Legislature(2025 - 2026)ADAMS 519
05/07/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB123 | |
| HB78 | |
| SB80 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 78 | TELECONFERENCED | |
| + | SB 80 | TELECONFERENCED | |
| += | SB 57 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 123 | TELECONFERENCED | |
HOUSE BILL NO. 78
"An Act relating to the Public Employees' Retirement
System of Alaska and the teachers' retirement system;
providing certain employees an opportunity to choose
between the defined benefit and defined contribution
plans of the Public Employees' Retirement System of
Alaska and the teachers' retirement system; and
providing for an effective date."
1:54:26 PM
Co-Chair Foster stated that the committee would consider
amendments to the bill. His office had received seven
amendments.
REPRESENTATIVE CHUCK KOPP, provided a brief recap of the
bill. He summarized that the bill offered a shared risk
hybrid pension plan for public employees currently enrolled
in the Defined Contribution (DC) plan. He furthered that
following an initial 180 day window, current employees
could choose to remain in the contribution plan.
Subsequently, the default plan would be the Defined Benefit
(DB) plan. He believed that bill would "improve greater
stability in the state's workforce," make the state a more
competitive employer, and strengthen the public service
infrastructure to attract and retain a workforce.
1:56:01 PM
Co-Chair Josephson MOVED to ADOPT Amendment 1, 34-
LS0493\N.3 (Wayne, 4/30/25) (copy on file):
Page 4, line 9:
Delete "member's"
Insert "teacher's"
Page 4, line 24, following "section":
Insert "to participate in the plan under AS 14.25.009
- 14.25.220"
Page 33, line 26, following "employee":
Insert "was first hired after June 30, 2006, and
before July 1, 2025, and, if not employed by an
employer on July 1, 2025, is reemployed by an employer
after July l, 2025, and, before the date of
reemployment,"
Page 33, lines 27 - 31:
Delete all material. 15
Page 34, line 1:
Delete "(A)"
Insert "(1)"
Page 34, line 4:
Delete "(B)"
Insert "(2)"
Page 34, line 26, following "section":
Insert "to participate in the plan under AS 39.35.095
- 39.35.680" 3
Page 51, line 6:
Delete", 14.25.061, 14.25.540; and AS 39.35.940"
Insert "and 14.25.061"
Co-Chair Foster OBJECTED for discussion.
Co-Chair Josephson explained the amendment. He read from a
prepared statement:
When the DC plan was passed in 2005, there was a
provision to allow existing DB employees to opt-in to
the new DC plan. That remains in law.
In HB78, all new employees would be enrolled in the
new Defined Benefit program. Existing DC employees
would have an option to join the new tier with a
process for converting their accounts.
In the bill as written, the DC plan would be closed to
new members, but would retain those current members
who choose to stay and to not convert to the new plan.
Amendment #1 adds a choice for the new DB employees;
they would have the ability to switch to the DC plan
at any point in their first five years of employment,
before they are vested.
If you look at the text of the amendment, most of it
is conforming language. The guts of the change in
Amendment #1 is actually on page 2, lines 5-6. This is
in the "repealers" section of the bill. The current
bill repeals the sections that allowed pre-2006 DB
employes to convert to DC. By passing this amendment,
it leaves open that existing process for the new DB
employees, if they were to choose to convert to the DC
plan.
The other effect of this amendment would be to keep
open the Defined Contribution plan for new members.
Co-Chair Josephson felt that the DB plan would likely be
in the self-interest of most new state, local, and school
district employees to join" and remain in the plan.
However, he presumed that there would be some individuals
that would want to choose the DC plan. He concluded that
the amendment allowed for "freedom of movement" while
starting the new DB tier.
1:59:09 PM
Co-Chair Foster asked Representative Kopp for comment on
the amendment.
Representative Kopp believed that "it was a good amendment
that preserved choice while still pointing Alaska's
workforce toward a more secure fiscally responsible DB
system." He communicated that many teachers were coming up
to Alaska to work for only two years to experience the
state. He appreciated that the DB was the default plan but
understood a situation where a teacher or employee might
want to work in Alaska for only a two or three year period
and a DC plan would be a more practical option. He reported
that the issue was relayed to him by several large
employers of school districts and other agencies familiar
with the situation. He hoped that 80 percent of new
employees would opt into the DB plan but believed that it
offered flexibility for temporary work seekers.
Representative Bynum liked the amendment. He asked to hear
from the actuary on what it would do to the long term
impact on the fund and from the Department of
Administration to see if it was problematic for them.
DAVID KERSHNER, CONSULTANT, ARTHUR J. GALLAGHER AND
COMPANY, AIKEN, SC (via teleconference), answered that the
projections in the March 24, 2025, fiscal note assumed that
all existing active members would elect to switch to the DB
plan and that all future hires would be under the DB plan.
If some future hires chose the DC plan, it would have a
small impact depending on the number of individuals doing
so. He indicated that it would decrease the projected cost
amounts.
2:03:24 PM
KATHY LEA, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS,
DEPARTMENT OF ADMINISTRATION (via teleconference), answered
that the division would have to check with its tax counsel
on the legality of switching into the DB plan and whether
it was allowable by the Internal Revenue Service (IRS). She
knew they allowed different elections at the time of hire
but was unsure whether it was permissible for a member to
switch from a DB plan into a DC plan after 5 years.
Representative Bynum asked if the amendment was restricted
to teachers or for all members. Representative Kopp replied
that the amendment applied to all members.
Representative Stapp pondered what happened if the
amendment was done the other way around. He guessed that it
would be acceptable to start in a DB plan and switch into a
DC plan.
Ms. Lea answered that the problem was that the IRS
considered the option "two bites at the same apple." She
furthered that the IRS generally restricted election to the
time of hire. She was not certain it was allowable either
way.
Co-Chair Foster WITHDREW the OBJECTION.
Representative Stapp OBJECTED. He believed that the
amendment improved the bill. However, he favored defaulting
new hires into the DC plan.
There being NO further OBJECTION, Amendment 1 was ADOPTED.
2:06:56 PM
Representative Hannan MOVED to ADOPT Amendment 2, 34-
LS0493\N.2 (Wayne, 4/30/25) (copy on file):
Page 8, line 10:
Delete "may"
Insert "shall"
Page 21, line 31, following "board":
Insert ", including a policy to prevent each fund from
having an unfunded liability greater than 10 percent"
Page 23, lines 3 - 4:
Delete "determined by a level percent of pay method"
Insert "[DETERMINED BY A LEVEL PERCENT OF PAY METHOD]"
Page 37, line 28:
Delete "may"
Insert "shall"
Co-Chair Foster OBJECTED for discussion.
Representative Hannan explained the amendment. She related
that the amendment made changes to clarify the statutory
responsibilities of the Alaska Retirement Management Board
(ARMB) and ensured that the proposed new DB tier was
managed with fiscal discipline. She furthered that the
amendment strengthened board duties, sets minimum funded
ratio policy, and provided flexibility in funding methods.
She delineated that the amendment contained four
provisions. The changes from "may" to "shall" on Page 8,
line 10, and Page 37, line 28, directed the ARMB to
increase member contributions for PERS and TRS, if the
plans were likely to fall below 90 percent funded and
shall implement versus may implement." She pointed to
the provision on Page 21, line 31, and noted that it added
an explicit policy that the ARMB must include a policy to
address the situation before falling below 90 percent.
Finally, the fourth provision deleted the existing
provision that mandated the ARMB use the level percent of
pay amortization method and allowed the board to decide,
under actuarial guidance, whether a level percent of pay or
level dollar value should be used. The methods changed
depending on economic circumstances.
2:09:28 PM
Representative Kopp favored the amendment. He believed that
it was a sound amendment and provided clear direction to
the ARMB to use the 90 percent funding levers if the fund
dipped below 90 percent on both the member contributions
and the Post Retirement Pension Adjustments (PRPA). He
indicated that the actuary testified that the plan was
"solid" due to its ability to react dynamically to the
market. The amendment's prescriptive language removed any
"political concerns" that the ARMB might not take proper
action regarding the future liability of the plan. He
expounded that the amendment directed the ARMB to have
written policies to support the statute and was widely
supported by the Alaska Municipal League (AML). He
addressed the level percent of pay amortization and
discovered that it had become an issue because a level
percent of pay meant paying larger interest and less
principal upfront. The level dollar value paid more
principal and less interest upfront. He reported that the
level percent method increased and lengthened the deficit
before reaching a zero balance by approximately 10 percent.
He shared that the ARMB director supported removing the
existing prescriptive language. He believed that the
amendment was "consistent with the whole spirit of the
bill?."
2:12:12 PM
Representative Galvin favored the clarity for the ARMB. She
asked if a timeline for the ARMB to act was necessary.
Representative Hannan was unable to answer the question and
deferred to Ms. Lea.
Ms. Lea responded that the board met quarterly and there
was one meeting annually where the ARMB adopted the
actuarial evaluation that included the funding levels of
the plans. She recalled that the board called special
meetings occasionally when needed. She suggested that the
ARMB could provide a precise answer.
Representative Galvin was satisfied with Ms. Lea's
response.
Co-Chair Josephson asked by what amount moving to a level
dollar amortization may increase the fund to.
Representative Kopp clarified that the amendment did not
require using the level dollar method; it allowed the board
flexibility to use it. He added that under the percent of
pay amortization, there was an assumption that payroll
would increase over time, however, the state had fewer
employees currently than in 2005, negating the assumption.
The level dollar might be a better method, but it remains
an option for the ARMB.
2:15:46 PM
Co-Chair Josephson hoped that the ARMB would consider the
state's fiscal position to some degree. Representative Kopp
answered that the ARMB was sensitive to the state's
fiscal position.
Representative Stapp wished the amendment required the
level dollar method. He deduced that the may to shall
provision only applied to the increase in the employee
contribution and not the reduction in PRPA.
2:17:07 PM
Representative Hannan requested an at ease.
2:17:20 PM
AT EASE
2:18:15 PM
RECONVENED
Representative Hannan replied that she did not believe it
applied to PRPA but deferred the answer to the sponsor.
Representative Kopp concurred that it only applied to
member contributions. He commented that member
contributions were a much larger adjustment versus PRPA. He
voiced that it was within the spirit of the amendment and
bill to include both items. He supported a conceptual
amendment.
Representative Stapp remarked that he was reticent to make
a conceptual amendment because of the bill's complexity and
technical nature. Representative Kopp appreciated his
comment.
Representative Hannan stated it was not her intent to leave
the PRPA out and was favorable to a conceptual amendment.
Representative Bynum commented that the plan was comprised
of a shared risk concept and supported the inclusion of the
PRPA.
Co-Chair Foster WITHDREW the OBJECTION.
Representative Stapp WITHDREW the OBJECTION. He wanted to
know why the level dollar value only could not be included
in statute.
Representative Allard OBJECTED.
Representative Hannan spoke to the level dollar provision.
She clarified that a level dollar provision would be just
as prescriptive as mandating a level percent of pay. She
felt that changing conditions over time might warrant one
method over another. She recounted that the actuary and the
ARMB requested the flexibility.
2:21:56 PM
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Jimmie, Hannan, Tomaszewski, Stapp,
Bynum, Josephson, Schrage, Foster.
OPPOSED: Johnson, Allard.
The MOTION PASSED (9/2).
Co-Chair Foster asked for the roll to be voided.
A roll call vote was taken on the motion.
IN FAVOR: Bynum, Johnson, Jimmie, Hannan, Tomaszewski,
Stapp, Bynum, Josephson, Schrage, Foster.
OPPOSED: Allard.
The MOTION PASSED (10/1).
There being NO further OBJECTION, Amendment 2 was ADOPTED.
2:23:44 PM
Co-Chair Schrage MOVED to ADOPT Amendment 3, 34-LS0493\N.1
(Wayne, 4/30/25) (copy on file). [Due to the length of the
amendment, it is not included here. See copy on file for
details.]
Co-Chair Foster OBJECTED for discussion.
Co-Chair Schrage explained the amendment. He reported that
the amendment changed the retiree's healthcare eligibility
based on the recommendations provided by the ARMB board
during its March 2025 meeting. The board passed two
resolutions in support of reforming access to retiree
healthcare benefits without increasing benefit liabilities.
The first provision removed the statutory requirement that
plan members must be actively employed 12 months prior to
retirement even if they met the age and service benchmarks.
The requirement forced the employee to delay retirement or
seek temporary re-employment to meet the eligibility
requirement. The second provision in the amendment reduced
the service threshold from 25 to 20 years for Public
Employees' Retirement System (PERS) public safety employees
and from 30 to 25 for non-public safety employees. He added
that the DC retirement healthcare plan would remain
overfunded even with the adoption of the amendment.
2:25:04 PM
Representative Kopp appreciated the amendment and
emphasized that it was strongly supported by ARMB. He
related that the statutory requirement regarding active
employment was considered "completely hostile" to
employees. He stressed that the current statue required a
65 year old to return to work at age 64 to retire directly
out of the plan into Medicare. He explained that when the
statute was adopted 15 years earlier it had not been well
thought through. He explicated that current statute already
addressed a contribution based on your years of service,
which is 30 percent of the Alaskacare premium if the
employee worked 10 to 14 years. The additional requirement
to return to work at the age of 64 for one year was
incorrect policy. He discussed that the second provision
regarding the reduction in service to obtain the Alaskacare
plan was in response to the overfunded health trust. The
actuarial report showed the fund would remain significantly
overfunded with the adoption of the provision.
2:27:49 PM
Representative Bynum favored the first provision but was
uncertain about the second. He deduced that the second
provision benefited the DB employees that were all
currently retired or soon to be retired and were already
enjoying the healthcare opportunity. He noted that the DB
healthcare plan was already agreed upon. However, employees
in Tier IV or the new plan did not receive the same
healthcare benefit. He did not favor the approach to the
healthcare component in HB 78. He supported the first
provision but wondered why the bill did not reform the
healthcare plan for future employees.
2:29:18 PM
Representative Kopp responded that the plan adopted in
whole the current existing healthcare plan and made no
change. He indicated that the amendment would benefit new
hires and current DC employees. He stressed that the
amendment did not alter the time and service to get a
pension, it adjusted the timeframe to become eligible for
healthcare and would only apply to the entire Tier IV
health plan. There were no legacy DB health benefits
addressed in the bill, and only applied to the new Tier 4
plan.
Representative Galvin understood the amendment included two
separate issues. She believed the second provision would
please many Alaskans and provide them more opportunity for
healthcare. She noted that the healthcare fund was over
funded and could only be used for healthcare. She approved
of offering current employees who had already given many
years of service the opportunity for healthcare. She
supported the amendment.
Representative Stapp ascertained that the amendment's two
sections were being added into the bill and could not be
enacted if the bill did not pass. He wondered whether it
was the only way the ARMB recommendations could be adopted
and if anyone considered offering them via a separate bill.
He favored the changes. He asked for clarification about
the section being deleted that required members to be
actively employed 12 months before retirement.
Representative Kopp answered that the language required
that a member must retire directly from the plan to get a
healthcare benefit and had to work the previous 12 months.
The statute required them to retire directly from the plan
into Medicare to obtain the state's Medicare supplement and
he thought it was an impossibly high bar to access
healthcare. Representative Stapp asked what happened to the
money and if the employee did not have access to their
Health Reimbursement Arrangement (HRA) money.
Representative Kopp clarified that the individual would not
be eligible for the healthcare supplement to Medicare at
age 65.
2:34:34 PM
Representative Stapp supported the concept but wanted to
see the amendment as a standalone bill in case HB 78 was
not enacted and would oppose the amendment.
Representative Bynum understood that the healthcare plan
was overfunded. He was concerned that the provision applied
to all retirees in all tiers and worried that it would
eventually lead to underfunding the healthcare plan.
Representative Kopp clarified that the amendment only
applied to Tier IV retirees and no other tier was included.
2:36:35 PM
AT EASE
2:36:55 PM
RECONVENED
Representative Johnson WITHDREW the OBJECTION.
There being NO further OBJECTION, Amendment 3 was ADOPTED.
2:37:51 PM
Co-Chair Josephson WITHDREW Amendment 4, 34-LS0493\N.4
(Wayne, 4/30/25)(copy on file).
Representative Stapp MOVED to ADOPT Amendment 5, 34-
LS0493\N.5 (Wayne, 5/5/25)(copy on file). [Due to the
length of the amendment, it is not included here. See copy
on file for details.]
Co-Chair Foster OBJECTED for discussion.
Representative Stapp explained the amendment. He commented
that the bill was complex and wished the committee held
more than 9 hearings. He reported that the amendment made
many substantial changes. First, it would leave the DC plan
open and make it the default plan for new hires and current
employees with an opt in option. The existing hires could
remain in the DC plan up until they bought their way into
the DB plan. He elaborated that the secondly, the amendment
would do was raise the maximum employee contribution rate
from 12 percent to 14 percent. The actuary predicted that
it would not be necessary but, in the event, it was, the
contribution could not be increased via the language in the
bill. The amendment also included several clarifications on
language changes. He continued that the third significant
change was the may to shall" language that was in
Representative Hannan's amendment except his amendment
included the PRPA. The fourth item in the amendment
specified that for non-state employers like municipalities
participating in Tier V that they would be paying the full
actuarial rate, which would stop any unfunded liability
from being assumed by the state. He exemplified the
Municipality of Anchorage. He believed that it should be
responsible for its own employees since they were not
th
employees of the state. He moved to the 5 large change he
proposed to the ARMB directive that the ARM board could not
increase the employees' contributions unless employers'
contributions were increased at an equal amount. He pointed
to the language on page 3, line 12 and read:
Delete "The board may not increase the member
contribution unless the board increases the employer
contribution under AS 14.24.070(a)(2) by an equal
amount."
Representative Stapp clarified that he was not in favor of
the employer contribution remaining uncapped. However, he
was uncertain that the language in Amendment 5 captured
what he wanted to achieve with equal contributions.
2:43:19 PM
BERNARD AOTO, STAFF, REPRESENTATIVE WILL STAPP, explained
one last provision in Amendment 5. He cited the last item
on page 4 of an Amendment 5 sectional handout (copy on
file) pointing to Page 7, line 12 of the bill that removed
the language that repealed the statues allowing any DB
member teacher or state employee who have not vested in
their defined benefits plan to opt into the defined
contribution plan.
2:44:06 PM
Representative Kopp appreciated the thought that
Representative Stapp put into his amendment. He did not
encourage the adoption of the amendment given the sponsor's
own uncertainties. He addressed some of the concepts in the
amendment. He voiced that switching the default from Tier 5
to the DC plan would exclude a large group of new employees
and shrink the new participant base effectively limiting
new contributions that helped sustain the plan over time.
The goal of the bill was to strengthen the state's
retirement plan and the provision went against the very
nature of the goal of the bill. He emphasized that the
point was to establish a shared risk pension that would be
strong and reliable for the future of the state. He did not
want to maintain the failed elements of the DC
experiment. He was opposed to the provision. He referred
to raising the employee's contribution to 14 percent and
noted that the employee contribution in earlier versions of
the bill was 8 to 10 percent. He recounted that former
Representative Bart LeBon, in a prior year, had an
amendment increasing it from 10 to 12 percent. He recounted
that every actuary consulted could not foresee a scenario
where the employee contribution would need to increase by
that amount. He relayed that Mr. Kershner had confidence
that the plan was "structurally balanced" and if an
unfunded liability occurred it would remain above the 90
percent funding level. He determined that increasing the
possible future employee contribution to 14 percent was
unnecessary. He delineated that when an adjustment was
necessary it was minute and typically increased 0.1 percent
because a slight adjustment had a significant fiscal
impact. He believed that linking the employee and employer
contribution was important because it communicated a shared
risk. He reiterated that the actuaries did not see an
additional unfunded liability to the state with Tier 5. He
stressed that raising the employee contributions was
unnecessary.
2:48:24 PM
Representative Bynum appreciated the maker of the
amendment, and he supported it. He deduced that if the 14
percent increase would never be necessary than there was no
risk to including it. He remarked that the amendment
submission period was short for such a complicated bill.
Representative Kopp referenced statements from
Representative Stapp regarding the unfunded actuarial
liability and how the state addressed it in the previous DB
tiers. The state capped the non-state employers' percent of
payroll at 22 percent. His amendment removed the cap. He
reminded the committee that with the actuaries predicting
that there would not be an unfunded liability, the actual
cost of a fully funded plan was about 13 percent for PERS
and about the same for TRS, well below the current 22
percent.
2:50:52 PM
AT EASE
2:51:35 PM
RECONVENED
Representative Bynum asked if the cap removal of 22 percent
was effective only for the new plan. Representative Stapp
replied affirmatively. He reiterated that his provision
explicitly wanted the municipalities to cover any liability
amount without any state intervention.
Representative Stapp provided wrap up on the amendment. He
thought the amendment offered a lot of good ideas and
attempted to improve the risk. He shared that he had asked
Mr. Kershner if he would pay the amount of any unfunded
liability and he answered in the negative. He commented
that with the initial DB plan no one had predicted that
there would be any liability, yet it happened. He hoped the
plan would perform well but warned that once enacted the
plan could not change.
Co-Chair Foster MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Allard, Stapp, Tomaszewski, Bynum, Johnson,
OPPOSED: Hannan, Jimmie, Galvin, Schrage, Josephson, Foster
The MOTION to adopt Amendment 5 FAILED (5/6).
2:54:44 PM
Representative Bynum MOVED to ADOPT Amendment 6, 34-
LS0493\N.9 (Wayne, 5/4/25) (copy on file):
Page 22, line 3, following "AS 39.35":
Insert "and annually determine a projected annual rate
of return on investments of the state retirement
systems, not to exceed the rolling average rate of
return for the most recent period of 10 calendar
years;"
Page 23, line 13, following the first occurrence of
"assumptions":
Insert "and the rolling average rate of return on
investments of the state retirement systems for the
most recent period of 10 calendar years"
Representative Hannan OBJECTED for discussion.
Representative Bynum explained the amendment. He indicated
that the amendment ensured that there was greater fiscal
discipline in the assumptions used by the retirement
system. He proposed anchoring the projected returns on the
actual historical performance. He cited page 22, line 3,
requiring that the ARMB must "annually determine a
projected annual rate of return on investments of the state
retirement systems, not to exceed the rolling average rate
of return for the most recent period of 10 calendar years;"
He determined that it prevented an "overly optimistic"
investment return assumption when calculating pension
liabilities. He exemplified that if over the prior 10
years, an investment return was 6.2 percent the board could
not assume a higher rate. He pointed to page 22, line 13,
which ensured that the rolling average invested return rate
was included alongside the actuarial assumption and was
reviewed by the board. He deemed that it ensured employing
the actual investment history in shaping long term fiscal
assumptions that were "grounded in the reality of the
markets." He elaborated that the amendment aimed to reduce
the risk of underfunding the plan due to inflationary
expectations of future investment earnings. He believed
that it was "particularly important in managing the long
term solvency of the plan. He was trying to prevent an
unfunded liability as existed in the current plans. He
understood that the Tier 5 plan included "levelers" in case
of a liability, but he wanted to avoid it from happening at
all.
Representative Kopp strongly opposed the amendment. He
stated it would be viewed as hostile by local government.
He explained that the amendment arbitrarily capped the
investment return assumption of the 10-year rolling average
regardless of market conditions, portfolio changes, or any
professional actuarial guidance. The state's and ARMB's
actuaries already review the return assumptions annually
using national standards and long-term forecasts and not
only past performance. He furthered that if the assumed
rate of return was lowered, the state could be forced to
report higher liabilities and increase employer
contributions, even if it was not recommended. He discerned
that it would lead to unnecessary pressure on local
governments and agencies. He thought the amendment was well
intended but believed relying on the actuaries was better
than being prescriptive and that moving from a 5-year
rolling average to a 10-year rolling average was
unnecessary and could have harmful effects.
Representative Bynum provided wrap up on Amendment 6. He
offered that he would not have offered the amendment if he
had full confidence in how the state had managed its DB
plans. He pointed out that the state had a multi-billion
dollar deficit on the previous DB plan. He did not support
planning solely around actuarial projections based on
future returns. He stressed that prior market conditions
were important for future projections. He reminded the
committee that the history of the assumptions "had always
been in the wrong direction" hence, the multi-billion
dollar deficit.
2:59:50 PM
Representative Bynum added that the prior amendment
attempted to address pressure on the municipal governments.
He stressed that the state was taking on liabilities for
employees that did not work for the state in Tier 5.
Municipalities had to begin caring for their own employees.
Representative Hannan MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Stapp, Tomaszewski, Bynum,
OPPOSED: Johnson, Jimmie, Galvin, Hannan, Allard, Schrage,
Josephson, Foster
The MOTION to adopt Amendment 6 FAILED (3/8).
3:01:27 PM
Representative Stapp MOVED to ADOPT Amendment 7, 34-
LS0493\N.6 (Wayne, 5/2/25) (copy on file):
Page 28, following line 16:
Insert new bill sections to read:
"* Sec. 43. AS 39.30.l 50(a) is amended to read:
(a) In place of contributions to the federal social
security system that would have been required on
behalf of an employee who first became a member of the
defined benefit retirement plan under AS 39.35.009 -
39.35.680 before July 1, 2006, had the participating
employer belonged to the social security system, the
participating employer shall contribute an amount
equal to 6.13 percent of the wages of the employee up
to the taxable wage base then in effect in the social
security system. This contribution shall be paid into
an individual employee annuity account in the
Department of Administration under the terms of the
State of Alaska Supplemental Annuity Plan. The
department shall pay 6.13 percent of the wages of the
employee up to the taxable wage base then in effect in
the social security system into the individual
employee annuity account established under this
subsection. This wage reduction shall be treated as an
employer contribution under 26 U.S.C. 414(h)(2). All
costs of establishing and administering the programs
established under AS 39.30.150 - 39.30.180 shall be
paid from the contributions made to the individual
employee annuity accounts under this section.
* Sec. 44. AS 39.30.150(c) is amended to read:
(c) An employee who first became a member of the
defined benefit retirement plan under AS 39.35.009 -
39.35.680 before July 1, 2006, may voluntarily elect
additional wage reductions to be paid into special
individual employee benefit accounts in the Depa1iment
of Administration. Money in these accounts may only be
used to purchase benefits selected by the employee
under the supplemental benefits plan established by
the administrator." 3
Renumber the following bill sections accordingly.
Page 52, following line 1:
Insert a new subsection to read:
"(c) Notwithstanding AS 39.30.150(a) and (c), an
employee who makes an election under (b) of this
section may not contribute to, or receive a benefit
from, the supplemental
benefits system under AS 39.30.150 - 39.35.180."
Page 52, line 10:
Delete "39- 94"
Insert" 39 - 96"
Page 52, line 16:
Delete "Section 95"
Insert "Section 97"
Page 52, line 17:
Delete "sec. 96"
Insert "sec. 98"
Co-Chair Josephson OBJECTED for discussion.
Representative Stapp explained the amendment. He pointed
out that during the discussion the Supplemental Benefit
System (SBS) was not discussed. He reported that the
amendment eliminated that SBS system from the Tier 5
system. He did not actually want to eliminate the benefit
but wanted to emphasize that the topic was never discussed.
He pointed out that the amendment explained the SBS system.
Representative Stapp WITHDREW the amendment.
3:02:43 PM
Representative Jimmie commented that our educators and
public safety employees deserved a retirement that worked
th
for them. She shared that she had the same teacher from 9
through 12the grade. Teachers used to stay and teach for
over 20 plus years in the village. Her daughter had 8
teachers and her district was spending heavily on hiring
teachers from the Philippines and other countries. She
spoke about the difficulty of recruiting and retaining
teachers and Village Public Safety Officers (VPOs) in
Alaska. She believed that the Department of Public Safety
(DPS) had done a good job building up the VPSO program. She
detailed that VPSOs were not state employees due to the
"unique nature of the grant program" and would not benefit
from the legislation. She indicated that there was no
legislative fix in the bill for them. She furthered that
the "disparity in retirement benefits reflected broader
economic inequalities between urban and rural areas." She
supported the bill so children in the villages could obtain
a quality education. However, it would not help retain and
recruit VPSOs. She informed the committee that currently
her village did not have VPSOs.
3:05:11 PM
Co-Chair Schrage MOVED to REPORT CSHB 78(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
Representative Stapp OBJECTED. He wished the committee had
spent more time on the bill and compared other options. He
believed that the bill could be improved. He hoped other
committees would explore all the provisions and options
thoroughly. He pointed out that the bill had a fiscal note
for the next fiscal year, and he wondered what the costs
were and where the revenue would come from.
Representative Bynum was a strong proponent of retirement
reform in Alaska. He appreciated the bill but did not think
they needed to rush the conversation with only one idea;
other ideas should be considered. He noted that most of the
9 committee hearings on HB 78 were generalized topics. He
maintained concerns about the current bill and what
employees would do when they went to retire and were
bridging healthcare benefits between work and Medicare
eligibility. He emphasized that the bill did not fix that
problem nor, he opined, any problems with an unfunded
liability. He noted the bill was exclusively heard by the
House Finance Committee. He was not in favor of moving the
legislation to fix it in the Senate. He thought they should
make fixes in the current committee. He supported working
on the idea over the interim resulting in a bill that was
friendly to employees and the state. He had been informed
by some that "it was not an employee friendly bill." He
supported making the bill employee friendly and cost
effective for municipalities. He opposed moving the bill.
3:09:41 PM
Representative Galvin stated that she was grateful for the
nine hearings she had attended in committee and the prior
years of work on the subject. She highlighted the public
testimony letters legislators received from Alaskans in
favor of the bill. She believed the challenges were
recruitment and retention of state workers. She wanted
Alaska on the map and being competitive in the workplace.
The state had been missing the recruitment and retention
piece in a retirement system. She understood the bill was
imperfect but thought that the bill solved a lot of issues.
She hoped that passing the bill would alleviate Alaskans
concerns regarding the insufficient number of public safety
responders and they would increase. She appreciated and
supported the bill.
3:12:24 PM
Co-Chair Josephson stated that the bill was too historic to
not make comments on. He stated that immediately after the
demise of the Tier 3 and entry into the DC plan there were
legislators seeking reforms and he believed the issue had
been prominent for a long time. He listed former
legislators who had sponsored DB bills. He noted that the
new plan utilized experts and elements from other state's
plans to create a plan that would remain solvent and was
supported by the state's actuary. He referred to the
current cost of training public safety employees. He
mentioned the fiscal note reflecting the cost of just over
$40 million in FY 27 versus the state having paid $12
million in penalties due to the backlog in Supplemental
Nutrition Assistance Program (SNAP) benefits. He believed
it would reduce costs because of the positive effect on
reducing vacancy rates, making governments more effective.
He spoke to the triggers or levers that made the plan cost
effective like a reduced PRPA for retirees leaving the
state and the contribution adjustment. He acknowledged that
mistakes were made with the previous DB tier. He offered
that the state should not saddle future generations with
the mistakes made from the prior DB plan. The bill was not
perfect, but at its inception, healthcare seemed to be the
expensive feature. He thought it would be a boon to public
service in the best sense and would populate jobs that the
state could not fill. He surmised that the plan
accomplished "government for commerce's sake" and would
make the private sector function better. He was strongly in
support of the bill.
3:16:54 PM
Representative Tomaszewski thanked the sponsor for bringing
the bill forward. He felt there were still many discussions
that needed to be had about the many unknown costs
associated with the bill. He deemed that the bill would
create decades of unfunded liability for Alaska based on
prior actuarial forecasts "coming up short for years. He
stated the vacancy rate had been used as a way to push the
bill forward, but the state was on par with the national
rates. He thought some of the good" and "thoughtful"
amendments brought forward could have made the bill more
palatable. He opposed moving the bill forward. He stressed
that the plan created a constitutional obligation for
decades to come for the state that the state would not be
able to change or afford. He emphasized that the bill would
bring untold costs to the state and its citizens.
3:20:00 PM
Representative Johnson opposed the bill. She thought the
state was going backwards. She pointed to the $3 billion
contribution to the unfunded liability that "made no
difference" to the amount of liability. She believed that
the current DC plan was not the worst DC plan ever and
might be doing better than the DB plan. She believed that
other states were trying to "get out from under their DB
plans." Alaska was 20 years ahead of time in adopting the
DC plan. She thought the DC plan was admirable. She deduced
that the bill had the potential of putting more on
municipalities and was not a "magic bullet" for recruitment
and retention." She was skeptical of the future liability
projections. She remarked that the Tier 5 plan was
"aspirational" but would not be beneficial to the state.
She would vote against moving the bill.
3:23:39 PM
Representative Hannan was an enthusiastic yes on the bill.
She viewed the bill as giving an incentive for encouraging
employees to stay and slowed the revolving door of public
employees, especially for teachers. She acknowledged it was
not perfect, but it was a step forward to slow employee
turnover. She believed that the costs of "crumbling
functioning government at state and local levels for 15
years" was huge and not factored into the cost of the
proposed plan. She happily supported the bill.
Representative Stapp MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Jimmie, Hannan, Josephson, Schrage,
Foster.
OPPOSED: Tomaszewski, Stapp, Bynum, Allard, Johnson.
The MOTION PASSED (6/5).
There being NO further OBJECTION, CSHB 78(FIN) was REPORTED
out of committee with six "do pass" recommendations, three
"do not pass" recommendations, and two "amend"
recommendations and with one new fiscal impact note from
the Department of Administration and one new fiscal impact
note from the Department of Administration for Various.
Representative Kopp thanked the committee for its comments
and thoughtful reflection on the issue.
3:27:06 PM
AT EASE
3:45:40 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB80 BGCSB Audit 06.22.23.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Commission on Aging Audit Ver. N 10.06.23.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Board of Massage Therapists Audit 8.14.23.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Explanation of Changes 34-LS0416A to 34-LS0416N 03.10.25.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Letter of Support APHA 02.04.25.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Marijuana Control Board Audit 10.30.23.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Sectional Analysis 34-LS0416N 03.10.25.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| SB80 Sponsor Statement 34-LS0416N 03.10.25.pdf |
HFIN 5/7/2025 1:30:00 PM |
SB 80 |
| HB 78 Amendment 5 Backup Stapp 050725.pdf |
HFIN 5/7/2025 1:30:00 PM |
HB 78 |
| HB 78 Amendments w Actions 050725.pdf |
HFIN 5/7/2025 1:30:00 PM |
HB 78 |
| HB 78 Public Testimony Rec'd by 050725.pdf |
HFIN 5/7/2025 1:30:00 PM |
HB 78 |