Alaska State Legislature

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CSSB 148(RLS) AM(EFD FLD): "An Act relating to contributions and benefits in the teachers' retirement system and in the public employees' retirement system; relating to retirement incentive programs for the public employees' retirement system and the teachers' retirement system; relating to separation incentives for certain state employees; repealing a provision permitting the National Education Association to participate in the teachers' retirement system."

00CS FOR SENATE BILL NO. 148(RLS) am(efd fld) 01 "An Act relating to contributions and benefits in the teachers' retirement system 02 and in the public employees' retirement system; relating to retirement incentive 03 programs for the public employees' retirement system and the teachers' 04 retirement system; relating to separation incentives for certain state employees; 05 repealing a provision permitting the National Education Association to participate 06 in the teachers' retirement system." 07 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 08 * Section 1. AS 14.25.040(a) is amended to read: 09 (a) Unless a teacher or member has elected to participate in the optional 10 university retirement program under AS 14.40.661 - 14.40.799, a teacher or member 11 contracting for service with a participating employer is subject to this chapter. A 12 school board shall, by resolution, elect whether to participate in the reduction in 13 contributions and benefits enacted by this Act and shall inform the administrator 14 of its decision. For school boards in existence on January 31, 1996, the board

01 shall inform the administrator no later than February 1, 1996. A school board 02 that comes into existence after January 31, 1996, shall inform the administrator 03 whether it elects to be a participating or nonparticipating employer. A school 04 board that elects to participate in the reductions may not later revoke its 05 participation. 06 * Sec. 2. AS 14.25.050(a) is amended to read: 07 (a) A [BEGINNING JANUARY 1, 1991, EACH] teacher who is first hired 08 on or after March 31, 1996, by the Department of Education, the University of 09 Alaska, or a participating school district shall contribute to the system an amount 10 equal to 5.5 percent of the teacher's base salary accrued from July 1 to the 11 following June 30. A teacher who is first hired before March 31, 1996, or who 12 was hired by a nonparticipating school district on or after March 31, 1996, shall 13 contribute to the system an amount equal to 8.65 percent of the teacher's base salary 14 accrued from July 1 to the following June 30. The employer shall deduct the 15 contribution from the teacher's salary at the end of each payroll period. The 16 contributions shall be deducted from employee compensation before the computation 17 of applicable federal taxes and shall be treated as employer contributions under 26 18 U.S.C. 414(h)(2). 19 * Sec. 3. AS 14.25.070 is amended to read: 20 Sec. 14.25.070. CONTRIBUTIONS BY EMPLOYER. For employees first 21 hired before March 31, 1996, and for employees hired after that date by a 22 nonparticipating school district, an [AN] employer shall contribute to the system an 23 amount equal to the percentage, as certified by the administrator, of the sum total of 24 the base salaries of all those teachers that is required in addition to teacher 25 contributions to provide the benefits of this chapter for those teachers times the sum 26 total of the base salaries paid to those teachers by the employer. For teachers first 27 hired on or after March 31, 1996, by the Department of Education, the University 28 of Alaska, or a participating school district, the percentage that the employer shall 29 contribute shall be computed under this section with the data that applies to those 30 teachers. 31 * Sec. 4. AS 14.25.110(a) is amended to read:

01 (a) Subject to AS 14.25.167, a member is eligible for a normal retirement 02 benefit if the member was first hired 03 (1) [WAS FIRST HIRED] before July 1, 1975, has attained the age of 04 55 years, and has at least 15 years of credited service, the last five of which have been 05 membership service or is otherwise vested in the system; 06 (2) on or after July 1, 1975, and before March 31, 1996, or after 07 March 31, 1996, by a nonparticipating school district, has attained the age of 60 08 years, and has at least eight years of membership service; 09 (3) before March 31, 1996, or on or after that date by a 10 nonparticipating school district, has attained the age of 60 years, has at least five 11 years of membership service, and has at least three years of Alaska BIA service; 12 (4) on or after March 31, 1996, by the Department of Education, 13 the University of Alaska, or participating school district and 14 (A) has attained the age of 60 years and has at least five 15 years of membership service; or 16 (B) the sum of the member's age plus the member's years 17 of membership service equals or exceeds 85; 18 (5) before March 31, 1996, or on or after that date by a 19 nonparticipating school district and [(4)] has at least 25 years of credited service, 20 the last five of which have been membership service; 21 (6) before March 31, 1996, or on or after that date by a 22 nonparticipating school district and [(5)] has at least 20 years of membership 23 service; 24 (7) before March 31, 1996, or on or after that date by a 25 nonparticipating school district and [(6)] has at least 20 years of combined 26 membership service and Alaska BIA service, the last five of which have been 27 membership service; or 28 (8) before March 31, 1996, or on or after that date by a 29 nonparticipating school district and [(7)] has, for each of 20 school years, 30 (A) at least one-half year of membership service as a part-time 31 teacher;

01 (B) one full year of membership service as a full-time teacher; 02 or 03 (C) any combination of service qualified under this paragraph. 04 * Sec. 5. AS 14.25.110(d) is amended to read: 05 (d) The monthly amount of a retirement benefit for a member who has paid 06 the full amount of any indebtedness is one-twelfth of the member's average base salary 07 during any three school years of membership service multiplied for members first 08 hired 09 (1) before March 31, 1996, or on or after that date by a 10 nonparticipating school district by 11 (A) [(1)] two percent of the years of credited service earned 12 before June 30, 1990, including credited fractional years, and the years of 13 credited service through a total of 20 years; plus 14 (B) [(2)] two and one-half percent of the years of credited 15 service earned after June 30, 1990, that are more than 20 years of total credited 16 service; or 17 (2) on or after March 31, 1996, by the Department of Education, 18 the University of Alaska, or a participating school district by one and one-half 19 percent of the years of credited service. 20 * Sec. 6. AS 14.25.110(j) is amended to read: 21 (j) For teachers first hired before March 31, 1996, or on or after that date 22 by a nonparticipating school district, an [AN] actuarial adjustment must be made 23 to benefits payable under (d) of this section for early retirement. For teachers first 24 hired on or after March 31, 1996, by the Department of Education, the University 25 of Alaska, or a nonparticipating school district, the monthly amount of a 26 retirement benefit that would be due under (d) of this section shall be reduced by 27 multiplying one-half of one percent times the number of months, to the nearest 28 month, by which the retirement date of the teacher falls short of the date on 29 which the teacher reaches 60 years of age. 30 * Sec. 7. AS 14.25.143(a) is amended to read: 31 (a) Once each year, the administrator shall increase benefit payments to

01 (1) eligible disabled members; 02 (2) [, TO] persons age 60 or older receiving benefits under this system 03 in the preceding calendar year; 04 (3) members who were first hired before March 31, 1996, or on or 05 after that date by a nonparticipating school district [, AND TO PERSONS] who 06 have received benefits under this system for at least eight years and who are not 07 otherwise eligible for an increase under this section; and 08 (4) survivors of members described in (3) of this subsection when 09 the member and the survivor have together received benefits under this system 10 for at least eight years. 11 * Sec. 8. AS 14.25.143(b) is amended to read: 12 (b) The increase in benefit payments applies to total benefit payments except 13 for the cost-of-living allowance under AS 14.25.142. For members first hired on or 14 after March 31, 1996, by the Department of Education, the University of Alaska, 15 or a participating school district, the amount of the increase is the lesser of 50 16 percent of the increase in the cost-of-living in the preceding calendar year or six 17 percent. For members first hired before March 31, 1996, or on or after that date 18 by a nonparticipating school district, the [THE] amount of the increase is a 19 percentage of the current benefit equal to 20 (1) the lesser of 75 percent of the increase in the cost of living in the 21 preceding calendar year or nine percent, for recipients who on July 1 are at least 65 22 years old and for members receiving disability benefits; and 23 (2) the lesser of 50 percent of the increase in the cost of living in the 24 preceding calendar year or six percent, for recipients who on July 1 are at least 60 but 25 less than 65 years old or for recipients who on July 1 are less than 60 years old but 26 who have received benefits from the system for at least eight years. 27 * Sec. 9. AS 14.25.167(a) is amended to read: 28 (a) Benefits payable under this section are in place of benefits payable under 29 AS 14.25.110, 14.25.125, 14.25.155, 14.25.157, 14.25.160, 14.25.162, or 14.25.164. 30 Upon filing an application for retirement with the administrator, or when a disabled 31 member becomes eligible for normal retirement under AS 14.25.130(e), the member

01 shall designate the person who is the member's spouse at the time of appointment to 02 retirement as the contingent beneficiary. However, if the designation of the spouse is 03 revoked under (c) of this section, the member may designate a dependent approved by 04 the administrator as the contingent beneficiary or may take normal or early retirement 05 under AS 14.25.110 or 14.25.125. The administrator shall pay benefits under the 06 option elected by the member. The member may elect an option that provides that 07 (1) the member is entitled to receive a reduced benefit payable for life, 08 and, after the member's death, the contingent beneficiary is entitled to receive 09 payments in the amount of 75 percent of the reduced benefit for life; 10 (2) the member is entitled to receive a reduced benefit payable for life, 11 and, after the member's death, the contingent beneficiary is entitled to receive 12 payments in the amount of 50 percent of the reduced benefit for life; or 13 (3) for members first hired before March 31, 1996, or on or after 14 that date by a nonparticipating school district, the member is entitled to receive a 15 reduced benefit payable during the joint lifetime of the member and the contingent 16 beneficiary, and, after the death of either the member or the contingent beneficiary, the 17 survivor is entitled to receive payments in the amount of 66-2/3 percent of the reduced 18 benefit for life. 19 * Sec. 10. AS 14.25.168(d) is amended to read: 20 (d) A benefit recipient may elect major medical insurance coverage in 21 accordance with regulations and under the following conditions: 22 (1) a person who is younger than 60 years of age must pay an amount 23 equal to the full monthly group premium for retiree major medical insurance coverage; 24 (2) a person who is at least 60 years of age but is younger than 65 25 years of age must pay an amount equal to one-half of the full monthly group premium 26 for retiree major medical insurance coverage; 27 (3) a disabled member or a person 65 years of age or older is not 28 required to make premium payments; 29 (4) a benefit recipient who was first hired on or after March 31, 30 1996, by the Department of Education, University of Alaska, or a participating 31 school district who is electing major medical insurance coverage for dependents

01 eligible under (a)(2) or (3) of this section shall pay the full cost of that insurance. 02 * Sec. 11. AS 14.25.220(42) is amended to read: 03 (42) "vested member" or "vested teacher" means an active member who 04 has completed either 05 (A) 15 years of service, the last five of which have been 06 membership service, for a member first hired before July 1, 1975; 07 (B) eight years of membership service if the member was first 08 hired before March 31, 1996, or on or after that date by a 09 nonparticipating school district; 10 (C) five years of membership and three years of BIA service if 11 the member was first hired before March 31, 1996, or on or after that date 12 by a nonparticipating school district; [OR] 13 (D) 12 school years of part-time membership service or 12 14 school years in each of which the member earned either part-time or full-time 15 membership service; or 16 (E) five years of membership service if the member was first 17 hired on or after March 31, 1996, by the Department of Education, 18 University of Alaska, or a participating school district; 19 * Sec. 12. AS 14.25.220 is amended by adding new paragraphs to read: 20 (44) "nonparticipating school district" means a school district that has 21 chosen under AS 14.25.040(a) not to participate in the amendments to this chapter and 22 AS 39.35 that reduce retirement contribution rates and benefits; 23 (45) "participating school district" means a school district that has 24 chosen under AS 14.25.040(a) to participate in the amendments to this chapter and 25 AS 39.35 that reduce retirement contribution rates and benefits. 26 * Sec. 13. AS 39.35.160(a) is amended to read: 27 (a) A [BEGINNING JANUARY 1, 1987, EACH] peace officer or fire fighter 28 who is first hired on or after March 31, 1996, other than an employee of a 29 nonparticipating employer, shall contribute to the system an amount equal to six 30 percent of the peace officer's or fire fighter's compensation. A peace officer or 31 fire fighter who is first hired before March 31, 1996, or who is an employee of a

01 nonparticipating employer, shall contribute to the system an amount equal to seven 02 and one-half percent of the peace officer's or fire fighter's compensation. Except for 03 employees of nonparticipating employers, each [BEGINNING JANUARY 1, 1987, 04 EACH] other employee who is first hired on or after March 31, 1996, shall 05 contribute to the system an amount equal to five and one-half percent of the 06 employee's compensation. Each other employee who is first hired before 07 March 31, 1996, or on or after that date by a nonparticipating employer shall 08 contribute to the system an amount equal to six and three-quarters percent of the 09 employee's compensation. The contributions shall be deducted by the employer at the 10 end of each payroll period. The contributions shall be deducted from employee 11 compensation before computation of applicable federal taxes, and the contributions 12 shall be treated as employer contributions under 26 U.S.C. 414(h)(2). 13 * Sec. 14. AS 39.35.250 is amended to read: 14 Sec. 39.35.250. CALCULATION OF EMPLOYER'S CONTRIBUTION RATE. 15 (a) An employer shall make contributions to the system in amounts determined in 16 accordance with this section. For the purposes of this section, the past service date for 17 each employer for employees first hired before March 31, 1996, and for employees 18 hired on or after that date by nonparticipating employers is the entry date of the 19 employer or December 31, 1972, whichever is later. The past service date for 20 employees first hired on or after March 31, 1996, other than employees of 21 nonparticipating employers, is the entry date of the employer or March 31, 1996, 22 whichever is later. After December 31, 1972, if amendments to this chapter are 23 enacted that substantially affect benefits accrued before the effective date of the 24 amendment, the past service date will be changed to December 31 of the year 25 immediately preceding that in which the amendment is enacted. The contribution rate 26 for employees first hired before March 31, 1996, and for employees hired on or 27 after that date by nonparticipating employers, is the sum of the consolidated 28 employer rate for those employees and the past service rate that applies to those 29 employees. The contribution rate for employees first hired on or after March 31, 30 1996, other than employees of nonparticipating employers, is the sum of the 31 consolidated employer rate for those employees and the past service rate that

01 applies to those employees. 02 (b) In (a) of this section, "consolidated employer rate" for employees first 03 hired before March 31, 1996, and for employees hired on or after that date by 04 nonparticipating employers means the percentage of compensation of all those active 05 employees in the system which, if paid over the period of their credited service after 06 the [THEIR] past service date of those employees and when combined with all 07 employee contributions from those employees, is sufficient to provide the benefits 08 earned after such past service dates. This percentage is uniformly determined for all 09 employers for employees first hired before March 31, 1996, and for employees 10 hired on or after that date by nonparticipating employers and is applicable to each 11 employer. The consolidated employer rate for employees first hired on or after 12 March 31, 1996, other than employees of nonparticipating employers, shall be 13 separately determined under this subsection with the data that applies to those 14 employees. 15 (c) In (a) of this section, "past service rate" for employees first hired before 16 March 31, 1996, and for employees hired on or after that date by 17 nonparticipating employers means the percentage of compensation of all those active 18 employees in the system necessary to provide the annual amount required to amortize 19 the unfunded obligations of the employer for benefits earned by those employees 20 before the employer's past service date over a period not to exceed 40 years. The 21 period of amortization begins at the past service date of each employer. The 22 percentage is separately determined for each employer. The past service rate for 23 employees first hired on or after March 31, 1996, and employees hired on or after 24 that date by nonparticipating employers shall be separately determined under this 25 subsection with the data that applies to those employees. 26 * Sec. 15. AS 39.35.370(a) is amended to read: 27 (a) Subject to AS 39.35.450, a terminated employee is eligible for a normal 28 retirement benefit 29 (1) at age 60 with at least five years credited service; [,] or 30 (2) with at least 20 years of credited service as a peace officer or fire 31 fighter for peace officers or fire fighters first hired before March 31, 1996, or

01 hired on or after that date by a nonparticipating employer; [, OR] 02 (3) with at least 25 years of credited service as a peace officer or 03 fire fighter for peace officers and fire fighters first hired on or after March 31, 04 1996, other than employees of nonparticipating employers; 05 (4) with at least 30 years of credited service for all other employees if 06 the employee was first hired before March 31, 1996, or if the employee was hired 07 on or after that date by a nonparticipating employer; or 08 (5) with a combination of age and years of credited service equal 09 to or greater than 85. 10 * Sec. 16. AS 39.35.370(b) is amended to read: 11 (b) Subject to AS 39.35.450, a terminated employee is eligible for an early 12 retirement benefit at age 55 with at least five years credited service. For employees 13 first hired before March 31, 1996, and for employees hired on or after that date 14 by nonparticipating employers, an [AN] actuarial adjustment must be made to 15 retirement benefits paid under this section for an early retirement benefit. For 16 employees first hired on or after March 31, 1996, other than employees of 17 nonparticipating employers, the monthly amount of a retirement benefit that 18 would be due under (c) of this section shall be reduced by multiplying one-half 19 of one percent times the number of months, to the nearest month, by which the 20 retirement date of the employee falls short of the date that the employee reaches 21 age 60. 22 * Sec. 17. AS 39.35.370(c) is amended to read: 23 (c) For employees first hired on or after March 31, 1996, other than for 24 employees of nonparticipating employers, the monthly amount of a retirement 25 benefit is one and one-half percent of the average monthly compensation times the 26 years of credited service. The monthly amount of a retirement benefit for a peace 27 officer or fire fighter first hired before March 31, 1996, and for a peace officer or 28 fire fighter hired on or after that date by a nonparticipating employer, is two 29 percent of the average monthly compensation times the years of credited service 30 through 10 years, plus two and one-half percent of the average monthly compensation 31 times the years of service over 10 years. For all other employees first hired before

01 March 31, 1996, and for other employees of nonparticipating employers first hired 02 on or after that date, it is 03 (1) two percent of the average monthly compensation times all years 04 of service before July 1, 1986, and for years of service through a total of 10 years; 05 plus 06 (2) two and one-quarter percent of the average monthly compensation 07 times all years of service after June 30, 1986, over 10 years of total service through 08 20 years; plus 09 (3) two and one-half percent of the average monthly compensation 10 times all years of service after June 30, 1986, over 20 years of total service. 11 * Sec. 18. AS 39.35.450(a) is amended to read: 12 (a) Benefits payable under this section are in place of benefits payable under 13 AS 39.35.370, 39.35.385, and 39.35.460. Upon filing an application with the 14 administrator or when a disabled employee first attains eligibility for normal retirement 15 under AS 39.35.400(f) or 39.35.410(h), the employee shall designate the person who 16 is the employee's spouse at the time of appointment to retirement as the contingent 17 beneficiary. However, if the designation of the spouse is revoked under (c) of this 18 section, the employee may designate a dependent approved by the administrator as the 19 contingent beneficiary or may take normal or early retirement under AS 39.35.370 or 20 39.35.385 or a level income option under AS 39.35.460. The administrator shall pay 21 benefits under the option elected by the employee. The employee may elect an option 22 that provides that 23 (1) the employee is entitled to receive a reduced benefit payable for 24 life, and, after the employee's death, the contingent beneficiary is entitled to payments 25 in the amount of 75 percent of the reduced benefit payable for life; 26 (2) the employee is entitled to receive a reduced benefit payable for 27 life, and, after the employee's death, the contingent beneficiary is entitled to receive 28 payments in the amount of 50 percent of the reduced benefit payable for life; 29 (3) for employees first hired before March 31, 1996, or hired on or 30 after that date by a nonparticipating employer, the employee is entitled to receive 31 a reduced benefit payable during the joint lifetime of the employee and the contingent

01 beneficiary, and, after the death of either the employee or the contingent beneficiary, 02 the survivor is entitled to receive payments in the amount of 66 2/3 percent of the 03 reduced benefit payable for life. 04 * Sec. 19. AS 39.35.460 is amended to read: 05 Sec. 39.35.460. LEVEL INCOME OPTION. For an employee first hired 06 before March 31, 1996, or hired on or after that date by a nonparticipating 07 employer, if [IF] the payment of a retirement pension begins before age 65, the 08 amount of pension payable before and after that age may be adjusted so that an 09 increased amount will be paid before the time that full social security benefits become 10 available and a reduced amount after that time, so that the employee may receive a 11 more level income for life. The aggregate value of all adjusted payments may not 12 exceed the actuarial equivalent of the value of the pension otherwise payable to the 13 employee. 14 * Sec. 20. AS 39.35.475(a) is amended to read: 15 (a) Once each year the administrator shall increase benefit payments to 16 (1) eligible disabled members; 17 (2) [, TO] persons age 60 or older receiving benefits under this system 18 in the preceding calendar year; 19 (3) members who were first hired before March 31, 1996, or who 20 were hired on or after that date by a nonparticipating employer [, AND TO 21 PERSONS] who have received benefits under this system for at least five years and 22 who are not otherwise eligible for an increase under this section; and 23 (4) survivors of members described in (3) of this subsection when 24 the member and the survivor have together received benefits under this system 25 for at least five years. 26 * Sec. 21. AS 39.35.475(b) is amended to read: 27 (b) The increase in benefit payments applies to total benefit payments except 28 for the cost-of-living allowance under AS 39.35.480. For members first hired on or 29 after March 31, 1996, other than employees of a nonparticipating employer, the 30 amount of the increase is a percentage of the current benefit equal to the lesser 31 of 50 percent of the increase in the cost of living in the preceding calendar year

01 or six percent. For members first hired before March 31, 1996, or hired on or 02 after that date by a nonparticipating employer, the [THE] amount of the increase 03 is a percentage of the current benefit equal to 04 (1) the lesser of 75 percent of the increase in the cost of living in the 05 preceding calendar year or nine percent, for recipients who on July 1 are at least 65 06 years old and for members receiving disability benefits; and 07 (2) the lesser of 50 percent of the increase in the cost of living in the 08 preceding calendar year or six percent, for recipients who on July 1 are at least 60 but 09 less than 65 years old or for recipients who are less than 60 years old on July 1 but 10 who have received benefits from the system for at least five years. 11 * Sec. 22. AS 39.35.535(c) is amended to read: 12 (c) A benefit recipient may elect major medical insurance coverage in 13 accordance with regulations and under the following conditions: 14 (1) a person who is younger than 60 years of age must pay an amount 15 equal to the full monthly group premium for retiree major medical insurance coverage; 16 (2) a person who is at least 60 years of age but is younger than 65 17 years of age must pay an amount equal to one-half of the full monthly group premium 18 for retiree major medical insurance coverage; 19 (3) a disabled member or a person 65 years of age or older is not 20 required to make premium payments; 21 (4) a benefit recipient who is first hired on or after March 31, 1996, 22 other than a recipient receiving benefits through a nonparticipating employer, 23 who is electing major medical insurance coverage for dependents eligible under 24 (a)(2) and (3) of this section shall pay the full cost of that insurance. 25 * Sec. 23. AS 39.35 is amended by adding a new section to read: 26 Sec. 39.35.565. PARTICIPATION IN REDUCED CONTRIBUTIONS AND 27 BENEFITS. A political subdivision or public organization participating in the system 28 on January 31, 1996, shall, by resolution, elect whether to participate in the reduction 29 in contributions and benefits enacted by this Act and shall inform the administrator of 30 its decision no later than February 1, 1996. A political subdivision or public 31 organization that becomes an employer in the system on or after February 1, 1996,

01 shall inform the administrator whether it has elected to be a nonparticipating employer. 02 A political subdivision or public organization that is an employer in the system that 03 elects to participate in the reductions may not later decide to participate in the system 04 as it existed before amendment by this Act. 05 * Sec. 24. AS 39.35.680 is amended by adding a new paragraph to read: 06 (41) "nonparticipating employer" means a political subdivision or public 07 organization that is an employer under this system that has chosen under AS 39.35.565 08 not to participate in the amendments to this chapter enacted in this Act. 09 * Sec. 25. FINDINGS AND PURPOSE AS TO SECS. 25 - 38. The State of Alaska and 10 many local governments and school districts are facing the need to restructure their operations 11 and their work forces in order to reduce expenditures and balance budgets. Retirement and 12 separation incentives are management tools that have been used extensively by the private 13 sector, the federal government, and other state and local governments across the country. The 14 purpose of secs. 25 - 38 of this Act is to make these management tools temporarily available 15 to the state and to the municipalities and school districts of the state. Sections 25 - 38 of this 16 Act will enable these entities to be more efficient and cost-effective by eliminating certain 17 nonessential positions, and producing a net reduction in personnel costs. 18 * Sec. 26. RETIREMENT INCENTIVE PROGRAM. (a) An employer may adopt a 19 retirement incentive plan under secs. 27 - 30 of this Act, as appropriate, and designate 20 categories of employees eligible to participate in that plan. An employer need not extend the 21 incentive plan to all employees who would otherwise be eligible, but may choose to extend 22 the plan only to employees 23 (1) in specific budget or administrative components of the employer; 24 (2) in specific job classifications; 25 (3) in specific geographic locations; or 26 (4) on the basis of any combination of factors under (1) - (3) of this 27 subsection. 28 (b) An employee is eligible to participate in a retirement incentive plan under secs. 25 29 - 38 of this Act only if the 30 (1) employee is a vested member of the public employees' retirement system 31 or the teachers' retirement system;

01 (2) employee will be qualified to retire under AS 14.25.110 or AS 39.35.370 02 after receipt of the credit described in (f) of this section; 03 (3) 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 (c) An employer shall file its proposed retirement incentive plan with the 07 commissioner of administration. The commissioner shall approve the plan if the plan meets 08 the requirements of secs. 25 - 38 of this Act, except that the commissioner may approve a 09 state agency's retirement incentive plan only if the office of management and budget approves 10 the calculation of savings under (b)(3) of this section. A proposed plan filed under this 11 section must 12 (1) identify job classifications of employees, and specific budget or 13 administrative components, eligible to participate in the plan; 14 (2) include a reimbursement agreement that 15 (A) requires the employer, for each employee who retires under the 16 plan, to reimburse the appropriate retirement system, within three years after the end 17 of the fiscal year in which the employee is appointed to retirement, in an amount equal 18 to 19 (i) the actuarial equivalent of the difference between the benefits 20 the participant receives after the addition of the credit under (f) of this section 21 and the amount the participant would have received without the credit, less the 22 amount the participant has paid on the indebtedness determined under (d) or (e) 23 of this section; and 24 (ii) an appropriate share of the administrative costs of the 25 program; and 26 (B) provides that contributions from the employer under this section 27 take priority over other obligations of the employer to the maximum extent permitted 28 by law. 29 (d) A member of the teachers' retirement system who participates in an approved 30 retirement incentive plan under secs. 25 - 38 of this Act is indebted to that system for an 31 amount calculated under this subsection. The indebtedness is 25.95 percent of the member's

01 actual compensation for the school year in which the member terminates employment, or the 02 calculated school year compensation for a member who works less than the entire school year. 03 An outstanding indebtedness at the time a member is appointed to retirement under an 04 approved retirement incentive plan requires an actuarial adjustment to the benefits payable to 05 that member. 06 (e) A member of the public employees' retirement system who participates in an 07 approved retirement incentive plan under secs. 25 - 38 of this Act is indebted to that system 08 for an amount calculated under this subsection. The indebtedness is 22-1/2 percent for a 09 peace officer or fire fighter, and 20-1/4 percent for other members, of the member's actual 10 annual compensation for the year in which the member terminates employment, or the 11 calculated annual compensation for a member who works fewer than 12 months. An 12 outstanding indebtedness at the time a member is appointed to retirement under an approved 13 retirement incentive plan requires an actuarial adjustment to the benefits payable to that 14 member. 15 (f) An employee who participates in an approved retirement incentive plan under 16 secs. 25 - 38 of this Act receives a credit of three years. The three years must be applied in 17 the following order until exhausted: 18 (1) to meet the age or service required for eligibility for normal retirement 19 under AS 14.25.110 or AS 39.35.370, as appropriate; 20 (2) to meet the age required for early retirement under AS 14.25.110 or 21 AS 39.35.370, as appropriate; 22 (3) to reduce the actuarial adjustment required for early retirement under 23 AS 14.25.110 or AS 39.35.370, as appropriate; 24 (4) as years of credited service for calculating retirement benefits. 25 (g) In this section, 26 (1) "department" means 27 (A) a principal department of the executive branch of state government; 28 an independent state entity that is attached to a principal department of the executive 29 branch for administrative purposes but that is not a public organization as defined in 30 AS 39.35.680 is part of that department for purposes of this paragraph; and 31 (B) the Office of the Governor;

01 (2) "employer" 02 (A) for purposes of a retirement incentive plan under AS 14.25, means 03 the Board of Regents of the University, the Department of Education, or the Regional 04 Resource Center; and 05 (B) for purposes of a retirement incentive plan under AS 39.35, has the 06 meaning given in AS 39.35.680 and includes a department. 07 * Sec. 27. AUTHORIZATION FOR STATE EMPLOYEE RETIREMENT INCENTIVE. 08 (a) A state agency may adopt, and file with the commissioner of administration for approval, 09 a proposed retirement incentive plan for its employees as part of a permanent reduction in the 10 personal services costs in that section. 11 (b) Upon the request of a state agency, the commissioner of administration shall 12 establish one or more periods during which the employees of that state agency who are 13 eligible under sec. 26(b) of this Act to participate in a retirement incentive plan may apply to 14 the commissioner of administration to participate in the state agency's approved plan. The 15 periods shall begin no earlier than June 30, 1995, and end no later than June 30, 1998. The 16 periods shall be no less than 30 days and no more than 60 days in duration, and may not 17 begin less than 30 days after their establishment. A state agency is not required to request an 18 application period, and may request more than one application period. 19 (c) A proposed retirement incentive plan adopted under this section may not permit 20 an employee who is the governor, the lieutenant governor, or a commissioner, deputy 21 commissioner, or assistant commissioner of a principal department of the executive branch to 22 participate in the plan. 23 (d) A proposed retirement incentive plan adopted under this section may permit 24 participation only by an employee who is eligible to participate under sec. 26(b) of this Act 25 and who 26 (1) has been continuously employed by the state for at least one year before 27 the employee applies to participate in the state agency's approved plan; 28 (2) is a permanent seasonal employee who has been continuously employed 29 by the state in a permanent seasonal position during all of the time in the one year before the 30 employee's application to participate in which the position normally is filled; 31 (3) has a job sharing agreement with a state agency in which two or more

01 employees share a single position identified by a single position control number and in which 02 the employee who applies to participate in the plan was continuously employed by the agency 03 during the portion of the one year before the employee's application in which the employee 04 normally worked under the job sharing agreement; or 05 (4) meets a combination of the requirements of this subsection. 06 (e) The commissioner of administration may not accept the application of an employee 07 to participate in an approved retirement incentive plan adopted under this section unless the 08 employee will be appointed to retirement not later than the first day of the month that is six 09 months after the last day of the application period established by the commissioner under (b) 10 of this section. A state agency, in a plan adopted under this section, may set an earlier date 11 by which an employee must be appointed to retirement in order to participate in the plan. 12 (f) A state agency that has adopted a retirement incentive plan for its employees may 13 not appoint a person to fill a vacant position in a category of position that was included in the 14 plan until after March 31, 1996, unless 15 (1) the governor submits a notice to the Legislative Budget and Audit 16 Committee of the intended appointment to the position for the committee's review; 17 (2) 45 days elapse before the appointment to the vacancy is made unless the 18 committee earlier recommends that the agency appoint a person to fill the position; and 19 (3) if, within the 45 days, the committee recommends that the vacancy not be 20 filled, the governor reviews the request to fill the position and determines to authorize the 21 hiring, in which case the governor shall provide the committee with a statement of the reasons 22 for the authorization before the appointment to the position is made. 23 (g) In this section, "committee" means the Legislative Budget and Audit Committee. 24 * Sec. 28. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR EMPLOYEES OF 25 THE UNIVERSITY OF ALASKA. (a) The Board of Regents of the University of Alaska 26 may adopt, and file with the commissioner of administration for approval, a proposed 27 retirement incentive plan for university employees. 28 (b) Upon the request of the Board of Regents, the commissioner of administration 29 shall establish one or more periods during which the employees of the university who are 30 eligible under sec. 26(b) of this Act to participate in a retirement incentive plan may apply to 31 the commissioner of administration to participate in the university's approved plan. The

01 periods shall begin no earlier than June 30, 1995, and end no later than June 30, 1998. The 02 periods shall be no less than 30 days and no more than 60 days in duration, and may not 03 begin less than 30 days after their establishment. The Board of Regents is not required to 04 request an application period, and may request more than one application period. 05 (c) The commissioner of administration may not accept the application of an employee 06 to participate in an approved retirement incentive plan adopted under this section unless the 07 employee will be appointed to retirement not later than the first day of the month that is six 08 months after the last day of the application period established by the commissioner under (b) 09 of this section. The Board of Regents, in a plan adopted under this section, may set an earlier 10 date by which an employee of the University of Alaska must be appointed to retirement in 11 order to participate in the plan. 12 (d) A participant in the optional university retirement program under AS 14.40.661 - 13 14.40.799 who is vested in the public employees' retirement system or the teachers' retirement 14 system may participate in a retirement incentive plan for that system if the participant meets 15 the other qualifications of secs. 25 - 38 of this Act. If a provision of this subsection is 16 inconsistent with another provision of law, the provision of this subsection governs. 17 * Sec. 29. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR OTHER 18 EMPLOYEES IN THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM. (a) The 19 governing body of a political subdivision of the state or public organization that has elected 20 to participate in the public employees' retirement system under AS 39.35.550 - 39.35.650 may 21 adopt, and file with the commissioner of administration for approval, a proposed retirement 22 incentive plan for its employees. Upon the request of the governing body, the commissioner 23 of administration shall establish one or more periods during which the employees of a political 24 subdivision or public organization who are eligible to participate in a retirement incentive plan 25 may apply to the commissioner of administration to participate in the approved plan. The 26 periods shall begin no earlier than October 31, 1995, and end no later than October 31, 1998. 27 The periods shall be no less than 30 days and no more than 60 days in duration, and may not 28 begin less than 60 days after their establishment. The governing body is not required to 29 request an application period, and may request more than one application period. 30 (b) 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 (a) 03 of this section. The governing body of the political subdivision or public organization, 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. 30. AUTHORIZATION FOR RETIREMENT INCENTIVE FOR EMPLOYEES OF 07 REGIONAL RESOURCE CENTERS IN THE TEACHERS' RETIREMENT SYSTEM. (a) 08 A regional resource center that has employees who are members of the teachers' retirement 09 system may adopt, and file with the commissioner of administration for approval, a proposed 10 retirement incentive plan for its employees. A plan adopted under this section must provide 11 that the application period for participation in the retirement incentive plan is June 30, 1995, 12 through December 31, 1995. 13 (b) The commissioner of administration may not accept the application of an employee 14 to participate in an approved retirement incentive plan adopted under this section unless the 15 employee will be appointed to retirement on or before August 1, 1996. The regional resource 16 center, in a plan adopted under this section, may set an earlier date by which an employee 17 must be appointed to retirement in order to participate in the plan. 18 * Sec. 31. POLITICAL SUBDIVISION OR PUBLIC ORGANIZATION EMPLOYMENT. 19 For purposes of determining the years of service requirements for retirement under 20 AS 14.25.110 or AS 39.35.370, as appropriate, a vested member who is a state employee and 21 who applies to participate in a retirement incentive plan approved under secs. 25 - 38 of this 22 Act may receive credit for employment with a political subdivision or public organization 23 before the political subdivision or organization became an employer under the public 24 employees' retirement system. The member may not receive credit for those years under this 25 subsection for purposes of determining benefits. If a provision of this section is inconsistent 26 with any other provision of law, the provision of this section governs. 27 * Sec. 32. RECOVERY OF EMPLOYER DELINQUENCIES. To recover a delinquency 28 owed by an employer other than the state under an agreement entered into under sec. 26(c)(2) 29 of this Act, the Department of Administration may 30 (1) direct that the amount of the delinquency or a lesser amount be withheld 31 from any money payable to the employer by a state department or agency and that the amount

01 withheld be credited to the delinquency; and 02 (2) bring an action against the employer. 03 * Sec. 33. REEMPLOYMENT INDEBTEDNESS; PROHIBITION ON REEMPLOYMENT. 04 (a) If an individual is reemployed as a member of the public employees' retirement system 05 under AS 39.35, the teachers' retirement system under AS 14.25, the judicial retirement system 06 under AS 22.25, or the optional university retirement program under AS 14.40.661 - 14.40.799 07 after appointment to retirement under secs. 25 - 38 of this Act, that individual forfeits the 08 incentive credit received under sec. 26(f) of this Act and is indebted to the system under 09 which the individual took retirement. The indebtedness is 110 percent of the amount the 10 individual received as a result of participation in a retirement incentive plan under secs. 25 - 11 38 of this Act and to which the individual would not otherwise have been entitled, including 12 the cost of health insurance. The amount that the individual has paid under sec. 26(d) or (e) 13 of this Act will be applied as a credit toward the reemployment indebtedness. Interest on the 14 reemployment indebtedness accrues from the date of reemployment until the date that the 15 individual either is appointed to retirement and accepts an actuarial adjustment to the 16 individual's future benefits or repays the indebtedness in full. The rate of interest is that estab- 17 lished by regulation for the public employees' retirement system by the public employees' 18 retirement board and for the teachers' retirement system by the teachers' retirement board. 19 (b) An individual who was appointed to retirement under secs. 25 - 38 of this Act may 20 not be employed by, or enter into a contract for personal services with, a state agency or the 21 University of Alaska within the three years after the date of appointment to retirement, except 22 that 23 (1) the University of Alaska may enter into a personal services contract with 24 the individual for teaching or research that does not entitle the individual to receive retirement, 25 health, or leave benefits, except social security replacement if required by the Internal Revenue 26 Code; and 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 (c) Notwithstanding the prohibition in (b) of this section, a state agency or the 31 University of Alaska may enter into a personal services contract with an individual who was

01 appointed to retirement under secs. 25 - 38 of this Act if the Board of Regents, for the 02 University of Alaska, or the commissioner of administration, for a state agency, determines 03 that there is a compelling reason to do so because of the individual's specialized or extensive 04 experience that relates to a particular program or project of the state agency or university. 05 However, a state agency may not enter into a contract with an individual under this subsection 06 if the individual was employed by that state agency at the time of the individual's appointment 07 to retirement. 08 * Sec. 34. SEPARATION INCENTIVE PROGRAM. (a) A state agency may, with the 09 approval of the director of the office of management and budget, establish a separation 10 incentive program for its employees. The program may be offered in combination with an 11 approved retirement incentive plan adopted under sec. 27 of this Act, or may be offered 12 separately from such a plan. A state agency need not extend an incentive program under this 13 section to all employees who would otherwise be eligible to participate, but may choose to 14 extend the program only to employees 15 (1) in specific budget or administrative components of the state agency; 16 (2) in specific job classifications; 17 (3) on the basis of any combination of factors under (1) and (2) of this 18 subsection. 19 (b) A separation incentive payment under this section shall be paid in a lump sum 20 after the employee's separation from state service, and shall be equal to the lesser of an 21 amount equaling six months of the employee's base salary, or $25,000. However, a state 22 agency or the office of management and budget may set a lower separation incentive payment 23 in the state agency's separation incentive program. 24 (c) Upon the request of a state agency, the commissioner of administration shall 25 establish one or more periods during which the employees of that state agency may apply to 26 the commissioner of administration to participate in the state agency's approved separation 27 incentive program. The periods shall begin no earlier than June 30, 1995, and end no later 28 than June 30, 1998. The periods shall be no less than 30 days and no more than 60 days in 29 duration, and may not begin less than 30 days after their establishment. A state agency is not 30 required to request an application period, and may request more than one application period. 31 If the commissioner of administration has established one or more application periods for a

01 state agency under sec. 27(b) of this Act, the application period or periods established under 02 this subsection must coincide with the period or periods established under sec. 27(b) of this 03 Act. 04 (d) A separation incentive program established under this section must provide that 05 a separation incentive payment to an employee may be made only if 06 (1) the employee is a permanent full-time or permanent full-time seasonal 07 employee with at least five years of service with the state; and 08 (2) the savings to the state agency in personal services costs for the position 09 occupied by that employee would exceed, in the three years after the employee separates, the 10 amount of the separation incentive payment. 11 (e) If an individual who received a separation incentive payment under this section 12 subsequently is reemployed by a state agency or the University of Alaska within the three 13 years after the date that the individual received the separation incentive payment, the 14 individual is liable to the state in an amount equal to 110 percent of the amount of the 15 separation incentive payment, plus interest at the rate prescribed by AS 45.45.010, 16 commencing on the date that the individual received the separation incentive payment. 17 (f) If an employee is eligible to participate in an approved retirement incentive plan 18 adopted under sec. 27 of this Act, 19 (1) a separation incentive payment to that employee may not exceed the 20 amount that the state agency would be obligated to pay to the appropriate retirement system, 21 notwithstanding (b) of this section; and 22 (2) the employee may participate in either the separation incentive program 23 under this section or the retirement incentive plan adopted under sec. 27 of this Act, but not 24 both. 25 (g) In this section, "base salary" means the monthly salary paid to an employee under 26 the applicable collective bargaining agreement, AS 39.27.011, or another applicable pay 27 schedule, and includes geographic differential; if an employee is paid on an hourly basis, the 28 employee's base salary is the employee's hourly rate, including geographic differential, 29 multiplied by the number of hours in the employee's regular work week, multiplied by 4.35. 30 * Sec. 35. OFFICE OF MANAGEMENT AND BUDGET. (a) When designating an 31 employee category for participation in a retirement incentive plan or a separation incentive

01 program under secs. 25 - 38 of this Act, the executive head of the relevant state agency shall 02 describe in detail the expected effect of the plan or program on the agency's personal services 03 cost and operation. This financial report must be approved by the director of the office of 04 management and budget before the commissioner of administration may approve the proposed 05 plan or program. The state agency shall report each year to the office of management and 06 budget on the cost of each employee's participation and the effect on the agency's personal 07 services cost and operation. 08 (b) The office of management and budget shall submit to the legislature annual reports 09 on the retirement incentive and separation incentive programs under secs. 25 - 38 of this Act 10 beginning January 15, 1997, and continuing through January 15, 1999, and shall submit a final 11 report January 15, 2000. Each report must provide the information necessary for the 12 legislature to evaluate the effectiveness of the programs in achieving their objectives. The 13 report must include information on the designated employee categories under the incentive 14 programs, including the cost of each incentive program per participant, the cost to the state, 15 the cost to the employee, the annual budgeted amount, by state agency, for the incentives, the 16 number of positions deleted or left vacant, and the projected or actual net savings over the 17 three-year period. 18 * Sec. 36. PROGRAM CHANGES. (a) An individual employee does not have a vested 19 or contractual right to a benefit under secs. 25 - 38 of this Act until an agreement is executed 20 with the administrator that specifically authorizes that employee to participate in the retirement 21 incentive program under secs. 25 - 38 of this Act or until an agreement is executed with the 22 commissioner of administration to participate in the separation incentive program under 23 secs. 25 - 38 of this Act. The legislature reserves the right to change any aspect of either 24 incentive program as it relates to employees for whom participation agreements have not yet 25 been executed with the administrator or with the commissioner of administration. 26 (b) In this section, "administrator" means the administrator of the public employees' 27 retirement system for employees who are members of that system, and the administrator of 28 the teachers' retirement system for employees who are members of that system. 29 * Sec. 37. REGULATIONS. The commissioner of the Department of Administration may 30 adopt regulations under AS 44.62 (Administrative Procedure Act) to implement and interpret 31 secs. 25 - 38 of this Act.

01 * Sec. 38. DEFINITIONS. (a) Unless provided otherwise in secs. 25 - 38 of this Act, the 02 definitions set out in AS 14.25.220 apply to provisions in secs. 26 - 33 of this Act that relate 03 to the teachers' retirement system and members of the teachers' retirement system except that 04 "employer" does not include a school district. 05 (b) Unless provided otherwise in secs. 25 - 38 of this Act, the definitions set out in 06 AS 39.35.680 apply to provisions in secs. 26 - 33 of this Act that relate to the public 07 employees' retirement system and members of the public employees' retirement system. 08 (c) In secs. 25 - 38 of this Act, 09 (1) "office of management and budget" means the office of management and 10 budget in the Office of the Governor; 11 (2) "public employees' retirement system" means the Public Employees' 12 Retirement System of Alaska (AS 39.35); 13 (3) "state agency" 14 (A) means 15 (i) the legislative branch of state government; 16 (ii) the judicial branch of state government; 17 (iii) a principal department of the executive branch of state 18 government; an independent state entity that is attached to a principal 19 department of the executive branch for administrative purposes but that is not 20 a public organization as defined in AS 39.35.680 is part of that department for 21 purposes of this clause; and 22 (iv) the Office of the Governor; 23 (B) does not include 24 (i) the University of Alaska; 25 (ii) a political subdivision of the state; or 26 (iii) a public organization as defined in AS 39.35.680; 27 (4) "teachers' retirement system" means the Teachers' Retirement System of 28 Alaska (AS 14.25). 29 * Sec. 39. AS 14.25.045 is repealed. 30 * Sec. 40. Sections 26, 27, and 34 of this Act are repealed July 1, 1999. 31 * Sec. 41. Sections 28 - 31 of this Act are repealed July 1, 1997.