00 CS FOR SENATE BILL NO. 137(HES) 01 "An Act relating to retirement incentive programs for the public employees' 02 retirement system, the judicial retirement system, and the teachers' retirement 03 system; relating to separation incentives for certain state employees; and providing 04 for an effective date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. FINDINGS AND PURPOSE. The State of Alaska and many local 07 governments and school districts are facing the need to restructure their operations and their 08 work forces in order to reduce expenditures and balance budgets. Retirement and separation 09 incentives are management tools that have been used extensively by the private sector, the 10 federal government, and other state and local governments across the country. The purpose 11 of this Act is to make these management tools temporarily available to the state and to the 12 municipalities and school districts of the state. This Act will enable these entities to be more 13 efficient and cost-effective by eliminating certain nonessential positions, and producing a net 14 reduction in personnel costs. 01 * Sec. 2. RETIREMENT INCENTIVE PROGRAM. (a) An employer may adopt a 02 retirement incentive plan under secs. 3 - 6 of this Act, as appropriate, and designate categories 03 of employees eligible to participate in that plan. An employer need not extend the incentive 04 plan to all employees who would otherwise be eligible, but may choose to extend the plan 05 only to employees 06 (1) in specific budget or administrative components of the employer; 07 (2) in specific job classifications; 08 (3) in specific geographic locations; or 09 (4) on the basis of any combination of factors under (1) - (3) of this 10 subsection. 11 (b) An employee is eligible to participate in a retirement incentive plan under this Act 12 only if the 13 (1) employee is a vested member of the public employees' retirement system 14 or the teachers' retirement system; 15 (2) employee will be qualified to retire under AS 14.25.110 or AS 39.35.370 16 after receipt of the credit described in (f) of this section; 17 (3) savings to the employer in personal services costs for the employee's 18 position will exceed the costs to the employer for that position within three years after the 19 employee is appointed to retirement. 20 (c) An employer shall file its proposed retirement incentive plan with the 21 commissioner of administration. The commissioner shall approve the plan if the plan meets 22 the requirements of this Act, except that the commissioner may approve a state agency's 23 retirement incentive plan only if the office of management and budget approves the calculation 24 of savings under (b)(3) of this section. A proposed plan filed under this section must 25 (1) identify job classifications of employees, and specific budget or 26 administrative components, eligible to participate in the plan; 27 (2) include a reimbursement agreement that 28  (A) requires the employer, for each employee who retires under the 29 plan, to reimburse the appropriate retirement system, within three years after the end 30 of the fiscal year in which the employee is appointed to retirement, in an amount equal 31 to 01  (i) the actuarial equivalent of the difference between the benefits 02 the participant receives after the addition of the credit under (f) of this section 03 and the amount the participant would have received without the credit, less the 04 amount the participant has paid on the indebtedness determined under (d) or (e) 05 of this section; and 06  (ii) an appropriate share of the administrative costs of the 07 program; and 08  (B) provides that contributions from the employer under this section 09 take priority over other obligations of the employer to the maximum extent permitted 10 by law. 11 (d) A member of the teachers' retirement system who participates in an approved 12 retirement incentive plan under this Act is indebted to that system for an amount calculated 13 under this subsection. The indebtedness is 25.95 percent of the member's actual compensation 14 for the school year in which the member terminates employment, or the calculated school year 15 compensation for a member who works less than the entire school year. An outstanding 16 indebtedness at the time a member is appointed to retirement under an approved retirement 17 incentive plan requires an actuarial adjustment to the benefits payable to that member. 18 (e) A member of the public employees' retirement system who participates in an 19 approved retirement incentive plan under this Act is indebted to that system for an amount 20 calculated under this subsection. The indebtedness is 22-1/2 percent for a peace officer or fire 21 fighter, and 20-1/4 percent for other members, of the member's actual annual compensation 22 for the year in which the member terminates employment, or the calculated annual 23 compensation for a member who works fewer than 12 months. An outstanding indebtedness 24 at the time a member is appointed to retirement under an approved retirement incentive plan 25 requires an actuarial adjustment to the benefits payable to that member. 26 (f) An employee who participates in an approved retirement incentive plan under this 27 Act receives a credit of three years. The three years must be applied in the following order 28 until exhausted: 29 (1) to meet the age or service required for eligibility for normal retirement 30 under AS 14.25.110 or AS 39.35.370, as appropriate; 31 (2) to meet the age required for early retirement under AS 14.25.110 or 01 AS 39.35.370, as appropriate; 02 (3) to reduce the actuarial adjustment required for early retirement under 03 AS 14.25.110 or AS 39.35.370, as appropriate; 04 (4) as years of credited service for calculating retirement benefits. 05 (g) In this section, 06 (1) "department" means 07  (A) a principal department of the executive branch of state government; 08 an independent state entity that is attached to a principal department of the executive 09 branch for administrative purposes but that is not a public organization as defined in 10 AS 39.35.680 is part of that department for purposes of this paragraph; and 11  (B) the Office of the Governor; 12 (2) "employer" has the meaning given in AS 14.25.220 and AS 39.35.680 and 13 includes a department. 14 * Sec. 3. AUTHORIZATION FOR STATE EMPLOYEE RETIREMENT INCENTIVE. 15 (a) A state agency may adopt, and file with the commissioner of administration for approval, 16 a proposed retirement incentive plan for its employees. 17 (b) Upon the request of a state agency, the commissioner of administration shall 18 establish one or more periods during which the employees of that state agency who are 19 eligible under sec. 2(b) of this Act to participate in a retirement incentive plan may apply to 20 the commissioner of administration to participate in the state agency's approved plan. The 21 periods shall begin no earlier than July 1, 1995, and end no later than June 30, 1998. The 22 periods shall be no less than 30 days and no more than 60 days in duration, and may not 23 begin less than 30 days after their establishment. A state agency is not required to request an 24 application period, and may request more than one application period. 25 (c) A proposed retirement incentive plan adopted under this section may not permit 26 an employee who is the governor, the lieutenant governor, or a commissioner, deputy 27 commissioner, or assistant commissioner of a principal department of the executive branch to 28 participate in the plan. 29 (d) A proposed retirement incentive plan adopted under this section may permit 30 participation only by an employee who is eligible to participate under sec. 2(b) of this Act and 31 who 01 (1) has been continuously employed by the state for at least one year before 02 the employee applies to participate in the state agency's approved plan; 03 (2) is a permanent seasonal employee who has been continuously employed 04 by the state in a permanent seasonal position during all of the time in the one year before the 05 employee's application to participate in which the position normally is filled; 06 (3) has a job sharing agreement with a state agency in which two or more 07 employees share a single position identified by a single position control number and in which 08 the employee who applies to participate in the plan was continuously employed by the agency 09 during the portion of the one year before the employee's application in which the employee 10 normally worked under the job sharing agreement; or 11 (4) meets a combination of the requirements of this subsection. 12 (e) The commissioner of administration may not accept the application of an employee 13 to participate in an approved retirement incentive plan adopted under this section unless the 14 employee will be appointed to retirement not later than the first day of the month that is six 15 months after the last day of the application period established by the commissioner under (b) 16 of this section. A state agency, in a plan adopted under this section, may set an earlier date 17 by which an employee must be appointed to retirement in order to participate in the plan. 18 * Sec. 4. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR EMPLOYEES OF 19 THE UNIVERSITY OF ALASKA. (a) The Board of Regents of the University of Alaska 20 may adopt, and file with the commissioner of administration for approval, a proposed 21 retirement incentive plan for university employees. 22 (b) Upon the request of the Board of Regents, the commissioner of administration 23 shall establish one or more periods during which the employees of the university who are 24 eligible under sec. 2(b) of this Act to participate in a retirement incentive plan may apply to 25 the commissioner of administration to participate in the university's approved plan. The 26 periods shall begin no earlier than July 1, 1995, and end no later than June 30, 1998. The 27 periods shall be no less than 30 days and no more than 60 days in duration, and may not 28 begin less than 30 days after their establishment. The Board of Regents is not required to 29 request an application period, and may request more than one application period. 30 (c) The commissioner of administration may not accept the application of an employee 31 to participate in an approved retirement incentive plan adopted under this section unless the 01 employee will be appointed to retirement not later than the first day of the month that is six 02 months after the last day of the application period established by the commissioner under (b) 03 of this section. The Board of Regents, in a plan adopted under this section, may set an earlier 04 date by which an employee of the University of Alaska must be appointed to retirement in 05 order to participate in the plan. 06 (d) A participant in the optional university retirement program under AS 14.40.661 - 07 14.40.799 who is vested in the public employees' retirement system or the teachers' retirement 08 system may participate in a retirement incentive plan for that system if the participant meets 09 the other qualifications of this Act. If a provision of this subsection is inconsistent with 10 another provision of law, the provision of this subsection governs. 11 * Sec. 5. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR OTHER 12 EMPLOYEES IN THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM. (a) The 13 governing body of a political subdivision of the state or public organization that has elected 14 to participate in the public employees' retirement system under AS 39.35.550 - 39.35.650 may 15 adopt, and file with the commissioner of administration for approval, a proposed retirement 16 incentive plan for its employees. A plan adopted under this section must provide that the 17 application period for participation in the retirement incentive plan is December 31, 1995 18 through June 30, 1996. 19 (b) The commissioner of administration may not accept the application of an employee 20 to participate in an approved retirement incentive plan adopted under this section unless the 21 employee will be appointed to retirement on or before February 1, 1997. The governing body 22 of the political subdivision or public organization, in a plan adopted under this section, may 23 set an earlier date by which an employee must be appointed to retirement in order to 24 participate in the plan. 25 * Sec. 6. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR OTHER 26 EMPLOYEES IN THE TEACHERS' RETIREMENT SYSTEM. (a) An employer under the 27 teachers' retirement system who is not otherwise covered by secs. 3 or 4 of this Act may 28 adopt, and file with the commissioner of administration for approval, a proposed retirement 29 incentive plan for its employees. A plan adopted under this section must provide that the 30 application period for participation in the retirement incentive plan is June 30, 1995 through 31 December 31, 1995. 01 (b) The commissioner of administration may not accept the application of an employee 02 to participate in an approved retirement incentive plan adopted under this section unless the 03 employee will be appointed to retirement on or before August 1, 1996. The employer, in a 04 plan adopted under this section, may set an earlier date by which an employee must be 05 appointed to retirement in order to participate in the plan. 06 * Sec. 7. POLITICAL SUBDIVISION OR PUBLIC ORGANIZATION EMPLOYMENT. 07 For purposes of determining the years of service requirements for retirement under 08 AS 14.25.110 or AS 39.35.370, as appropriate, a vested member who is a state employee and 09 who applies to participate in a retirement incentive plan approved under this Act may receive 10 credit for employment with a political subdivision or public organization before the political 11 subdivision or organization became an employer under the public employees' retirement 12 system. The member may not receive credit for those years under this subsection for purposes 13 of determining benefits. If a provision of this section is inconsistent with any other provision 14 of law, the provision of this section governs. 15 * Sec. 8. RECOVERY OF EMPLOYER DELINQUENCIES. To recover a delinquency 16 owed by an employer other than the state under an agreement entered into under sec. 2(c)(2) 17 of this Act, the Department of Administration may 18 (1) direct that the amount of the delinquency or a lesser amount be withheld 19 from any money payable to the employer by a state department or agency and that the amount 20 withheld be credited to the delinquency; and 21 (2) bring an action against the employer. 22 * Sec. 9. PROVISION AND AUTHORIZATION FOR ADMINISTRATIVE DIRECTOR 23 OF COURT. (a) The chief justice of the state supreme court may adopt a retirement 24 incentive plan for an administrative director of the Alaska Court System who is a member of 25 the judicial retirement system under AS 22.25.012 if participation in the plan will result in 26 savings to the court system in personal services costs within three years after the 27 commencement of the plan. The administrative director may participate only if the 28 administrative director is vested in the judicial retirement system and will be qualified to retire 29 under AS 22.25.010 after receipt of the retirement incentive. To participate, the administrative 30 director shall apply to the commissioner of administration to participate in the approved court 31 system plan. 01 (b) The court system shall include in the retirement incentive plan a reimbursement 02 agreement that requires the court system, for each administrative director of the Alaska Court 03 System who is retired under the plan, to reimburse the judicial retirement system within three 04 years after the end of the fiscal year in which the administrative director is appointed to 05 retirement in an amount equal to 06 (1) the actuarial equivalent of the difference between the benefits the 07 administrative director receives after the addition of the credit under (e) of this section and 08 the amount the participant would have received without the credit, less the total of the amount 09 the participant has paid on the indebtedness determined under (d) of this section; and 10 (2) an appropriate share of the administrative costs of the program. 11 (c) A retirement incentive plan adopted under this section must provide that 12 contributions from the court system under (b) of this section take priority over other 13 obligations of the court system to the maximum extent permitted by law. 14 (d) An administrative director of the Alaska Court System who participates in an 15 approved retirement incentive plan is indebted to the system. The amount of indebtedness is 16 equal to 21 percent of the director's actual annual compensation for the year in which the 17 director terminates employment to participate in the program, or the calculated annual 18 compensation for an administrative director who works fewer than 12 months. An outstanding 19 indebtedness at the time the administrative director is appointed to retirement under an 20 approved retirement incentive plan will require an actuarial adjustment to the benefits payable 21 to the director. 22 (e) An administrative director of the Alaska Court System who participates in an 23 approved retirement incentive plan receives a credit of three years that may only be used to 24 meet the age requirements for normal or early retirement under AS 22.25.010(d). 25 (f) The chief justice of the Alaska Court System may adopt, and file with the 26 commissioner of administration for approval, a proposed retirement incentive plan for the 27 administrative director of the court system who is a member of the judicial retirement system. 28 Upon the request of the chief justice, the commissioner of administration shall establish a 29 period during which an administrative director eligible to participate in the retirement incentive 30 plan of the court system may apply to the commissioner of administration to participate in the 31 court system's approved plan. The period shall begin no earlier than July 1, 1995, and end 01 no later than June 30, 1998. The period shall be no less than 30 days and no more than 60 02 days in duration and may not begin less than 30 days after establishment. The chief justice 03 is not required to request an application period. 04 (g) The commissioner of administration may not accept the application of an 05 administrative director of the court system to participate in an approved retirement incentive 06 plan adopted under this section unless the administrative director will be appointed to 07 retirement not later than the first day of the month that is six months after the last day of the 08 application period established by the commissioner under (f) of this section. The chief justice, 09 in a plan adopted under this section, may set an earlier date by which an administrative 10 director must be appointed to retirement in order to participate in the plan. 11 * Sec. 10. REEMPLOYMENT INDEBTEDNESS; PROHIBITION ON 12 REEMPLOYMENT. (a) If an individual is reemployed as a member of the public employees' 13 retirement system under AS 39.35, the teachers' retirement system under AS 14.25, the judicial 14 retirement system under AS 22.25, or the optional university retirement program under 15 AS 14.40.661 - 14.40.799 after appointment to retirement under this Act, that individual 16 forfeits the incentive credit received under sec. 2(f) or sec. 9(e) of this Act and is indebted to 17 the system under which the individual took retirement. The indebtedness is 110 percent of 18 the amount the individual received as a result of participation in a retirement incentive plan 19 under this Act and to which the individual would not otherwise have been entitled, including 20 the cost of health insurance. The amount that the individual has paid under sec. 2(d) or (e) 21 or sec. 9(d) of this Act will be applied as a credit toward the reemployment indebtedness. 22 Interest on the reemployment indebtedness accrues from the date of reemployment until the 23 date that the individual either is appointed to retirement and accepts an actuarial adjustment 24 to the individual's future benefits or repays the indebtedness in full. The rate of interest is that 25 established by regulation for the public employees' retirement system by the public employees' 26 retirement board and for the teachers' retirement system by the teachers' retirement board. 27 (b) An individual who was appointed to retirement under this Act may not be 28 employed by, or enter into a contract for personal services with, a state agency or the 29 University of Alaska within the three years after the date of appointment to retirement, except 30 that 31 (1) the University of Alaska may enter into a personal services contract with 01 the individual for teaching or research; and 02 (2) the individual may accept employment with the legislature during a 03 legislative session if the employment is on an hourly basis and does not entitle the individual 04 to receive retirement, health, or leave benefits. 05 (c) Notwithstanding the prohibition in (b) of this section, a state agency or the 06 University of Alaska may enter into a personal services contract with an individual who was 07 appointed to retirement under this Act if the Board of Regents, for the University of Alaska, 08 or the commissioner of administration, for a state agency, determines that there is a 09 compelling reason to do so because of the individual's specialized or extensive experience that 10 relates to a particular program or project of the state agency or university. However, a state 11 agency may not enter into a contract with an individual under this subsection if the individual 12 was employed by that state agency at the time of the individual's appointment to retirement. 13 * Sec. 11. SEPARATION INCENTIVE PROGRAM. (a) A state agency may, with the 14 approval of the director of the office of management and budget, establish a separation 15 incentive program for its employees. The program may be offered in combination with an 16 approved retirement incentive plan adopted under sec. 3 of this Act, or may be offered 17 separately from such a plan. A state agency need not extend an incentive program under this 18 section to all employees who would otherwise be eligible to participate, but may choose to 19 extend the program only to employees 20 (1) in specific budget or administrative components of the state agency; 21 (2) in specific job classifications; 22 (3) on the basis of any combination of factors under (1) and (2) of this 23 subsection. 24 (b) A separation incentive payment under this section shall be paid in a lump sum 25 after the employee's separation from state service, and shall be equal to the lesser of an 26 amount equaling six months of the employee's base salary, or $25,000. However, a state 27 agency or the office of management and budget may set a lower separation incentive payment 28 in the state agency's separation incentive program. 29 (c) Upon the request of a state agency, the commissioner of administration shall 30 establish one or more periods during which the employees of that state agency may apply to 31 the commissioner of administration to participate in the state agency's approved separation 01 incentive program. The periods shall begin no earlier than July 1, 1995, and end no later than 02 June 30, 1998. The periods shall be no less than 30 days and no more than 60 days in 03 duration, and may not begin less than 30 days after their establishment. A state agency is not 04 required to request an application period, and may request more than one application period. 05 If the commissioner of administration has established one or more application periods for a 06 state agency under sec. 3(b) of this Act, the application period or periods established under 07 this subsection must coincide with the period or periods established under sec. 3(b) of this 08 Act. 09 (d) A separation incentive program established under this section must provide that 10 a separation incentive payment to an employee may be made only if 11 (1) the employee is a permanent full-time or permanent full-time seasonal 12 employee with at least five years of service with the state; and 13 (2) the savings to the state agency in personal services costs for the position 14 occupied by that employee would exceed, in the three years after the employee separates, the 15 amount of the separation incentive payment. 16 (e) If an individual who received a separation incentive payment under this section 17 subsequently is reemployed by a state agency or the University of Alaska within the three 18 years after the date that the individual received the separation incentive payment, the 19 individual is liable to the state in an amount equal to 110 percent of the amount of the 20 separation incentive payment, plus interest at the rate prescribed by AS 45.45.010, 21 commencing on the date that the individual received the separation incentive payment. 22 (f) If an employee is eligible to participate in an approved retirement incentive plan 23 adopted under sec. 3 of this Act, 24 (1) a separation incentive payment to that employee may not exceed the 25 amount that the state agency would be obligated to pay to the appropriate retirement system, 26 notwithstanding (b) of this section; and 27 (2) the employee may participate in either the separation incentive program 28 under this section or the retirement incentive plan adopted under sec. 3 of this Act, but not 29 both. 30 (g) In this section, "base salary" means the monthly salary paid to an employee under 31 the applicable collective bargaining agreement, AS 39.27.011, or another applicable pay 01 schedule, and includes geographic differential; if an employee is paid on an hourly basis, the 02 employee's base salary is the employee's hourly rate, including geographic differential, 03 multiplied by the number of hours in the employee's regular work week, multiplied by 4.35. 04 * Sec. 12. OFFICE OF MANAGEMENT AND BUDGET. (a) When designating an 05 employee category for participation in a retirement incentive plan or a separation incentive 06 program under this Act, the executive head of the relevant state agency shall describe in detail 07 the expected effect of the plan or program on the agency's personal services cost and 08 operation. This financial report must be approved by the director of the office of management 09 and budget before the commissioner of administration may approve the proposed plan or 10 program. The state agency shall report each year to the office of management and budget on 11 the cost of each employee's participation and the effect on the agency's personal services cost 12 and operation. 13 (b) The office of management and budget shall submit to the legislature annual reports 14 on the retirement incentive and separation incentive programs under this Act beginning 15 January 15, 1997, and continuing through January 15, 1999, and shall submit a final report 16 January 15, 2000. Each report must provide the information necessary for the legislature to 17 evaluate the effectiveness of the programs in achieving their objectives. The report must 18 include information on the designated employee categories under the incentive programs, 19 including the cost of each incentive program per participant, the cost to the state, the cost to 20 the employee, the annual budgeted amount, by state agency, for the incentives, the number of 21 positions deleted or left vacant, and the projected or actual net savings over the three-year 22 period. 23 * Sec. 13. PROGRAM CHANGES. (a) An individual employee does not have a vested 24 or contractual right to a benefit under this Act until an agreement is executed with the 25 administrator that specifically authorizes that employee to participate in the retirement 26 incentive program under this Act or until an agreement is executed with the commissioner of 27 administration to participate in the separation incentive program under this Act. The legisla- 28 ture reserves the right to change any aspect of either incentive program as it relates to 29 employees for whom participation agreements have not yet been executed with the 30 administrator or with the commissioner of administration. 31 (b) In this section, "administrator" means the administrator of the public employees' 01 retirement system for employees who are members of that system, and the administrator of 02 the teachers' retirement system for employees who are members of that system. 03 * Sec. 14. REGULATIONS. The commissioner of the Department of Administration may 04 adopt regulations under AS 44.62 (Administrative Procedure Act) to implement and interpret 05 this Act. 06 * Sec. 15. DEFINITIONS. (a) Unless provided otherwise in this Act, the definitions set 07 out in AS 14.25.220 apply to provisions in secs. 2 - 10 of this Act that relate to the teachers' 08 retirement system and members of the teachers' retirement system. 09 (b) Unless provided otherwise in this Act, the definitions set out in AS 39.35.680 10 apply to provisions in secs. 2 - 10 of this Act that relate to the public employees' retirement 11 system and members of the public employees' retirement system. 12 (c) Unless provided otherwise in this Act, the definition set out in AS 22.25.900 13 applies to provisions in sec. 9 of this Act that relate to the judicial retirement system and 14 members of the judicial retirement system. 15 (d) In this Act, 16 (1) "judicial retirement system" means the retirement system established for 17 judges and justices in AS 22.25; 18 (2) "office of management and budget" means the office of management and 19 budget in the Office of the Governor; 20 (3) "public employees' retirement system" means the Public Employees' 21 Retirement System of Alaska (AS 39.35); 22 (4) "state agency" 23  (A) means 24  (i) the legislative branch of state government; 25  (ii) the judicial branch of state government; 26  (iii) a principal department of the executive branch of state 27 government; an independent state entity that is attached to a principal 28 department of the executive branch for administrative purposes but that is not 29 a public organization as defined in AS 39.35.680 is part of that department for 30 purposes of this clause; and 31  (iv) the Office of the Governor; 01 (B) does not include 02  (i) the University of Alaska; 03  (ii) a political subdivision of the state; or 04  (iii) a public organization as defined in AS 39.35.680; 05 (5) "teachers' retirement system" means the Teachers' Retirement System of 06 Alaska (AS 14.25). 07 * Sec. 16. Sections 2, 3, and 11 of this Act are repealed July 1, 1999. 08 * Sec. 17. Sections 4 - 7 and 9 of this Act are repealed July 1, 1997. 09 * Sec. 18. This Act takes effect immediately under AS 01.10.070(c).