CS FOR HOUSE BILL NO. 242(FIN) "An Act relating to reemployment of and medical benefits for retired members of the teachers' retirement system and public employees' retirement system; relating to the inclusion of cost-of-living differentials on compensation and benefits under the public employees' retirement system; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. DENISE HENDERSON, staff to Representative Pete Kott, testified read a statement into the record as follows. Basically, what House Bill 242 is designed to provide a tool to bring back retired employees into the public service workforce as well as retain those who are about to retire and possibly aide in the further recommendation and recruitment of younger, qualified employees. The bill itself will make a modest improvement to the Alaska retirement statutes to assist Alaska's public employers in attracting and retaining qualified workers as workforce shortages become more pronounced. Employers throughout the state now are having difficulty in filling certain vacancies and this is occurring at all levels: the teaching, professional, technical and clerical. GUY BELL, Director, Division of Retirement and Benefits, Department of Administration detailed the bill, noting that Sections 1,2,4 and 6 - relate to the teachers retirement system. He pointed out these sections contain segments equivalent to those in SB 149, that passed the Senate a week prior. Mr. Bell detailed Section 1, which permits school districts to hire retired teachers after a declaration of a shortage or an anticipated shortage by a school district. He shared that this section also allows those retired teachers an option of continuing to receive their retirement benefits during their return to teaching, but no long accrue an additional benefit during their return. He pointed out there is a sunset provision of the year 2006 to these provisions. He qualified that a proposed committee substitute changes this date to the year 2005. Mr. Bell informed that Section 6 relates to a "modest enhancement" to medical benefits for Tier II teachers. He explained this is designed as a retention plan in that it provides full medical coverage paid by the Teachers Retirement System (TRS) after 25 years of teaching. He noted that currently a teacher is allowed to retire after 25 years, but does not become eligible to receive medical benefits until age 60, when the system pays half of the costs. He also noted there is a "modest" cost to the TRS fund of .17 percent. He calculated the additional cost based on a $40,000 annual salary to be $68 per teacher per year. Mr. Bell next addressed Sections 7 and 8, which makes equivalent changes to the Public Employees Retirement System (PERS). He listed this applies to state as well as political subdivision, such as municipal government employees, peace officers, professional and technical employees, and "other workers." Mr. Bell stated that Section 10 similar provides similar enhancement of medical benefits to public employees as TRS employees, as detailed above. Mr. Bell concluded with Section 11, which simplifies the method the geographic pay differential is included in the calculation of a retirement benefit and applies to state employees. He shared this is related to legislation adopted in 1986, which required employees hired after that date to spend at least 50 percent of their time in a pay differential area in order for the pay differential to be included in the calculation of their retirement benefits. He noted this legislation also included a provision requiring a comparable amount or "equivalent steps" in the total service to qualify for the retirement pay differential. He stressed the confusing second portion is hard to interpret and explain to members, which makes career planning difficult. He relayed concerns from the Alaska State Troopers and the Department of Fish and Game because these agencies tend to transfer employees across the state during their careers. He stated that HB 242 changes the geographic pay differential provision to only require an employee to spend at least 50 percent of their career in a pay differential area to qualify for the increased benefits in their retirement. Senator Austerman asked if this legislation applies to employees who retired under the Retirement Incentive Plan (RIP) or other early retirement efforts. Mr. Bell answered that this bill specifically prohibits an early retiree from returning to work and also does not allow such employees to receive these additional considerations. He explained an employee must have a "full service" retirement in order to qualify for the added benefits. Co-Chair Kelly announced that because members have not had ample opportunity to review this legislation, he planned to keep it in the Committee. Senator Leman moved to adopt CS HB 242, 22-LS0885\J as a working draft. Co-Chair Kelly asked if the sponsor supported the committee substitute. Ms. Henderson answered yes. Without objection, the committee substitute was ADOPTED. TIM ROGERS, Legislative Program Coordinator, Municipality of Anchorage, testified in support of the bill. He told of the "brain drain" of qualified teachers and the economic necessity for teachers to retire from teaching and work in a second career rather than continue to teach. Co-Chair Kelly ordered the bill HELD in Committee. AT EASE 11:52 AM / 11:56 AM