Legislature(2021 - 2022)
05/14/2021 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB55 | |
| HB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 202 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 55 | TELECONFERENCED | |
| += | HB 132 | TELECONFERENCED | |
| += | HB 110 | TELECONFERENCED | |
HOUSE BILL NO. 55
"An Act relating to participation of certain peace
officers and firefighters in the defined benefit and
defined contribution plans of the Public Employees'
Retirement System of Alaska; relating to eligibility
of peace officers and firefighters for medical,
disability, and death benefits; relating to liability
of the Public Employees' Retirement System of Alaska;
and providing for an effective date."
3:30:48 PM
Co-Chair Merrick indicated the committee would be taking up
two amendments on HB 55.
Representative LeBon MOVED to ADOPT Amendment 1 (copy on
file):
Page 10, line 2:
Delete "10"
Insert "12"
Co-Chair Merrick OBJECTED for discussion.
Representative LeBon explained that Amendment 1 increased
the employee contribution rate ceiling by 2 percentage
points. The new range for members of the public safety
defined benefit tier would be 8 percent to 12 percent
rather than 8 percent to 10 percent. It increased the
ceiling from 10 percent to 12 percent. Raising the
contribution rate ceiling provided an extra level of
adjustment to ensure the plan remained fully funded
adequately spreading risks between employers and employees.
Representative LeBon continued that the current underfunded
liability in Public Employees' Retirement System (PERS) and
Teachers' Retirement System (TRS) demonstrated the need for
the type of headroom he was proposing. He wanted to protect
the defined benefit program long into the future. He had
received reports that the likelihood of solvency was very
high. However, if he looked back over the history of PERS
and TRS, it had not always been the case. The legislature
was forced, two prior administrations ago, to fund an
additional $3 billion into PERS and TRS, and an effort was
made in the current session to add $1 billion to PERS to
bring it into a funded condition. He hoped circumstances
would never require asking employees to increase their
contribution range. He thought by incorporating a 12
percent ceiling in the bill it would allow for flexibility.
He encouraged members to consider Amendment 1.
Co-Chair Merrick WITHDREW the objection.
Representative Josephson OBJECTED.
Representative Josephson indicated that the data he had
from two sources suggested that the amendment was
unnecessary. His first source was Flick Fornia who
represented firefighters' interests. He talked about his
credentials which were considerable. He showed
Representative Josephson a PowerPoint slide which indicated
in several different scenarios the plan was above 100
percent solvent. There was one scenario where it briefly
dipped below 100 percent. However, he reminded members that
80 percent was regarded as a reasonably solvent plan, and
90 percent was regarded as superior. His second source, Mr.
Kirshner, who represented the state's interest, had looked
a similar bill, HB 79 [Legislation introduced by
Representative Chuck Kopp in 2019], and reported that the
bill was in the range of 97.9 percent solvent.
Representative Josephson continued that members had already
made a concession to move from 8 percent to 10 percent in
the event the Alaska Retirement Management Board (ARMB)
called for it. The increments would be small - there would
not be a sudden jump from 8 to 10. He thought it was
already a concession of the participant code. He noted that
employees' checks would be smaller because of an ARMB
decision. He asked the committee to respectfully reject the
amendment.
Co-Chair Merrick noted Representative Edgmon had joined the
meeting.
3:35:57 PM
Representative Wool questioned whether the amendment was
necessary based on Representative Josephson's comments. He
wondered if moving the percentage to 12 would pose any kind
of threat. He also asked at what point the ceiling would
need to go to 10 percent and 12 percent.
Co-Chair Merrick invited Mr. Young to comment.
3:37:07 PM
SCOTT YOUNG, HEALTH ACTUARY, BUCK CONSULTING (via
teleconference), introduced himself and asked
Representative Wool to repeat his question.
Representative Wool restated his question.
Mr. Young replied that as he understood the provisions, he
would look at the fund position of the plan each year. If
it fell below the threshold of 90 percent, the ARMB would
determine whether to apply any of the triggers - to
increase the 8 percent to some higher amount, eliminate a
Cost of Living Adjustment (COLA), or any other impact. He
did not think the percentage would jump from 8 to 10 or
from 10 to 12 in one increment. It was his understanding
that the ARMB would have the discretion, based on the
current fund status and the amounts of the projected future
contributions, to decide on what trigger should be
initiated and how much to change.
Representative Wool reiterated his understanding of the
amendment and asked if he was accurate.
Mr. Young responded he was correct. He indicated that every
year he would do a reassessment of the funding status in
the plan. If it was below 90 percent or some other
threshold established by the ARMB, he would evaluate how
much to change any of the triggers. An increase from 10
percent to 12 percent would simply provide additional
flexibility if needed.
Representative Josephson thought another consideration was
that the states that were mirroring the proposed plan did
not have the same kind of percentage leap. He thought
recruitment considerations might come into play. The state
might have to tell a person being recruited that the
percentage could go from 8 percent to 12 percent. He
thought it would be hurtful to recruitment efforts.
Representative LeBon summarized that his motivation for the
amendment was a result of the unfunded liability from the
past. He wanted to create additional headroom to share the
risk of underfunding or underperformance of the fund some
day in the future. Once a defined benefits plan was put
into place it would be generational.
3:41:29 PM
At EASE
3:43:12 PM
RECONVENED
Representative Josephson MAINTAINED the objection.
A roll call vote was taken on the motion.
IN FAVOR: Carpenter, LeBon, Thompson, Merrick, Wool
OPPOSED: Edgmon, Josephson, Ortiz, Foster
The MOTION PASSED (5/4).
Amendment 1 was ADOPTED.
Representative Josephson MOVED to ADOPT Amendment 2 (copy
on file):
Page 12, line 7, following "service":
Insert "in the system"
Page 12, line 9, following "service":
Insert "in the system"
Page 20, line 26:
Delete "30"
Insert "60"
Page 20, line 30:
Delete "30-day"
Insert "60-day"
Co-Chair Merrick OBJECTED for discussion.
Representative Josephson asked his staff to review the
amendment which was requested by the administration.
ELISE SORUM-BIRK, STAFF, REPRESENTATIVE JOSEPHSON,
explained that the amendment came about after a couple of
lengthy conversations with the staff at the Division of
Retirement and Benefits regarding clarifications they
wanted in the bill. She followed up with Legislative Legal
Services about what was already taken care of in the bill's
current draft. The amendment before the committee was a
result of all of those conversations. The amendment did two
things. First, on Page 7, line 12, it added the words "in
the system" following "service." The change had to do with
vesting. There was a concern on the part of the division
that if someone was fully vested in the PERS system
currently, worked for 5.2 years, but the actuarial analysis
showed they could only purchase 4.5 years of service, they
would lose their vested status. The request was to insert
the language to indicate that vesting depended on years in
the PERS System.
Ms. Sorum-Birk continued that the second portion of the
amendment had to do with the timeframe the division had to
transfer money over from Tier IV accounts to the new tier
for individuals who choose to buy in. The division noted
they were in the middle of an information technology (IT)
modernization and their current workload was very heavy.
They asked for 60 days rather than 30 days to complete that
task.
Co-Chair Merrick WITHDREW the objection.
There being NO OBJECTION, it was so ordered.
Amendment 2 was ADOPTED.
Co-Chair Foster MOVED to report CSHB 55(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes.
Representative Carpenter OBJECTED and chose not to speak to
his objection.
A roll call vote was taken on the motion.
IN FAVOR: Edgmon, Josephson, LeBon, Ortiz, Thompson, Wool,
Merrick, Foster
OPPOSED: Carpenter
The MOTION PASSED (8/1).
CSHB 55(FIN) was REPORTED out of committee with five "do
pass" recommendations, one "do not pass" recommendation,
and three "no recommendation" recommendations and with one
new fiscal impact note from the Department of
Administration.
3:47:38 PM
AT EASE
3:50:13 PM
RECONVENED
Co-Chair Merrick noted Representative Johnson had joined
the meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 110 Public Testimony by 051421.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 110 |
| HB 110 Amendment 6 051221.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 110 |
| HB 110 Amendments 1 - 5 051221.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 110 |
| HB 55 Amendments 1-2 041121.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 55 |
| HB 132 Amendments 1-3 051121.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 132 |
| HB 110 Public Testimony by 051521.pdf |
HFIN 5/14/2021 1:30:00 PM |
HB 110 |