Legislature(2017 - 2018)BARNES 124
02/19/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB346 | |
| HB304 | |
| HB83 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 207 | TELECONFERENCED | |
| *+ | HB 346 | TELECONFERENCED | |
| += | HB 304 | TELECONFERENCED | |
| += | HB 83 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 83-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS
3:34:39 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 83, "An Act relating to new defined benefit tiers
in the public employees' retirement system 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 and the
teachers' retirement system; and providing for an effective
date."
3:35:09 PM
EDRIC CARILLO, Staff, Representative Sam Kito, Alaska State
Legislature, introduced HB 83 on behalf of Representative Kito,
prime sponsor. He paraphrased the sponsor statement [included
in committee packet], which reads as follows [original
punctuation provided]:
House Bill 83 lets teachers, Troopers, firefighters
and other public employees choose one of two state
retirement systems: today's defined contribution
retirement account, or earning a new defined benefit
pension. And it saves the state money in the
process.
A defined benefit pension takes time to earn, but
rewards public service by paying a guaranteed monthly
benefit and, for long-term employees, health
insurance. An individual defined contribution account
is portable from one employer to another, and flexible
in how it can be used, but makes no guarantees.
HB 83 lets newly hired public servants in Alaska
choose the one that fits best. HB 83 creates a new
more stable, more predictable defined benefit pension
tier for teachers and public employees. A few years
ago, Alaska beefed up oversight of the pension system
to head off any new surprises. HB 83 keeps these smart
reforms, making Alaska pensions stronger than ever.
And because the defined benefit pensions for new
employees include sharing the risk of rising health
costs, they will never cost employers more than the
defined contribution system, saving money for schools,
cities, and the State of Alaska. Fiscal notes prepared
for prior versions of this bill show it save the state
roughly $70 million in the first 10 years.
Alaska teachers and public employees don't earn the
private sector's defined benefit of Social Security,
and many even lose Social Security benefits they
earned in past jobs. So for most, a defined benefit
pension makes sense. Other employees will choose
individual defined contribution accounts because they
prefer flexibility, portability, and control, or
because their plans do not include long-term service
in the public sector. HB 83 lets them choose an
individual account.
The teachers who educate our children, the police and
firefighters who protect our families, and the public
employees who serve our state and cities will be able
to choose the benefit that best fits their service.
Thank you for your support of House Bill 83.
3:37:24 PM
REPRESENTATIVE BIRCH stated that his biggest concern was the
unconstrained cost downstream and asked about a fiscal note for
the proposed bill.
MR. CARILLO deferred to Senator Dennis Egan's staff.
3:38:13 PM
JESSI KIEHL, Staff, Senator Dennis Egan, Alaska State
Legislature, answered questions in the hearing on HB 83. He
stated all bills that impact the retirement system of the state
are required by statute to have an actuarial analysis before
they are reported from the Rules Committee to the floor. He
said the proposed bill maintains all the safeguards that had
been put in place 10 or 12 years previously.
REPRESENTATIVE BIRCH asked about the current contribution rate
for PERS/TERS between employee match and employer match.
MR. KIEHL said it's difficult to disaggregate by tier, but in
the fiscal year 2018 [FY 18] budget all employers are charged 22
percent employer rate after the employee contribution rate,
which is different for the defined contribution tiers than for
prior defined benefit tiers. He added the state makes "on-
behalf" payments for the legacy unfunded liability which was
roughly 3 percent of payroll in the previous year. He remarked
the Tier I system is much more expensive. He highlighted that
under HB 83 with employee choice, all employees in the defined
contribution plan or the new defined benefit system would pay in
at 8 percent of payroll.
REPRESENTATIVE BIRCH asked for confirmation that the employee
pays 8 percent and the employer matches that.
MR. KIEHL answered the employer rate would remain 22 percent,
but the prefunding cost is different. He added the unfunded
legacy issue is still being dealt with.
REPRESENTATIVE BIRCH surmised if an employee makes $1,000 a
month, 8 percent goes into an account with their own name, and
the employer matches 22 percent.
MR. KIEHL answered in the defined contribution plan it goes into
an account with the employee's name on it.
REPRESENTATIVE BIRCH suggested 30 percent of the employee's
salary goes into the account.
CHAIR KITO said he thought the question was whether the state of
Alaska's current plan is different from other 401K plans.
3:42:55 PM
MR. KIEHL answered the current defined contribution plan is
similar to some major employers' plans in which the employee
contributes to a personalized account and the employer has a
partial match equivalent to a 401K. He added that the employer
also puts money into the health benefits trust, the health
reimbursement account, and the occupational death and disability
account. He added that the new tier created in HB 83 would not
cost more for the employer to prefund than the defined
contribution tier. He said with the risk-sharing of employee
health the new pension tier [in HB 83] would not cost employers
more to prefund than the defined contribution tier.
CHAIR KITO said there is a percentage that an employee pays and
a percentage the employer pays. He asked what those percentages
are.
MR. KIEHL answered that in the defined contribution plan, the
employee pays 8 percent into an individual account, the employer
matches 5 percent into that individual account, roughly 1.2
percent goes into the health trust, 3 percent of payroll goes
into a health reimbursement account with the employee's name on
it, and the occupational death and disability is roughly 1.4
percent for police and fire employees, and about .75 percent for
all other PERS.
3:45:14 PM
REPRESENTATIVE BIRCH asked whether the Supplemental Annuity Plan
(SBS) comes into the equation.
MR. KIEHL answered that it would for those state employees that
get SBS. He specified most teachers and municipal employees do
not get SBS.
REPRESENTATIVE BIRCH asked what that amounts to.
MR. KIEHL answered the employees contribute roughly the same as
social security, so just under 7 percent each.
3:46:02 PM
REPRESENTATIVE SULLIVAN-LEONARD said it was not clear where the
$70 million in savings comes from.
MR. KIEHL answered that those numbers come from two groups of
actuaries who did a series of long-term actuarial projections on
the impacts of the proposed bill.
REPRESENTATIVE SULLIVAN-LEONARD suggested it was Conduit Group
from the Alaska Retirement Management Board (ARMB).
MR. KIEHL said it was the Department of Administration (DOA)
Division of Retirement and Benefits who hired the actuaries.
REPRESENTATIVE SULLIVAN-LEONARD shared her understanding that
Conduit Group and Buck had done a study.
MR. KIEHL answered the numbers were generated by Buck and an
actuary called Flick Fornia in 2013 and it was not an analysis
of a new proposal. He added updated numbers would need to be
analyzed.
REPRESENTATIVE SULLIVAN-LEONARD asked for a copy of the study.
MR. KIEHL said he would comply.
3:48:58 PM
REPRESENTATIVE BIRCH said he thought many current employees are
largely in support. He brought up a concern from law
enforcement employees who don't have health insurance for 20
years because they retire at age 45.
MR. KIEHL asked whether he was asking about the defined
contribution plan or the new tier in HB 83.
REPRESENTATIVE BIRCH asked if there is a medical benefit
afforded to law enforcement employees who have a different
retirement age from other retirees.
MR. KIEHL stated that under the current defined contribution-
only tier, a peace officer or firefighter who retires with 25
years of service will get access to medical coverage as long as
they retire directly from the system. Under HB 83, that same 25
years of service applies for vesting in the retirement health
benefit, unless the employee is over 65 years of age. He said
they also will pay a percentage of the premium that may change
over the course of one's career until retirement age, then the
percentage locks. He added the premiums do not lock, the
percentage paid would lock.
3:51:57 PM
CHAIR KITO said public testimony was still open from the
previous hearing. Upon ascertaining that no one was available
to testify, he closed public testimony on HB 83.
3:52:22 PM
CHAIR KITO said the effective date had not been updated and
would be addressed in Amendment 1.
3:52:43 PM
CHAIR KITO moved to adopt Amendment 1, which read as follows:
Page 18, line 7:
Delete "July 1, 2017"
Insert "January 1, 2019"
3:53:02 PM
There being no objection, Amendment number 1 was adopted.
CHAIR KITO advised that a committee substitute would be
forthcoming.
REPRESENTATIVE STUTES expressed her full support for the
proposed bill.
REPRESENTATIVE JOSEPHSON said he supports HB 83 and said he
thinks it will assist with employee retention problems.
3:54:08 PM
REPRESENTATIVE BIRCH said he was a "no" vote because he had
concerns regarding the mounting liability to the state and he
did not know how the proposed bill would impact the budget.
REPRESENTATIVE SULLIVAN-LEONARD said she echoed Representative
Birch's comments. She added she did not understand where the
$70 million savings would come from and that she felt that until
the final actuarial report was issued, "it was pretty hard to
say yes on this."
3:55:40 PM
REPRESENTATIVE WOOL said he thinks public employers are in
support of this bill. He gave the example of firefighters who
are trained in the state and leave the state after five years.
CHAIR KITO said he thought it was a good idea to have additional
tools for employers to recruit and retain employees, especially
as the generation of baby boomers enters retirement. He added
that one of the biggest liabilities for the state is the
liability of health care costs which no one can predict.
3:57:49 PM
REPRESENTATIVE WOOL moved to report HB 83 as amended out of
committee with individual recommendations and the accompanying
fiscal notes.
3:58:03 PM
REPRESENTATIVE SULLIVAN-LEONARD objected.
3:58:05 PM
A roll call vote was taken. Representatives Stutes, Josephson,
Kito, and Wool voted in favor of HB 83. Representatives Birch
and Sullivan-Leonard voted against it. Therefore, HB 83 was
reported out of the House Labor and Commerce Standing Committee
by a vote of 4-2.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB346 Letters of Support 2.17.18.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 346 |
| HB346 Supporting Document - Dentist specialty numbers.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 346 |
| HB346 Version A.PDF |
HL&C 2/19/2018 3:15:00 PM |
HB 346 |
| HB346 Fiscal Note DCCED CBPL 2.16.18.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 346 |
| HB083 Opposition Letter 2.16.18.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 83 |
| HB083 Letters of Support 2.17.18.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 83 |
| HB346 Sponsor Statement.pdf |
HL&C 2/19/2018 3:15:00 PM |
HB 346 |