00 SENATE BILL NO. 6 01 "An Act relating to retirement incentives for members of the defined benefit retirement 02 plan of the teachers' retirement system and the defined benefit retirement plan of the 03 Public Employees' Retirement System of Alaska; and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 06 to read: 07 PURPOSE AND INTENT. The State of Alaska and many local governments and 08 school districts are facing the need to restructure their operations and workforces to reduce 09 expenditures and balance budgets. Retirement incentives are management tools that have been 10 used extensively by the private sector, the federal government, and other state and local 11 governments across the country. The purpose of this Act is to make those management tools 12 temporarily available to the state and to municipalities and school districts in the state. This 13 Act will enable those entities to reduce operating costs by allowing certain positions to 14 become vacant and then eliminating those positions or leaving them vacant. The legislature 01 intends that employers that adopt retirement incentive programs under this Act adopt an 02 accompanying policy that prohibits hiring of new employees. 03 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 RETIREMENT INCENTIVE PROGRAM. (a) An employer, including a state agency, 06 a political subdivision of the state, a public organization, and the University of Alaska, may 07 elect to adopt a retirement incentive program under this Act. The employer may limit 08 applicability of the program to employees 09 (1) in specific budget or administrative components designated by the 10 employer; 11 (2) in specific job classifications designated by the employer; 12 (3) in specific geographic locations identified by the employer; or 13 (4) based on any combination of factors under (1) - (3) of this subsection. 14 (b) Only the administrator may approve or deny an employee's application to 15 participate in a retirement incentive program adopted by an employer under (a) of this section. 16 (c) An employer that elects to adopt a retirement incentive program under (a) of this 17 section shall propose the adopted program to the administrator for approval. The administrator 18 shall approve the program if the program meets the requirements of this section and, if the 19 employer is a state agency, sec. 9(a) of this Act. A program proposed under this section must 20 include 21 (1) job classification designations, and specific budget and administrative 22 components related to those job classification designations, that are wholly or partially made 23 up of employees who may be eligible to participate in the program; 24 (2) a reimbursement agreement that requires 25 (A) the employer, for each employee who participates in the program, 26 to reimburse the defined benefit retirement plan in the appropriate retirement system, 27 within three years after the end of the fiscal year in which the employee is appointed 28 to retirement, in an amount equal to the actuarial equivalent of the difference between 29 the benefits the participant receives after the addition of the credit under (i) of this 30 section and the benefits the participant would have received without the credit, less the 31 amount the participant has paid on the indebtedness determined under (g) or (h) of this 01 section; and 02 (B) the employer's obligation to contribute under this section be given 03 priority over other financial obligations of the employer to the maximum extent 04 permitted by law. 05 (d) An employer that elects, under (a) of this section, to adopt a retirement incentive 06 program may request that the administrator establish one or more periods during which one or 07 more employees of the employer who are eligible under (e) of this section may apply to 08 participate in the program. A period established by the administrator under this subsection 09 may not begin earlier than 30 days after the date it is established or end later than June 30, 10 2024, and must be not less than 30 days and not more than 60 days in duration. 11 (e) The administrator may not allow an employee to participate in a retirement 12 incentive program adopted under this Act unless the employee is eligible under the program 13 for appointment to retirement not later than the earlier of 14 (1) the first day of the sixth month that follows the last day of the application 15 period established by the administrator under (d) of this section; or 16 (2) a date set under the retirement incentive program as the date employees are 17 required to be eligible for appointment to retirement. 18 (f) An employee is eligible to participate in a retirement incentive program under this 19 Act only if 20 (1) the employee is a vested member of a defined benefit retirement plan in 21 the public employees' retirement system or the teachers' retirement system; 22 (2) the employee has credit for service under AS 14.25.110 or AS 39.35.370 23 that occurred before July 1, 2006; 24 (3) the employee is at least 50 years of age, and, before application of credit 25 described in (i) of this section, has 26 (A) at least 15 years of credited service as a peace officer or firefighter, 27 as those terms are defined in AS 39.35.680; or 28 (B) at least 20 years of credited service as an employee other than an 29 employee described in (A) of this paragraph; 30 (4) the employee will be qualified to retire under AS 14.25.110 or 31 AS 39.35.370 after receipt of the credit described in (i) of this section; 01 (5) for an employer that is a state agency, the employee satisfies the additional 02 requirements under sec. 3 of this Act; and 03 (6) the savings to the employer in personal services costs for the employee's 04 position will exceed the costs to the employer for that position within three years after the 05 employee is appointed to retirement. 06 (g) A member of the defined benefit retirement plan in the teachers' retirement system 07 who participates in an approved retirement incentive program under this Act is indebted to the 08 defined benefit retirement plan for an amount calculated under this subsection. The 09 indebtedness is 25.95 percent of the member's actual compensation for the school year in 10 which the member terminates employment, or the calculated school year compensation for a 11 member who works less than the entire school year, plus an appropriate share of the 12 administrative costs of the program. The member may apply annual or personal leave to the 13 indebtedness before appointment to retirement. If the indebtedness is outstanding 14 indebtedness at the time the member is appointed to retirement under the retirement incentive 15 program, the pension benefits payable to the member shall be reduced by an actuarial 16 adjustment that eliminates the indebtedness. 17 (h) A member of the defined benefit retirement plan in the public employees' 18 retirement system who participates in an approved retirement incentive program under this 19 Act is indebted to the defined benefit retirement plan for an amount calculated under this 20 subsection. The indebtedness is 22 1/2 percent for a peace officer or firefighter, and 20 1/4 21 percent for other members, of the member's actual annual compensation for the year in which 22 the member terminates employment, or the calculated annual compensation for a member 23 who works fewer than 12 months, plus an appropriate share of the administrative costs of the 24 program. The member may apply annual or personal leave to the indebtedness before 25 appointment to retirement. If the indebtedness is outstanding at the time the member is 26 appointed to retirement under the retirement incentive program, the pension benefits payable 27 to the member shall be reduced by an actuarial adjustment that eliminates the indebtedness. 28 (i) An employee who participates in an approved retirement incentive program under 29 this Act receives a credit of three years. The three years must be applied in the following 30 order of priority until exhausted: 31 (1) to meet the age or service required for eligibility for normal retirement 01 under AS 14.25.110 or AS 39.35.370, as appropriate; 02 (2) to meet the age required for early retirement under AS 14.25.110 or 03 AS 39.35.370, as appropriate; 04 (3) to reduce the actuarial adjustment required for early retirement under 05 AS 14.25.110 or AS 39.35.370, as appropriate; 06 (4) as years of credited service for calculating retirement benefits. 07 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 08 read: 09 AUTHORIZATION FOR STATE EMPLOYEE RETIREMENT INCENTIVE. (a) 10 Subject to (b) of this section, an employee of a state agency may participate in a retirement 11 incentive program approved under sec. 2 of this Act by the administrator if the employee is 12 eligible to participate under sec. 2 of this Act and the employee 13 (1) has been continuously employed by the state for at least one year before 14 the employee applies to participate in the program; 15 (2) is a permanent seasonal employee employed by the state in a permanent 16 seasonal position for the entire period the position was filled during the 12 months preceding 17 the employee's application to participate in the program; 18 (3) has been employed under a job-sharing agreement in which a state agency 19 allowed two or more employees to share a single position that is identified by a single 20 position control number, for the entire period in which the position was shared during the 12 21 months preceding the employee's application to participate in the program; or 22 (4) meets a combination of the requirements of this subsection. 23 (b) The governor, the lieutenant governor, and a commissioner, deputy commissioner, 24 or assistant commissioner of a principal department of the executive branch of state 25 government may not retire under a retirement incentive program adopted under this Act. 26 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 AUTHORIZATION FOR RETIREMENT INCENTIVE FOR EMPLOYEES OF THE 29 UNIVERSITY OF ALASKA. Notwithstanding AS 14.40.661 - 14.40.799, a participant in a 30 university retirement program under AS 14.40.661 - 14.40.799 who is vested in a defined 31 benefit retirement plan in the public employees' retirement system or the teachers' retirement 01 system may participate in a retirement incentive program for that defined benefit retirement 02 plan if the participant satisfies the requirements under this Act that apply to participants in 03 that retirement incentive program. 04 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 POLITICAL SUBDIVISION OR PUBLIC ORGANIZATION EMPLOYMENT. 07 Notwithstanding AS 14.25 or AS 39.35, for purposes of determining the years of service 08 required for retirement under AS 14.25.110 or AS 39.35.370, as appropriate, an employee of a 09 state agency who has vested as a member of a defined benefit retirement plan in the teachers' 10 retirement system or the public employees' retirement system and applies to participate in a 11 retirement incentive program approved under this Act may receive credit for service while 12 employed with a political subdivision or a public organization that occurred before the 13 political subdivision or public organization elected to participate in that defined benefit 14 retirement plan. The credit may not be applied for the purpose of determining the amount of a 15 retirement benefit. 16 * Sec. 6. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 RECOVERY OF EMPLOYER DELINQUENCIES. To recover a delinquency owed 19 under this Act by an employer other than the state, the commissioner of administration may 20 (1) withhold an amount of money equal to the amount of the delinquency, or a 21 lesser amount, from money payable to the employer by the state, and credit it against the 22 delinquency; and 23 (2) bring an action against the employer. 24 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 25 read: 26 STOPPING ENROLLMENT FOR ACTUARIAL REASONS. If the administrator 27 determines after approving a retirement incentive program under this Act that an increase in 28 the number of participants in that retirement incentive program will have a significant 29 negative effect on the actuarial soundness of a defined benefit retirement plan in the teachers' 30 retirement system or the public employees' retirement system, the administrator may close the 31 program to new applicants. 01 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 REEMPLOYMENT INDEBTEDNESS; PROHIBITION ON REEMPLOYMENT. (a) 04 If an individual is reemployed as a member of the defined benefit retirement plan in the public 05 employees' retirement system under AS 39.35, the defined benefit retirement plan in the 06 teachers' retirement system under AS 14.25, the defined benefit retirement plan in the judicial 07 retirement system under AS 22.25, or the defined benefit retirement plan in the optional 08 university retirement program under AS 14.40.661 - 14.40.799 after appointment to 09 retirement under this Act, that individual forfeits incentive credit received or due under sec. 10 2(i) of this Act and incurs an indebtedness to the defined benefit retirement plan under which 11 the individual has been reemployed as a member. The indebtedness is 110 percent of the 12 amount, including health insurance premium costs, that the individual received solely as a 13 result of participation in a retirement incentive program under this Act. The administrator 14 shall apply the amount the individual has paid under sec. 2 of this Act as a requirement for 15 participation in the retirement incentive as a credit toward the member's reemployment 16 indebtedness under this subsection. Interest on the reemployment indebtedness accrues from 17 the date of reemployment until the date that the individual either is appointed to retirement 18 and accepts an actuarial adjustment to the individual's future benefits or repays the 19 indebtedness in full. The rate of interest is that established by regulation for the member's 20 defined benefit retirement plan by the Alaska Retirement Management Board. 21 (b) A state agency or the University of Alaska may not employ or contract for 22 personal services with an individual who is appointed to retirement under a retirement 23 incentive program authorized by this Act for a period of three years immediately following 24 the date of the individual's appointment to retirement, except that 25 (1) the University of Alaska may enter into a personal services contract with 26 the individual for teaching or research; 27 (2) the individual may accept employment with the legislature during a 28 legislative session if the employment is on an hourly basis and does not entitle the individual 29 to receive retirement, health, or leave benefits; 30 (3) the individual may accept employment with a school district as a substitute 31 teacher; and 01 (4) the individual may accept employment with a school district if the 02 individual participated in the defined benefit retirement plan in the teachers' retirement system 03 and the employment is on an hourly basis and does not entitle the individual to receive 04 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 administrator approves the contract. 08 * Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 09 read: 10 OFFICE OF MANAGEMENT AND BUDGET. (a) The director of the office of 11 management and budget shall review each retirement incentive program adopted by a state 12 agency, determine whether the program will result in a net reduction to the operating costs of 13 the state agency that adopted it for a five-year period beginning July 1, 2021, and report the 14 outcome of the review to the administrator. The administrator may not approve a retirement 15 incentive program adopted by a state agency under sec. 2 of this Act unless the office of 16 management and budget determines that the program's expected effect on the state agency's 17 operation costs is a net reduction. The state agency that adopts the program shall cooperate 18 with and provide information to the office of management and budget to aid with the 19 preparation of the review under this subsection and reports under (b) of this section. 20 (b) Beginning January 15, 2022, and continuing through January 15, 2025, the office 21 of management and budget shall submit to the senate secretary and the chief clerk of the 22 house of representatives an annual report on the retirement incentive programs established 23 under this Act and notify the legislature that the report is available. Each report must provide 24 the information necessary for the legislature to evaluate the retirement incentive programs, 25 including the effect of the programs on the defined benefit retirement plans of the teachers' 26 retirement system and the public employees' retirement system, and whether the programs are 27 economical for employers. The report must include, for each program, 28 (1) the designated employee categories; 29 (2) the employer's cost for each participant; 30 (3) the actual annual cost to the state; 31 (4) for state agencies, the budgeted annual cost; 01 (5) the cost paid by each participant; 02 (6) the number of positions that became vacant as a result of the program and 03 how many of those positions remain vacant; 04 (7) for the relevant three-year period, the projected net savings and the actual 05 net savings resulting from the program. 06 * Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 PROGRAM CHANGES. An individual employee does not have a vested or 09 contractual right to a benefit under this Act until an agreement is executed with the 10 administrator that authorizes the employee to participate in that retirement incentive program. 11 The legislature may change a retirement incentive program established under this Act as it 12 relates to employees for whom an agreement under this section has not been executed. 13 * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 14 read: 15 REGULATIONS. The commissioner of administration may adopt regulations under 16 AS 44.62 (Administrative Procedure Act) to implement and interpret this Act. 17 * Sec. 12. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 DEFINITIONS. (a) Unless provided otherwise in this Act, the definitions set out in 20 AS 14.25.220 apply to provisions in secs. 2 - 11 of this Act that relate to the teachers' 21 retirement system and members of the teachers' retirement system. 22 (b) Unless provided otherwise in this Act, the definitions set out in AS 39.35.680 23 apply to provisions in secs. 2 - 11 of this Act that relate to the public employees' retirement 24 system and members of the public employees' retirement system. 25 (c) In this Act, 26 (1) "administrator" means the commissioner of administration or the 27 commissioner's designee; 28 (2) "employer" has the meaning given in AS 14.25.220 and AS 39.35.680; 29 (3) "office of management and budget" means the office of management and 30 budget in the Office of the Governor; 31 (4) "public employees' retirement system" means the Public Employees' 01 Retirement System of Alaska (AS 39.35); 02 (5) "public organization" has the meaning given in AS 39.35.680; 03 (6) "state agency" means 04 (A) the legislative branch of state government; 05 (B) a principal department of the executive branch of state 06 government; 07 (C) an independent state entity that is attached to a principal 08 department of the executive branch of state government for administrative purposes 09 and is not a public organization as defined in AS 39.35.680; or 10 (D) the Office of the Governor; 11 (7) "teachers' retirement system" means the teachers' retirement system under 12 AS 14.25. 13 * Sec. 13. The uncodified law of the State of Alaska is amended by adding a new section to 14 read: 15 APPLICABILITY TO EXISTING BENEFICIARIES. Sections 1 - 12 of this Act may 16 not impair or diminish the retirement benefits of a person who is appointed to retirement 17 under a defined benefit retirement plan in the teachers' retirement system or the public 18 employees' retirement system, or receives a benefit under that plan, before the effective date 19 of this Act. 20 * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 APPLICABILITY TO CONTRACTS. Sections 1 - 12 of this Act apply to contracts 23 entered into on or after the effective date of this Act. 24 * Sec. 15. Sections 1 - 12 of this Act are repealed July 1, 2024. 25 * Sec. 16. This Act takes effect immediately under AS 01.10.070(c).