
account, the federal government would require it to be rolled
over into a supplemental benefits account or an individual
retirement account. It would not be taken from the employee, he
said.
MR KIEHL continued the section-by-section analysis of HB 83,
Sections 27-29, which read as follows [original punctuation
provided]:
Section 27 Allows the Commissioner of Administration
to adopt regulations to implement and make specific
the bill's provisions.
Section 28 Is an immediate effective date for sections
26 and 27 of the bill.
Section 29 Makes the bill effective July 1, 2017,
except as provided in Sec. 28.
4:58:26 PM
MR. KIEHL stated that this provision makes the effective date
July 1, 2017, which needs to be adjusted going forward.
CHAIR KITO agreed that the date would be fixed.
4:58:51 PM
MS. OAKLEY reiterated the three "Key Reasons" as the longevity
pool, maintaining an investment portfolio, and since typically a
DB plan will have more assets than an individual account, the
fees are lower. Historically, in reviewing DB and DC plans,
what economists call behavioral drag exists, in that individual
investors invest on their own, she said. She clarified that
sometimes employees do not make the right investment decisions,
for example, buying or selling at the wrong time.
MS. OAKLEY referred to slide 4, titled "Colorado State Auditor:
DB Pension Higher Income Replacement over DC." She referred to
the graph on the slide that summarizes data from a report that
is produced by the Colorado State Auditor. She explained that
Colorado does give its employees a choice between a DB pension
and a DC plan. The auditor's analysis shows the percent of
income being replaced by PERA, [Public Employee Retirement
Association], the side-by-side DB/DC plan, and a specific DB
"Cash Balance" plan. She further clarified the DB "Cash Balance
plan is one that works like a DB plan with contributions, but
unlike a regular DB plan in which the individual has control
over the investment, this gives them a fixed investment return.
She referred to the bottom line of the chart, which shows the
amount of income that would be replaced in a self-directed DC.
Each column represents an employee at a given age, for example,
an employee age 40 with 3 years of service is compared to
someone who retires at 65 with 30 years of service. Over time,
the DB plan will ultimately provide a career employee with a
higher income than for a short-term employee. It would provide
a higher amount of income than a self-directed DC plan would,
she said.
5:02:26 PM
MS. OAKLEY refereed to slide 5, titled "Different Workforces:
Public Sector Has Job Tenure Twice that of Private Sector." She
explained that this slide gives an indication of the tenure of
employees derived from data by the United States Department of
Labor. Referring to a graph on slide 5, she indicated the gold
line reflects the public sector and the green line reflects
private employees. She explained that the public employees
typically have a longer tenure than the private sector
employees, about twice that of the private sector. This
provides one reason why the DB plan is attractive to many
employees in the public sector. In addition, the DB plan
encourages them to stay longer and maintain their employment
relationship with the state or local agency.
5:03:44 PM
MS. OAKLEY referred to slide 6, titled "DB Plan's Role in the
Public Sector: Workforce Management," which read as follows
[original punctuation provided]:
• DBs improve public sector productivity:
Employees are more likely to value their work and
tend to invest more in their skills.
• Pensions help recruit and retain quality workers.
Moving to a DC design could affect recruitment,
retention, and productivity.
• Teacher effectiveness increases with experience.
Greater teacher retention means higher overall
teacher productivity. When a mid-career teacher
is replaced by an inexperienced teacher, the
school as a whole sees a drop in productivity.
MS. OAKLEY said this slide represents a summary of some of the
research that has been done to examine how the DB plans help the
public sector manage its workforce. She paraphrased the bullet
points, commenting that firemen, police officers, and teachers
are all valued members of the community. Further, greater
teacher retention means higher overall educational productivity.
When a mid-career teacher is replaced by an inexperienced
teacher, the overall productivity in the school tend to drop,
she stated.
5:05:41 PM
MS. OAKLEY directed attention to slide 7, titled "Palm Beach
Case Study: Costs Due to Employee Turnover Wasn't Considered,"
which read, in part, as follows [original punctuation provided]:
In 2012, Palm Beach closed its DB pension and opened a
Combined DB/DC plan, greatly reducing benefits. During
the next four years (2012-2015), a total of 109 police
officers and firefighters left the forces before
retirement, including 53 vested officers.
MS. OAKLEY explained that slide 7 summarizes the result of a
case study. She said that the City of Palm Beach closed its DB
pension and opened a combined DB/DC plan, which greatly reduced
benefits in the DB plan. She noted that the matching
contribution was 100 percent for the employees' contribution of
four percent, which went into the DC plan. In 2011, a year
prior to the plan change, the city had about 60 police and
firefighter employees. In the next four years, the department
lost 109 employees, who left before they were eligible to
retire. In addition, 20 percent of the workforce retired as
soon as the new DB/DC plan was adopted. Thus, police and
firefighter employees left in droves, she said. In fact, in the
four years prior to the change only two vested employees left.
In the four years after the combined plan was adopted, 53
experienced police and firefighters left. She compared that to
the trend for new police and firefighter employees. In the four
years prior to the change, only four new employees left, yet in
2015, 31 firefighters left. She explained that the young
officers came to Palm Beach, went through the academy and rookie
training, but left as soon as an opportunity arose to join a
force with a DB plan. Ultimately, the lost training funds
exceeded $20 million, she said. She implied that the city was
short-sighted, thinking it was saving money in pension funds,
but losing not only training costs, but overtime costs, as well,
due to short staffing.
5:09:20 PM
MS. OAKLEY turned to slide 8, titled "92% of Americans: Public
Pensions a Good Way to Recruit and Retain Employees," and to the
illustration on the slide that captured the public sentiment in
a survey. She reiterated that plans are valuable for recruiting
and retaining employees. In a survey, when the public was asked
whether the person agreed or disagreed that pensions are a good
way to recruit and retain qualified teachers, police officers,
and firefighters, 92 percent agreed, of which 6 out of 10
strongly agreed. She concluded that demonstrates the level of
support that many public pensions have in the broader public
arena.
5:10:05 PM
MS. OAKLEY turned to slide 9, titled "Economic Impact of Alaska
Public Retirees Spending," which read, in part, as follows
[original punctuation provided]:
Expenditures by state retirees provide steady economic
stream to Alaska. In 2016, these expenditures
supported in Alaska:
• Over 7,600 jobs that paid $400 million in wages.
• $1.2 billion in total economic output. Each
dollar in DB benefits supported $1.12 in total
economic activity.
• $168 million in federal, state, and local tax
revenues.
• Each taxpayer dollar "invested" in plans
supported $4.39 in total economic activity in the
state.
MS. OAKLEY paraphrased statistics on expenditures by retirees in
Alaska. She recapped that the pension enables the retirees to
spend, knowing they have an income stream. If retirees in a DC
plan were worried about running out of money, they would be less
likely to take more money out of their pensions and spend it.
5:12:40 PM
REPRESENTATIVE CHENAULT, referring to slide 7, asked about the
Palm Beach employee turnover. He suggested that the chart
seemed a bit deceiving. He asked for clarification on the
actual numbers of employees between 2011 and 2015.
MS. OAKLEY answered that in each case the [year listed] is
capturing the prior four years, from 2012 to 2015. She further
explained that 2011 is capturing from 2008 to 2011. She offered
to provide information that details the difference in the
composition of the staff at that time. She recalled that by
2015 half of the firefighters and police officers had less than
five years of service.
5:14:50 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether she had discussed
with the Department of Administration (DOA) what it would take
to change to the proposed system and any actuarial valuation
that would need to be done prior to a change in retirement
systems.
MS. OAKLEY answered no; that she has not had the opportunity to
have that discussion with the department. Currently, the state
operates a DB plan for employees hired prior to 2006. The skill
sets to invest those dollars exists within the departments that
administer the retirement system. She offered her belief that
the state has been operating the two systems, so it would not be
difficult to take it back to one system. She offered that these
choices are ones occurring throughout the country, that state
employees in approximately 12 states currently have a choice
between a DB and DC plan.
5:16:28 PM
REPRESENTATIVE SULLIVAN-LEONARD recalled prior committee
discussions that indicated an actuarial study and analysis would
need to be performed so the legislature could decide whether the
state could afford to move forward with this type of system.
CHAIR KITO answered that his office had held discussions with
DOA. He reported that the department has advised that it is not
prepared to perform such an intensive actuarial analysis until
the bill is before the House Finance Committee. The DOA would
like the committee to provide any recommended policy changes and
the actuarial would only perform the analysis once.
5:17:43 PM
REPRESENTATIVE JOSEPHSON asked for clarification on subsequent
hearings. He offered his support for the bill.
CHAIR KITO was unsure of the time commitment. He expressed an
interest in having the actuarial review done at the time the
bill is before the House Finance Committee.
5:18:44 PM
REPRESENTATIVE WOOL asked whether the existing Palm Beach
employees were forced into the new plan.
MS. OAKLEY answered that the city council voted to move the
employees into the new plan, thus, employees were forced into
the new plan. She indicated that many of the employees did not
feel there were any benefits to stay in Palm Beach. Their
benefits were frozen based on their salaries and would not
increase, she explained. She pointed out that nearby
communities were offering retirement plans like their old plans.
The "churning part" by the new employees in the Palm Beach study
is something that the state would likely want to consider.
5:20:32 PM
JACOB BERA, Public School Teacher, shared his personal
background, offering his support for HB 83, based on his
experience as a public-school teacher for the past 15 years in
Eagle River. His goal is to help the committee understand how
the current retirement plan affects student learning and the
effective use of the limited budget and core education. After
he finished his time in the United States Marine Corps Reserve,
he and his wife, who is also a teacher, moved from Wisconsin to
Alaska to start their careers in education. The beauty of the
state attracted them since they both like to run and spend time
in the mountains; however, they also want to start a family and
put down roots. He emphasized that the retirement plan has made
a big difference for his decision to stay in Alaska. Since
their teacher service started in 2003, they fall under the Tier
II DB plan, which allows them to contribute to a pension plan
after they retire. When the plan changed in 2006, public
employees could no longer contribute to the DB plan. If they
had been considering moving to Alaska after 2006, they simply
would not have done so as it would not have made economic sense.
He said they learned that all new public employees cannot
participate in the Social Security [Old-Age, Survivors, and
Disability Insurance (OASDI) program administered by the Social
Security Administration (SSA)]. In fact, employees lose Social
Security benefits in Alaska by becoming public employees in
Alaska. They could contribute to both plans in Wisconsin, but
they opted to stay to supplement their losses by opening a Roth
IRA [individual retirement account].
5:22:11 PM
MR. BERA said that when he explains the public employee's
choices to other Alaskans, especially those not in the public
sector, they better understand the risks that public employees
take. He acknowledged that he and his wife feel lucky to be
under the Tier II plan, even absent the ability to contribute to
the OASDI [Social Security], that they are still trying to make
their retirement system work for them. Other colleagues moved
to Alaska for a few years for the adventure, but have taken
their savings and left, in part due to budget cuts and increased
demands. For those reasons, Alaska is becoming less attractive
for teachers to stay, he said. The state has continued to lose
the money it invested in attracting and training teachers.
Teacher turnover is rising in Alaska and schools and educators
suffer.
MR. BERA said he hopes the committee will understand the quality
of the educators who remain, noting he is one of four nationally
board-certified teachers in his school, and one of 200 in the
state. His college friend who teaches in his school just won
the Milken Educator Award. He described a recent experience
that illustrated teacher dedication. Despite his son's
teacher's facing family medical issues that day, the teacher
immediately focused on the school conference and his son's
progress in school. He emphasized the importance of retaining
teachers, noting he often hears students express an interest in
teaching. He said the state is not competitive with other
states in terms of salary and benefits. Teacher positions are
being cut and relatively new teachers must make choices to stay
in Alaska or to leave, invest and build up their retirement
plans, including building their social security benefits. Even
he and his wife must consider their options due to job security
issues.
MR. BERA offered his belief that HB 83 could provide an
incentive for public employees to stay in Alaska by providing
the ability for them to earn a better retirement security for
their future. Attracting and keeping the best educators makes
the most economic sense for Alaska, especially for the children
who attend public schools.
5:25:24 PM
[HB 83 was held over.]
5:25:59 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:25 p.m.