Legislature(2007 - 2008)
03/30/2007 07:17 AM House W&M
| Audio | Topic |
|---|---|
| Start | |
| HB204 | |
| HB206 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
March 30, 2007
7:17 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Anna Fairclough, Vice Chair
Representative Bob Roses
Representative Paul Seaton
Representative Peggy Wilson
Representative Sharon Cissna
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 204
"An Act relating to the public employees' and teachers' defined
benefit retirement plans; relating to the public employees' and
teachers' defined contribution retirement plans; relating to the
judicial retirement system; relating to the health reimbursement
arrangement plan for certain teachers and public employees;
relating to the supplemental employee benefit program; relating
to the public employees' deferred compensation program; relating
to group insurance for public employees and retirees; making
conforming amendments; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 206
"An Act relating to the accounting and payment of contributions
under the defined benefit plan of the Public Employees'
Retirement System of Alaska, to calculations of contributions
under that defined benefit plan, and to participation in, and
termination of and amendments to participation in, that defined
benefit plan; making conforming amendments; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 204
SHORT TITLE: PUBLIC EMP./TEACHERS/JUDGES EMP. BENEFITS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/16/07 (H) READ THE FIRST TIME - REFERRALS
03/16/07 (H) W&M, FIN
03/28/07 (H) W&M AT 7:00 AM HOUSE FINANCE 519
03/28/07 (H) Heard & Held
03/28/07 (H) MINUTE(W&M)
03/30/07 (H) W&M AT 7:00 AM HOUSE FINANCE 519
BILL: HB 206
SHORT TITLE: PERS CONTRIBUTIONS; UNFUNDED LIABILITY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/16/07 (H) READ THE FIRST TIME - REFERRALS
03/16/07 (H) W&M, FIN
03/28/07 (H) W&M AT 7:00 AM HOUSE FINANCE 519
03/28/07 (H) Scheduled But Not Heard
03/30/07 (H) W&M AT 7:00 AM HOUSE FINANCE 519
WITNESS REGISTER
ANNETTE KREITZER, Commissioner Designee
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Provided information on aspects and HB 204
and answered questions pertaining to HB 204 and HB 206.
KATHLEEN LEA, Acting Director
Retirement Manager
Division of Retirement and Benefits (DRB)
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Presented HB 204 on behalf of the
Department of Administration and answered questions on HB 204
and HB 206.
CHRISTINA MAIQUIS, Acting Chief Financial Officer
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Presented HB 206 on behalf of the
Department of Administration and answered questions.
ACTION NARRATIVE
CHAIR MIKE HAWKER called the House Special Committee on Ways and
Means meeting to order at 7:17:45 AM. Present at the call to
order were Representatives Hawker, Fairclough, Seaton, Roses,
Gruenberg, Cissna, and Wilson.
HB 204-PUBLIC EMP./TEACHERS/JUDGES EMP. BENEFITS
CHAIR HAWKER announced that the first order of business would be
HOUSE BILL NO. 204, "An Act relating to the public employees'
and teachers' defined benefit retirement plans; relating to the
public employees' and teachers' defined contribution retirement
plans; relating to the judicial retirement system; relating to
the health reimbursement arrangement plan for certain teachers
and public employees; relating to the supplemental employee
benefit program; relating to the public employees' deferred
compensation program; relating to group insurance for public
employees and retirees; making conforming amendments; and
providing for an effective date."
7:19:37 AM
ANNETTE KREITZER, Commissioner Designee, Department of
Administration (DOA) addressed some prior questions by committee
members. First, she noted DOA has requested the Department of
Law (DOL) further review of the need for any retroactivity
provisions in HB 204. Second, she confirmed that there are
currently no statutory provisions that empower the state to
intercept funds of employers who fail to contribute to the
unfunded liabilities. Third, she provided the committee with a
chart that compares HB 204 with House bill 475 [from the 24th
Legislative session]. Last, she stated they have requested an
opinion from tax counsel about when elected officials are
considered employees of the governmental entity they are elected
to serve.
7:22:57 AM
KATHLEEN LEA, Acting Director, Retirement Manager, Division of
Retirement and Benefits (DRB), Department of Administration,
responded to a query regarding the exclusion of National
Education Association Alaska (NEA-Alaska) members from the
state's retirement plans by confirming that the Internal Revenue
Service (IRS) does not allow private non-profit entities to
participate in a governmental retirement plan.
REPRESENTATIVE ROSES noted that it has been at least 25 years
since the NEA-Alaska inclusion has been an issue.
7:23:59 AM
REPRESENTATIVE SEATON asked for clarification of the chart
provided to the committee by DOA and titled "Comparison of
Former HB 475 and HB 204."
MS. LEA explained that the intent of the chart was to set forth
sections that are in HB 204 that were not in House bill 475.
7:26:42 AM
REPRESENTATIVE FAIRCLOUGH expressed concern that if the state
switches to a cost share basis for retirement contributions,
some communities will receive debt relief for their portions of
the unfunded pension plan liabilities. She asked for further
information regarding those employers that are in arrears in
making their payments under the Public Employees' Retirement
System (PERS) defined benefits (DB) plans.
COMMISSIONER DESIGNEE KREITZER noted that the issue of unfunded
liabilities is not a new one. She acknowledged that some
communities would benefit greatly should the state move to a
cost share plan. She stated that DOA has offered some
suggestions for how to help communities that would be adversely
affected by a cost share plan. She recognized that some
communities, such as Fairbanks, would essentially be relieved of
a debt, but stated that "what we are trying to do is go
forward." She explained that DOA has prepared a "heroes list"
which sets forth communities that received rate relief, but
applied it towards their unfunded liabilities. She offered that
it is a policy call of the legislature how to treat communities
that are differently affected by imposition of a cost share
system.
The committee took an at ease from 7:29:59 AM to 7:32:45 AM.
7:33:41 AM
COMMISSIONER DESIGNEE KREITZER said that when viewing the chart
comparing HB 204 and House bill 475, it may be most useful to
ignore the column to the far left and focus instead on the table
that lists the new sections that were not in House bill 475.
MS. LEA confirmed that DOL advised that some sections listed in
the chart were in House bill 475, but that they have been
modified in HB 204.
REPRESENTATIVE ROSES requested details on which sections of HB
204 codify existing practices that are not in statute.
7:39:16 AM
CHAIR HAWKER asked about the practice of codifying an existing
agency practice and the requirement, if any, that the
codification be made retroactive.
COMMISSIONER DESIGNEE KREITZER opined that it is common to
codify regulatory practices and opined that DOA has broad
regulatory authority. She stated that it would provide clarity
to include these provisions in statute.
REPRESENTATIVE GRUENBERG commented that it is riskier if the
practice being codified is controversial, but cautioned that
careful consideration will help avoid any legal issues.
COMMISSIONER DESIGNEE KREITZER emphasized that HB 204 was
crafted by the DOL in accordance with independent tax counsel,
and she said she does not believe there are any retroactivity
provisions in this bill.
7:42:51 AM
CHAIR HAWKER said that while he is generally comfortable with
the substance of the bill, he would like additional explanation
of the reasons for exclusion of elected municipal officials.
COMMISSIONER DESIGNEE KREITZER noted there had been extensive
discussion of the aforementioned issue, but that she would need
to review this issue to provide the committee a more detailed
explanation of the reasons for exclusion of municipal officials.
MS. LEA said that the section regarding which elected officials
are included in the Defined Contribution Retirement (DCR) plan
is contained in HB 204, section 110 under the definition of
"employee."
REPRESENTATIVE CISSNA expressed concern that exclusion of other
elected officials could have unintended consequences.
COMMISSIONER DESIGNEE KREITZER reiterated she will review her
notes on this issue so she can recall the reasons for the policy
choice to recommend exclusion of elected municipal officials.
CHAIR HAWKER requested that review consider whether it is
feasible or appropriate to contemplate an opt-in provision for
municipalities.
7:47:39 AM
REPRESENTATIVE SEATON noted there is a huge difference between a
cost sharing plan and one where an employer has responsibility
for only its own employees. He referenced that difficulties
occur when persons are paid less than the average employee base,
because that employee's liability can be substantial despite not
contributing much to the wage base. The result can be that an
elected public employee can accumulate a huge liability that
must be paid by contributions from other employees. He said
that in his district, many municipalities have opted out of
including their elected officials in retirement plans due to the
high cost. He explained that Senate bill 141 [from the 24th
legislative session] disallowed new employees from participation
in the defined benefit plans, but employees that had previously
been elected to a city or state government position prior to
Senate bill 141 would come under the provisions of the existing
defined benefit plans. He expressed concern that a cost share
system would allow municipalities to include their elected
officials in the retirement plans, and that other employers
would be responsible for payment of costs.
7:51:55 AM
REPRESENTATIVE WILSON asked about the prospective nature of HB
204 and whether it applies to persons who have already served as
an elected official.
MS. LEA said that the bill's provisions would apply from the
effective date of the bill forward.
7:52:48 AM
REPRESENTATIVE FAIRCLOUGH stated she would like further
information regarding the possible liability that would result
from inclusion of municipal elected officials.
MS. LEA stated that currently municipalities can choose whether
to have their elected officials participate in defined benefit
plans. However, there are concerns in the cost share bill [HB
206] about allowing municipalities to include elected officials
in the defined benefits plans. She reminded the committee that
elected municipal officials are currently not allowed to
participate in the defined contribution retirement plan.
REPRESENTATIVE FAIRCLOUGH predicted there may be financial
reasons as to why municipal officials are excluded from
participation in the DCR plan and that it would help her
consideration of this issue to see the fiscal implications of
this policy decision.
[HB 204 was held in committee.]
7:59:37 AM
HB 206-PERS CONTRIBUTIONS; UNFUNDED LIABILITY
CHAIR HAWKER announced that the next order of business would be
HOUSE BILL NO. 206, "An Act relating to the accounting and
payment of contributions under the defined benefit plan of the
Public Employees' Retirement System of Alaska, to calculations
of contributions under that defined benefit plan, and to
participation in, and termination of and amendments to
participation in, that defined benefit plan; making conforming
amendments; and providing for an effective date."
8:00:38 AM
COMMISSIONER DESIGNEE KREITZER set forth that DOA would provide
an overview of accounting issues in the defined benefit plans
prior to a detailed analysis of HB 206, the cost share bill.
8:00:57 AM
CHRISTINA MAIQUIS, Acting Chief Financial Officer, Division of
Retirement and Benefits, Department of Administration, referred
to a PowerPoint presentation on the Public Employees' Retirement
System (PERS) Defined Benefit (DB) Plan, which was sub-titled
"Accounting Issues" and dated March 28, 2007. She stated that
there are concerns about employer level accounting for the DB
plan as the current accounting system results in employer
contribution rates not being supported by employer level
accounting records. The cost share legislation introduced by
the governor presents a proposal whereby the administration and
accounting of the PERS DB plan would mirror that of the
Teachers' Retirement System (TRS) plan. Under HB 206, the state
will assume 65 percent of the unfunded PERS' DB plan liability
as of June 30, 2006. The unfunded liability is estimated to be
$5.5 billion; under HB 206 the state would assume $3.6 billion
of that amount. She opined that the cost share legislature
would result in simplified plan administration and eliminate
employers' level accounting concerns. Furthermore, all
employers would share in the cost of benefits, administration,
and investment.
MS. MICAS reminded the committee that the PERS is a multi-
employer, multi-agent system whereby assets are accounted for by
employer as they come in. The assets are consolidated with
those of other employers once transferred to the retirement
account. She went on to say that part of the proposed solution
to the unfunded pension fund liability is to possibly issue
pension obligation bonds (POBs) to reduce the unfunded
liability.
8:00:12 AM
MS. MICAS responded to a question by explaining that out of the
169 PERS employers, one is the state, while the rest are
municipal and other governmental employers.
CHAIR HAWKER requested clarification as to whether the Elected
Public Officials Retirement System (EPORS) is part of PERS Tiers
I, II, or III.
MS. MICAS answered that the EPORS is a separate, stand alone
plan and that the proposed changes to PERS would have no effect
on that system.
REPRESENTATIVE FAIRCLOUGH queried who pays the costs of the 27
members of the EPORS and noted that a witness affirmatively
nodded that the payment for this plan was from general funds.
8:08:26 AM
MS. MICAS explained that the proposed change to a cost share
plan does not affect TRS, benefits paid to DB members, PERS DB
plan level accounting as a whole, and the PERS DCR Plan (Tier
IV). She explained that in a multiple employer plan, there are
separate accounts for each employer and that the employer
provides benefits only for its employees. However, there are
pooled administrative and investment functions. She explained
that AS 30.35.100(b) (3) requires that a separate account be
maintained for each employer; this account is charged with the
employer's actuarial charge for pension and other benefits.
Furthermore, AS 39.35.250 requires amortization of an employer's
unfunded obligations in determining the past service
contribution rate
MS. MICAS referred to slides 10-11 and explained that employer
contributions are accounted for in two separate accounts. In
the active employer asset accounts, one account is maintained
for each individual employer. In the retiree reserve account,
all payments are maintained in a consolidated account for all
participating employers. She emphasized that it is the retiree
reserve account that has raised concerns as it is not split out
by employer. She said the retiree reserve account is funded by
investment income and transfers from the active employer asset
account. Once assets are transferred to the retiree reserve
account, assets are no longer tracked by individual employer.
In response to a question, she confirmed that once assets are in
the retiree reserve account, payments to retirees are not
tracked by employer.
8:14:04 AM
REPRESENTATIVE SEATON asked whether benefits are paid from the
retiree reserve account. He further queried whether the DOA is
aware of how much each employer contributed to the retiree
reserve account, how much interest the account makes, and the
amount being paid for each employer's liability to their
employees.
MS. MICAS confirmed that retirement benefits are paid out of the
retiree reserve account. As to the second part of his query,
she responded that DOA is aware of which employer is responsible
for payment, but that the amount of payment is not allocated to
the responsible employer's assets once the money is in the
retiree reserve account.
8:15:33 AM
MS. MICAS explained the allocation process used to calculate an
employer's past service contribution rate, referring to slides
13 to 14. She responded to a question by explaining that the
retiree reserve account does not separately track each
employer's funds. She went on to explain that once an employer
has retirees, a calculation is done to establish the amount of
retiree reserve account assets that need to be transferred to
the retiree reserve account, referring to slides 15 and 16.
8:19:27 AM
COMMISSIONER DESIGNEE KREITZER reminded the committee that this
allocation process has been going on about 20 years. She
assured the committee that her department has met with the
Alaska Municipal League (AML) and considered this issue in
deciding to put forward a cost share approach. She explained
that it may be possible to determine the amounts that individual
employers have contributed to the retiree reserve account, but
cautioned that such an accounting would be expensive. She
opined that as the committee reviews the allocation process, it
will become clear why the suggestion has been made to move to a
cost share system.
CHAIR HAWKER relayed that although the current allocation
process was perhaps a valid policy process at time, now is an
appropriate time to assess whether the current system is in the
best interest of the state and other plan participants.
8:21:04 AM
REPRESENTATIVE SEATON expressed strong concern as to the
accuracy of actuarial determinations of past employer service
costs in light the fact that plan assets are not tracked by
individual employer once they are transferred into the retiree
reserve account. He indicated concern that determinations of an
employer's unfunded liability and contribution rate must be
accurate. He referenced some extensive actuarial calculations
that were done in conjunction with House bill 238 [from the 24th
legislative session].
COMMISSIONER DESIGNEE KREITZER replied that DOA is not
necessarily unaware of individual employer liabilities, but she
emphasized it would "not be cheap" to go back and determine
these figures.
REPRESENTATIVE SEATON noted that part of the reason for some of
the actuarial work last year was to determine the average cost
per employer so as to lessen the possibility that some employers
would be over-funded and others under-funded.
8:24:57 AM
CHAIR HAWKER offered that there has been a mechanism in place to
assign assets to individual employers and to compare those
assets to liabilities to determine the unfunded portion
allocated to each employer. He opined that the issue before the
committee was to review that mechanism and evaluate whether it
is appropriate to change that approach.
REPRESENTATIVE SEATON reiterated his concern that the current
approach may not result in an accurate determination of employer
contributions and liabilities. He indicated that some employers
have over-funded their share of the pension liabilities, while
others have under-funded their share. He expressed unease as to
whether these differences were being fairly accounted for in
light of the fact that the retiree reserve account does not
track individual employer contributions.
CHAIR HAWKER summarized that once funds are placed in the
retiree reserve account, they become co-mingled with other
assets.
8:29:41 AM
REPRESENTATIVE WILSON expressed concern that once funds are
transferred to the retiree reserve account, there is no
accounting to keep track of whether an employer's contributions
are adequate to pay its retirees. She asked what happens if an
employer is paying out more in retirement benefits than it has
contributed.
COMMISSIONER DESIGNEE KREITZER answered that the aforementioned
scenario is a concern, but that it is not necessarily occurring
at present. She emphasized that the past accounting practice is
not necessarily unfair and untrue, but the process could be
better administered through a cost share plan. She emphasized
that this process has been in place 20 years and that it is as
accurate as possible, but that she believes a cost share plan
provides a better method for administration of PERS.
CHAIR HAWKER relayed his understanding that the accounting
mechanism has been used with integrity and as accurately as
possible. He suggested that the committee consider whether the
current system remains the best policy.
COMMISSIONER DESIGNEE KREITZER relayed she does not know why the
past system was set up like it is. She conveyed that the
administration has had discussions with AML, and that a result
of those discussions, there was agreement that a cost share
approach would be preferable to the present system.
8:34:21 AM
REPRESENTATIVE SEATON noted it is common for the state to have a
single manager for funds. He charged that it is imperative to
accurately determine employer's unfunded liabilities to be able
to assign employer contribution rates. He noted he is not
adverse to a change for policy reasons, but sought assurance
that the current system does not result inaccurate
determinations of employer contribution rates.
COMMISSIONER DESIGNEE KREITZER offered that persons may not
agree with the current system, but that does not make the
numbers wrong. She went on to say that because of issues with
the current plan, it makes sense to change to a cost share.
8:37:12 AM
REPRESENTATIVE ROSES asked if part of the cost share plan is an
attempt to get to one contribution rate for all employers. He
suggested that it may be easier to allocate payments to reduce
the system liabilities if a one-rate system is established for
PERS.
COMMISSIONER DESIGNEE KREITZER answered that part of the change
is designed to establish a one-rate system for all employees and
that it may indeed be easier to use various payment methods to
reduce the unfunded liabilities with a cost share system.
8:37:57 AM
REPRESENTATIVE ROSES asked how many of the PERS employers have
no tax base, such as the university system or school systems.
He expressed concern regarding how much of the suggested
allocation results in a re-direction of state funds, since the
state funds some employers that have no tax base. He stated he
understands the risk of not enacting some measures to help fix
the past pension fund problems. However, he expressed that he
still has some discomfort with changes brought about by Senate
bill 141, but ventured that he understands the political
difficulties inherent in any attempt to change the provisions of
Senate bill 141. He said he has concerns over attempts to fix a
system that may not accomplish all it was intended to do. He
noted that in some circumstances, it is important to fix
problems in current system even if there is a possibility for
change in the future.
8:43:17 AM
COMMISSIONER DESIGNEE KREITZER responded to a request for
information by explaining that there is an exhibit titled "Cost
Share Exhibits," which lists the effect on various employers
from a change to a cost share system. [A copy of this was
provided to the committee and is on the DRB website]. She
explained that the first pages of the exhibit explain what
happens if the state changes to a cost share system. Under the
first scenario, the state would save about $36 million, but it
would cost the communities about $52 million. Therefore, she
considered how to hold employers harmless from their fiscal year
(FY) 2007 to FY 08 rate.
8:44:31 AM
REPRESENTATIVE FAIRCLOUGH asked about the situation of an
employer that has overpaid into the system and opined that an
employer that had overpaid into the system, such as Anchorage,
would perhaps withdraw from the system if its contributions were
not recognized.
COMMISSIONER DESIGNEE KREITZER replied that in the
aforementioned scenario, termination costs for an employer the
size of Anchorage would be fairly costly. She said that the
cost share solution will require "some give and take." She said
that she believes that Anchorage is a member of AML and is aware
of AML's support of the cost share approach, yet she has not
heard from Anchorage.
8:45:36 AM
REPRESENTATIVE SEATON expressed concern over the effect of
calculating contribution rates across the entire wage base. He
asked whether the calculations provided consider whether the
changes in contribution rates are based on the effect of a cost
sharing plan, or whether they are based on re-calculation
against the entire wage base instead of just the DB wage base.
He opined that inclusion of the DCR wage base would result in a
lower contribution rate based on inclusion of that wage base
rather than a change to a cost share approach.
COMMISSIONER DESIGNEE KREITZER noted she could address
aforementioned issue at a later date.
8:48:32 AM
CHAIR HAWKER noted the amount allocated to an employer in the
retiree reserve account does not represent contributions made by
the employer, rather, it is a mechanism used to assign the
account's assets. He suggested that mechanism is at issue in
the cost sharing proposal.
8:51:39 AM
MS. MICAS explained the current allocation system from the time
an employer has no retirees to the process whereby contributions
are made to the retiree reserve when an employer has retirees.
8:53:26 AM
REPRESENTATIVE WILSON requested clarification as to when assets
move from the active to the retiree account.
CHAIR HAWKER explained that before an employee retires, the
funds attributable to that employee are placed in the active
employer asset accounts. When an employee retires, the funds
are transferred to the retiree reserve account.
8:55:45 AM
MS. LEA explained that an annual actuarial accounting of an
employer's responsibilities under the active asset accounts
determines the normal cost rate. There will also be a past
service rate assigned if the prior year's funding was not
adequate to cover the employer's responsibilities. It is this
past service rate that creates the liabilities, she explained.
When a member retires, an actuarial process determines the
present value of the potential benefits the employee will accrue
during his or her remaining lifetime. That amount is
transferred to the retiree reserve account, and benefits are
paid from that account, she explained. Benefits are first paid
from the employee account, which allows time for the evaluation
process to occur and for the funds to transfer to the retiree
reserve account. She said that under a multi-employer plan,
assets may be pooled for expenses and benefits are considered an
expense. At that point, the funds are not accounted for
separately, she indicated.
8:58:00 AM
REPRESENTATIVE WILSON clarified that there is no separate
accounting in the retiree reserve account, and questioned what
factors are considered to determine the retiree reserve account
obligations.
MS. LEA agreed that when a member retires, a valuation is done
to determine the costs associated with that retiring employee.
Each employer the employee worked for then transfers the present
value of that employee's liability into the retiree reserve
account. The goal is that the transfer results in full funding
of the benefits due during the lifetime of the retiring
employee, she said.
8:59:15 AM
REPRESENTATIVE WILSON surmised that the reason funds were not
tracked in the retiree reserve account is because the payment
was designed to fully fund the retiring employee's benefits for
life.
MS. LEA agreed that explains why the funds are not tracked in
the retiree reserve account - the calculations are done prior to
the funds being transferred. In response to a question, she
said that she believes that when the retiree reserve accounts
fall short it becomes part of the unfunded liability.
9:00:47 AM
REPRESENTATIVE ROSES suggested that those in the retired pool
are generating the unfunded liability due to increased life
spans and health care costs. However, since the retirees do not
pay into the system, the state has to look to active employees
and employers for funds to pay the unfunded liability.
MS. LEA stated that in general, she agreed with the above
statement. She explained that the presumption is that the
retiree reserve account assets will be invested so as to pay
benefits. She opined that unforeseen factors can escalate costs
beyond what was predicted at the time of valuation.
9:02:22 AM
REPRESENTATIVE ROSES observed that an employer that has an
unfunded liability is still liable for the costs attributable to
its retired employees even if it has no active employees to
contribute to the liabilities. He asked if part of the reason
for proposing a level payment approach is to help pay for the
unfunded liability of past employees even though the employer
has no active employees.
MS. LEA explained the aforementioned situation occurs when a
system has closed because at some point an employer will have no
active employees. If the rate is calculated across both DB and
DCR salaries, it will provide a mechanism for an employer to pay
their liability for all their retirees.
9:04:26 AM
REPRESENTATIVE ROSES asked if employers must pay for the costs
of their unfunded liabilities if they decide to opt out of the
PERS so as that their liability is not passed on to other
employees in the system.
MS. LEA replied that is how termination cost is calculated.
9:06:20 AM
MS. LEA responded to a question by explaining that the
contribution rate may change when it is calculated on the entire
salary base, but the amount the employer owes does not change.
REPRESENTATIVE SEATON noted that even without employees,
employers have liability for their employee costs.
REPRESENTATIVE WILSON offered her belief that loss of revenue
sharing funds has negatively effected the financial situation of
many municipalities.
COMMISSIONER DESIGNEE KREITZER stated she is aware of
municipality concerns and that is why this bill and the
technical fix bill contain hold harmless provisions. She
indicated her willingness to work towards resolving the varying
issues of each employer without causing financial harm to the
state or municipalities.
COMMISSIONER DESIGNEE KREITZER explained that an employer's
retiree liabilities are calculated as a percent of total retiree
liabilities.
REPRESENTATIVE WILSON asked about the situation where an
employer's account is short when an employee retires.
9:17:14 AM
CHAIR HAWKER suggested that this complex subject may be better
served with a more succinct presentation detailing the key
points of this issue.
REPRESENTATIVE SEATON asked about potential state savings as set
forth in the fiscal note to HB 206.
COMMISSIONER DESIGNEE KREITZER explained that Exhibit 5 of the
Cost Share Exhibit addresses the issue of savings to the general
fund.
[HB 206 was held in committee.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
9:23:56 AM.
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