Legislature(2005 - 2006)CAPITOL 106
04/09/2005 09:30 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB208 | |
| HB238 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 208 | TELECONFERENCED | |
| += | HB 191 | TELECONFERENCED | |
| += | HB 238 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 9, 2005
9:35 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Carl Gatto, Vice Chair
Representative Jim Elkins
Representative Bob Lynn
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jay Ramras
COMMITTEE CALENDAR
HOUSE BILL NO. 208
"An Act authorizing the Department of Military and Veterans'
Affairs to establish and maintain an Alaskan veterans' cemetery;
and establishing the Alaska veterans' cemetery fund in the
general fund."
- MOVED HB 208 OUT OF COMMITTEE
HOUSE BILL NO. 238
"An Act relating to contribution rates for employers and members
in the defined benefit plans of the teachers' retirement system
and the public employees' retirement system and to the ad-hoc
post-retirement pension adjustment in the teachers' retirement
system; requiring insurance plans provided to members of the
teachers' retirement system, the judicial retirement system, the
public employees' retirement system, and the former elected
public officials retirement system to provide a list of
preferred drugs; relating to defined contribution plans for
members of the teachers' retirement system and the public
employees' retirement system; and providing for an effective
date."
- HEARD AND HELD
HOUSE BILL NO. 191
"An Act relating to defined contribution systems for members of
the teachers' retirement system and the public employees'
retirement system; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 208
SHORT TITLE: STATE VETERANS' CEMETERY
SPONSOR(s): REPRESENTATIVE(s) GUTTENBERG
03/07/05 (H) READ THE FIRST TIME - REFERRALS
03/07/05 (H) MLV, STA, FIN
03/31/05 (H) MLV AT 1:00 PM CAPITOL 124
03/31/05 (H) Moved CSHB 208(MLV) Out of Committee
03/31/05 (H) MINUTE(MLV)
04/01/05 (H) MLV RPT CS(MLV) NT 5DP
04/01/05 (H) DP: GRUENBERG, DAHLSTROM, ELKINS,
THOMAS, LYNN
04/09/05 (H) STA AT 9:30 AM CAPITOL 106
BILL: HB 238
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT
SPONSOR(s): STATE AFFAIRS
03/30/05 (H) READ THE FIRST TIME - REFERRALS
03/30/05 (H) STA, FIN
03/31/05 (H) STA AT 8:00 AM CAPITOL 106
03/31/05 (H) Heard & Held
03/31/05 (H) MINUTE(STA)
04/02/05 (H) STA AT 10:00 AM CAPITOL 106
04/02/05 (H) Heard & Held
04/02/05 (H) MINUTE(STA)
04/05/05 (H) STA AT 8:00 AM CAPITOL 106
04/05/05 (H) Heard & Held
04/05/05 (H) MINUTE(STA)
04/07/05 (H) STA AT 8:00 AM CAPITOL 106
04/07/05 (H) Scheduled But Not Heard
04/09/05 (H) STA AT 9:30 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE DAVID GUTTENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 208 as sponsor.
DANIELLE BROWN, Staff
to Representative David Guttenberg
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
208, on behalf of Representative Guttenberg, sponsor.
BENNO H. CLEVELAND
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of the Alaska Native
Veterans' Association, Chapter 1, and the Military Order of
Purple Heart, Chapter 675, in support of HB 208.
MORGAN SOLOMON
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of the Veteran of
Foreign Wars (VFW) 3629 and the Alaska Native Veterans
Association during the hearing on HB 208.
DANA NACHTRIEB
Fairbanks, Alaska
POSITION STATEMENT: Testified as a life member of the Marine
Corps League, Detachment 674, and on behalf of the Veterans of
Foreign Wars (VFW) 3629, during the hearing on HB 208.
DENNIS GOLDBACH
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of the Purple Heart
Society during the hearing on HB 208.
DARREL DORSHER, State Legislative Officer
Veterans of Foreign Wars of Alaska
Douglas, Alaska
POSITION STATEMENT: Testified on behalf of the Veterans of
Foreign Wars of Alaska in support of HB 208.
MELANIE MILLHORN, Director
Health Benefits Section
Division of Retirement & Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Reviewed a portion of Version L and
answered committee questions during the hearing on HB 238.
KATHY LEA, Retirement Manager
Health Benefits Section
Division of Retirement and Benefits
Alaska Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of the
division during the hearing on HB 238.
KATHERINE SHOWS, Staff
to Representative Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained the existence of certain language
in HB 238, Version L, on behalf of Representative Seaton,
sponsor.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House State Affairs Standing
Committee meeting to order at 9:35:11 AM. Representatives
Seaton, Gatto, Elkins, Lynn, and Gardner were present at the
call to order. Representatives Gruenberg arrived as the meeting
was in progress.
HB 208-STATE VETERANS' CEMETERY
9:36:29 AM
CHAIR SEATON announced that the first order of business was
HOUSE BILL NO. 208, "An Act authorizing the Department of
Military and Veterans' Affairs to establish and maintain an
Alaskan veterans' cemetery; and establishing the Alaska
veterans' cemetery fund in the general fund."
9:36:40 AM
REPRESENTATIVE DAVID GUTTENBERG, Alaska State Legislature, as
sponsor of HB 208, stated that the proposed legislation would
provide veterans who live in Alaska with a place to be laid to
rest. He referred to the sponsor statement [included in the
committee packet].
9:38:17 AM
REPRESENTATIVE GARDNER directed attention to [a two-page e-mail
in the committee packet, sent by Bill Jayne of the U.S.
Department of Veterans Affairs, showing an estimate of the total
grant cost for design, construction, and operating equipment for
the Interior]. She suggested that the costs incurred when a
veteran is buried would be a cost already incurred rather than
an additional cost.
REPRESENTATIVE GUTTENBERG concurred.
9:39:19 AM
CHAIR SEATON offered his understanding that there would be a
federal offset amount for design, construction, and operating
equipment, but the state would be responsible for the land and
the operation and maintenance. He asked Representative
Guttenberg to discuss the plot allowance.
REPRESENTATIVE GUTTENBERG said the veteran plot allowance is
$300. He stated his understanding that that would cover the
interment.
CHAIR SEATON asked if that would depend upon whether the veteran
was going to be buried at no charge by the state.
DANIELLE BROWN, Staff to Representative David Guttenberg, Alaska
State Legislature, on behalf of Representative Guttenberg,
sponsor, clarified that the [Department of Veterans Affairs
(federal - succeeded the Veterans Administration in 1989, called
VA)] plot allowance is $300 per veteran, and it would include
the interment.
CHAIR SEATON offered clarification that the state is required to
bury the veteran at no cost, at which time the plot allowance
would compensate the state for conducting that burial. He asked
if that statement is accurate.
MS. BROWN answered in the affirmative.
9:41:25 AM
REPRESENTATIVE ELKINS asked who would pay for the spouse of a
veteran.
9:41:32 AM
REPRESENTATIVE GUTTENBERG said he imagines anyone who is
eligible would receive the plot allowance. He said the purpose
of the bill is not to add or subtract to the eligibility
requirements that are set by the VA.
9:41:54 AM
REPRESENTATIVE LYNN asked where the proposed cemetery might be
located and how the land would be acquired.
9:42:06 AM
REPRESENTATIVE GUTTENBERG responded that there is no designated
place. He suggested that someone could donate the property or
the state could find a piece of land to purchase. He said that
issue is not addressed in the bill.
REPRESENTATIVE GUTTENBERG, in response to a follow-up question
from Representative Lynn, said the land would need to be a
minimum of 20 acres.
9:43:29 AM
CHAIR SEATON asked a question regarding spouses.
9:43:43 AM
MS. BROWN directed attention to [a seven-page handout included
in the committee packet, entitled, "Burial & Memorial
Benefits"]. She indicated that the state will mirror the
national requirements. In response to a question from Chair
Seaton, she pointed out that there are guidelines regarding
spouses and dependents on page 5 of the handout, which detail
who is eligible for burial in a national cemetery.
9:45:31 AM
CHAIR SEATON, in response to a comment by Representative Elkins,
stated his presumption that "non-service" means a person no
longer in the active military. In response to Representatives
Lynn and Gardner, he said:
Everything that I've seen says [there will] be a $300
plot allowance to the veteran. There are other people
that are eligible to be buried there. I just want to
make sure ... that we have in the record whether the
plot allowance is given to spouses [and] eligible
dependents, or whether the state is required to pick
up the full tab for those eligible dependents without
charge, or whether the state ..., as operating this
cemetery, will be charging at some rate - whatever
that variable rate is.
9:47:02 AM
REPRESENTATIVE GUTTENBERG said he doesn't have that answer at
present, but would provide one to the committee. He reiterated
that this bill is not changing any of the VA's already existing
requirements.
CHAIR SEATON said he is not meaning that the committee would
"make it different for this veteran cemetery than the other,"
but he said it's incumbent on the committee to understand the
program.
9:48:41 AM
REPRESENTATIVE GUTTENBERG, in response to a question from
Representative Gatto, said he is not certain how dishonorable
discharges are treated. In response to a follow-up question
from Representative Gatto, he said, for example, a deceased
veteran in Fairbanks who left wishes to be buried in a veteran's
cemetery would be interred in Anchorage or Sitka. He said,
"From that cemetery's perspective, they probably have a
quarterly report for the VA [regarding] how many people were
buried, and it would just become a billing situation; ... it's a
standing grant program - how many we buried. It would be the
same thing whether you were buried up on the hill ... in the
local community cemetery." He emphasized the importance of
leaving clear instructions regarding last wishes.
9:51:19 AM
REPRESENTATIVE GARDNER noted that in the previously mentioned e-
mail from Mr. Jayne, a sentence read: "The allowance is payable
for each veteran buried at no cost." She said she thinks the
implication is that the $300 allowance is for the veteran only.
CHAIR SEATON told Representative Guttenberg that, before the
bill is heard in the House Finance Committee, it would be
advisable to find out whether all the other eligible people
would pay for the interment services or whether the state is
required to pick up that tab. He stated that he doesn't want to
hold up the bill.
REPRESENTATIVE ELKINS echoed Chair Seaton's remark that he
doesn't want to hold the bill up in the committee.
9:52:48 AM
BENNO H. CLEVELAND testified on behalf of the Alaska Native
Veterans' Association, Chapter 1, and the Military Order of
Purple Heart, Chapter 675, in support of HB 208. He noted that
he is also associated with: the American Legion; the Disabled
American Veterans (DAV); and the Marine Corps League, Detachment
674. He stated that one of the rights of a veteran is to have
full military services when he/she dies. He said there is a
large population [of veterans] in Fairbanks and there are not
enough burial plots available.
CHAIR SEATON assured Mr. Cleveland that the committee has no
intention of questioning the right and privilege of every
veteran, but is looking to establish a new cemetery in Fairbanks
for Interior Alaska.
9:56:44 AM
MORGAN SOLOMON, Veteran of Foreign Wars (VFW) 3629; Alaska
Native Veterans Association, said, "I'm a life member there and
also a life member up in Barrow, Alaska." He said he was
surprised to see HB 208. He said Birch Hill Cemetery in
Fairbanks is filling to capacity. He said a new cemetery in
Fairbanks would benefit the veterans. He indicated that a
veteran from the Interior should not have to be buried in
Anchorage. Mr. Solomon concluded, "For your information, in the
Interior we have many veterans that are forgotten, one way or
the other."
9:58:43 AM
CHAIR SEATON noted that data shows there are 11,164 veterans in
the Fairbanks North Star Borough "and the three adjoining
areas," and "we definitely want to make sure that we have area
to take care of them."
9:59:03 AM
DANA NACHTRIEB testified as a life member of the Marine Corps
League, Detachment 674, and the Veterans of Foreign Wars (VFW)
3629. He noted that he is also a 32-year member of the Elks
Lodge, a member of the American Legion, and a member of the
Alaska Native Veterans Association. Regarding the previous
committee discussion regarding dishonorable discharge, he drew
attention to the first page of the "Burial Benefits Eligibility"
handout, which shows who is eligible as follows:
(1) Any member of the Armed Forces of the United
States who dies on active duty.
(2) Any veteran who was discharged under conditions
other than dishonorable. With certain exceptions,
service beginning after September 7, 1980, as an
enlisted person, and service after October 16, 1981,
as an officer, must be for a minimum of 24 continuous
months or the full period for which the person was
called to active duty (as in the case of a Reservist
called to active duty for a limited duration).
Undesirable, bad conduct, and any other type of
discharge other than honorable may or may not qualify
the individual for veterans benefits, depending upon a
determination made by a VA Regional Office. Cases
presenting multiple discharges of varying character
are also referred for adjudication to a VA Regional
Office.
MR. NACHTRIEB noted that the sixth page of the same handout
shows categories of those who would not be qualified for burial
in a VA national cemetery. [The third category, "Disqualifying
Characters of Discharge," read as follows:]
A person whose only separation from the Armed Forces
was under dishonorable conditions or whose character
of service results in a bar to veterans benefits.
MR. NACHTRIEB said the Marine Corp League, Detachment 674, at
last count is 100 percent in favor of having a veterans'
cemetery in Fairbanks so that families don't have to drive to
Anchorage. Personally, he stated his belief that there should
be a veterans' cemetery "in every county, borough, and parish
throughout the United States" because it is "ridiculous" to make
people travel across their state to visit the burial site of
their past friends and loved ones.
10:01:21 AM
DENNIS GOLDBACH, Purple Heart Society, told the committee he
wears many other hats like the previous testifiers. He said
nothing is being requested that other cities don't already have.
He said he is retired and volunteers his time to work with
veterans. Many of them, he said, don't have the peace of mind
that they had before joining the military. He indicated that
providing a cemetery those veterans know will be waiting for
them would provide them with that piece of mind while they're
still alive, and may cut down the cost of counseling. Because
of the distance to drive to the existing cemeteries, visiting
buried loved ones becomes an annual trip for people. He said
people are also deprived of the personal aspect of a military
funeral. He expressed appreciation for the concerns of
"everybody" regarding the bill.
10:04:19 AM
DARREL DORSHER, State Legislative Officer, Veterans of Foreign
Wars of Alaska, stated support of HB 208 on behalf of those
veterans, particularly for the cemetery and "the concept of the
license plates and the $300 veterans' death benefit allowance."
He added, "I'm sure that the criteria will be set to follow the
federal VA standards for veterans and their families ...." He
indicated that having a cemetery in Fairbanks would allow
veteran's families in the Fairbanks area to honor their families
on holidays such as Memorial Day.
MR. DORSHER told the committee that his wife's cremated remains
were interred at a VA national cemetery in Minnesota, and when
he dies he will join her there. He emphasized the importance of
having a DD 214 available, which is required for the $300
allowance. He said, "Every veteran should have that very handy,
and their family should know where it is located at all times."
10:06:54 AM
REPRESENTATIVE GRUENBERG thanked his constituent, Mr. Dorsher,
for his testimony.
10:07:09 AM
REPRESENTATIVE LYNN stated for the record that a [DD 214] is "a
military port of separation" that every veteran has.
10:07:24 AM
CHAIR SEATON announced that public testimony was closed.
10:07:36 AM
REPRESENTATIVE GATTO remarked that there is a lot he didn't know
about burials before reading the information provided to the
committee. For example, there is a requirement that the land
provided must be able to hold veterans, their spouses, and their
minor children for 20 years.
10:08:12 AM
REPRESENTATIVE GUTTENBERG, in response to a question from
Representative Gatto, reiterated that he has not yet addressed
the subject of where the land will be found. In response to a
follow-up question from Representative Gatto, he said there is a
grant program for the construction of the cemetery up to 100
percent. He explained that the $300 is just to cover the
interment. He said he imagines the other costs, such as the
ceremony and flowers, would be the family's responsibility.
10:09:40 AM
REPRESENTATIVE LYNN moved to report HB 208 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 208 was reported from the House
State Affairs Standing Committee.
The committee took an at-ease from 10:09:40 AM to 10:16:27 AM.
HB 238-PUBLIC EMPLOYEE/TEACHER RETIREMENT
CHAIR SEATON announced that the last order of business was HOUSE
BILL NO. 238, "An Act relating to contribution rates for
employers and members in the defined benefit plans of the
teachers' retirement system and the public employees' retirement
system and to the ad-hoc post-retirement pension adjustment in
the teachers' retirement system; requiring insurance plans
provided to members of the teachers' retirement system, the
judicial retirement system, the public employees' retirement
system, and the former elected public officials retirement
system to provide a list of preferred drugs; relating to defined
contribution plans for members of the teachers' retirement
system and the public employees' retirement system; and
providing for an effective date."
REPRESENTATIVE GATTO moved to adopt the committee substitute
(CS) for HB 238, Version 24-LS0761\L, Craver, 4/8/05, as a work
draft. There being no objection, Version L was before the
committee.
10:19:11 AM
CHAIR SEATON directed attention to page 15 [of Version L], and
asked the representatives of the Division of Retirement &
Benefits to offer their feedback. Specifically, he noted that a
phrase [on page 15, line 4] read, "retire directly from the
plan", while a phrase [in the next sentence on line 5] read,
"retire from the plan". He asked if the division would like to
see the word "directly" in both places.
MELANIE MILLHORN, Director, Health Benefits Section, Division of
Retirement & Benefits, Department of Administration, responded
that she thinks "it works" [to add "directly"].
10:21:21 AM
REPRESENTATIVE GATTO said he thinks the language is "clumsy."
10:22:30 AM
MS. MILLHORN, in response to a remark by Chair Seaton, said the
definition for "plan" is found on page 17, beginning on line 15.
10:22:49 AM
CHAIR SEATON said he would flag the area on page 15 as needing a
definition of "plan". Notwithstanding that, he asked which
terminology would be best regarding retiring and the plan.
10:23:32 AM
MS. MILLHORN clarified as follows:
Retirement, under the defined contribution plan, can
be at any point in time .... What this is really
speaking to is when you become eligible for medical
benefits under the plan. So, ... that's the
distinction when we're talking about retiring from the
plan is that you also, satisfying certain criteria,
would be eligible for medical benefits.
10:24:37 AM
CHAIR SEATON said he would flag that area for future discussion.
Continuing the discussion of page 15, he highlighted that one of
the options that "the member has at least 30 years of service"
is applicable at any age. The other option is that "the member
reaches the normal retirement age and has at least 10 years of
service." He read lines 10-11: "(b) The normal retirement age
is 60 months less than the age set for Medicare eligibility."
10:25:29 AM
REPRESENTATIVE GATTO asked what would happen if the Medicare
eligibility age is changed during a person's career.
10:26:03 AM
MS. MILLHORN speculated that the number to go by would be the
age set for Medicare eligibility on a person's retirement date.
10:26:33 AM
CHAIR SEATON said he wants that to be clear on the record. He
suggested adding "at the time of retirement" after "the age set
for Medicare eligibility." He said he would flag that, as well.
10:27:56 AM
REPRESENTATIVE GRUENBERG offered his understanding that,
constitutionally, when a person's rights vest, he/she then has a
constitutional right that cannot be changed without violating
that section of the constitution. He offered further details.
CHAIR SEATON told Representative Gruenberg that it's anticipated
that the government will move that number back and has already
done so to the age of 67 "for some folks." He said original
language in the bill is 60 and 65, "because those are the
current ones." He said the intent is to vest employees and have
everyone knowledgeable about what benefits they will accrue.
Those benefits that accrue are related to Medicare eligibility.
He added, "Because that's when the premium split comes between
what this plan can supply and what is supplied by the federal
government."
REPRESENTATIVE GRUENBERG said he understands that but is
considering what people's reasonable expectations are and what
their constitutional rights are. He gave an example.
CHAIR SEATON said, "If you tell somebody they have a benefit at
60 when they come to work, they'll have a benefit at age 60. If
you tell them, and their agreement is, that they will get 60
months pre-Medicare premium support, then I don't know how they
could attach a particular age to that, because what you're
saying is, "This is the amount of benefit you're going to have;
you're going to have 60 months of pre-Medicare eligibility
benefit." Chair Seaton stated that so far he doesn't think
there is a problem with this issue, but Legislative Legal and
Research Services could be asked for a further opinion.
10:33:04 AM
REPRESENTATIVE ELKINS stated, "That's what we're here for; we
want to build a plan that protects the retirees. And if the
[federal] law does change, and we haven't got that area covered
so that we've drawn enough money, we're still responsible, I
feel, to pick that up until Medicare kicks in."
CHAIR SEATON said the committee must make a policy call in
deciding whether to set the age at 60 and, no matter what
happens, provide the unanticipated amounts, or to set a time of
60 months pre-Medicare premium support. In response to a
comment by Representative Gruenberg, he said, "I don't want to
go beyond this until we wrestle with it and decide what we want
to do."
REPRESENTATIVE GRUENBERG said he doesn't want the committee and
the public to think that those are the only two choices.
CHAIR SEATON replied, "Those are the two choices that we have in
the two bills before us. We have HB 191, which has Medicare
eligibility being the start point for a subsidy on health care
costs, and we have HB 238, which currently ... [in Version L]
gives 60 months pre-Medicare eligibility." He told
Representative Gruenberg that if he wants to offer an amendment
for another option, that would be fine.
10:36:35 AM
REPRESENTATIVE ELKINS said every time the committee meets it
becomes more apparent to him that this issue needs a lot of
work. He continued:
I don't see how we can pass this out this session.
And I would think for the safety of the retirees and
future retirees of the State of Alaska, that we need
some committee work this summer just to -- you know,
this issue is too important to slam it through here
and put out a bad piece of ... legislation. I come to
one meeting [and] I think I've got a handle on it; I
come to the next and I don't know.
CHAIR SEATON questioned whether meetings would take place when
the committee members are spread across the state during the
Interim. He noted that the committee is meeting on Saturdays
for the purpose of dealing with this issue. He said, "I think
we're doing exactly the right thing in discussing the philosophy
of where we want to go ...."
10:38:08 AM
REPRESENTATIVE GARDNER expressed her appreciation of Chair
Seaton's leadership and his years dealing with the issue in
advance of the rest of the committee. She said in the issue at
hand that it seems clear that the question is whether to put the
state's interest first or the employees' interest.
CHAIR SEATON answered that's correct. He said he thinks people
are very cautious not to create a system that will have unfunded
liabilities built into it. He said, "It's not just the state;
it's ... 154 employers that are in this system with us. And
every one of them gets stuck with whatever we design." He
offered further details.
10:41:26 AM
REPRESENTATIVE GATTO said it will be impossible to supply a
benefit to employees if the state goes into ruin; therefore, the
goal of the legislature is to save the employees' benefits by
ensuring the state doesn't get itself so deeply entrenched in
paying benefits that it can't afford.
10:41:57 AM
REPRESENTATIVE GRUENBERG responded, "I guess when Chicken Little
said the sky was falling, the real question was whether it was."
10:42:14 AM
CHAIR SEATON said that's true. He added that, considering the
payment schedules that will have to be made over the next years,
by the year 2015, the state will be paying $300 million of the
retirement benefits that haven't been collected. He continued:
Now, we can put that all on the school districts, but
they have no tax base. So, what the legislature's
done to date with the $38 million that ... we put into
the budget - and that's just the very tip of this
escalating curve - is ... picked up that PERS/TRS
money to the school district. But that grows to $300
million a year, instead of $38 million. And ... the
question is, "Is that sustainable? Can we do that?
... If we have those kinds of liabilities, will we be
able to pass school budgets that increase anything for
the classes?" I mean, that is more why we're here, I
think, and why we're wrestling with this, than the
retirement system is: "What is the budgetary effect
going to be on everything else we do?"
10:43:37 AM
REPRESENTATIVE GRUENBERG said Chair Seaton is right. This issue
deals with fiscal policy - where the state is going to raise
money and where it will spend it. He indicated that federal
taxes are something over which the state has no control. He
said he thinks this is a solvable problem, but it needs to be
put into perspective.
10:45:23 AM
CHAIR SEATON stated, "Really what we're coming to here, folks,
is: What [are] the medical benefits that we're willing to
charge the employers and the employee? Because, under our
defined contribution program, ... we had a 10 percent
employee/10 percent employer match, and ... if we want to crank
up the contribution, all of the medical has to come from the
employer." He offered further details. He said no one is
coming to the legislature with an answer on a silver platter;
the committee must create the best benefit package that it can.
CHAIR SEATON turned to page 5 of Version L, which shows that the
employer contribution under [HB 238] would be 11 percent. The
breakdown of that 11 percent is shown [in the following
subsections]. [Subsection (b)] shows what goes into the
retirement portion, and [subsection (c)] shows that the health
care benefit would be at 3.75 percent. [Subsection (d)] shows
that the employer would contribute 1.5 percent for the health
care reimbursement account (HRA). If the committee wants to
provide a larger benefit it can "crank up these numbers." He
noted that the normal cost rate from 1980 through 2003 was 11.16
percent average. [HB 238] would keep that rate the same. Chair
Seaton said the $300 million liability will still have to be
paid, but [HB 238] offers a plan to replace the system that
created that liability.
10:49:11 AM
REPRESENTATIVE GARDNER remarked that benefits work in harmony
with salary levels - one can be less if the other is higher.
She said, "We don't know what the other half of the whole
package is, so when we try to figure out what is adequate and
responsible for recruiting and retaining good employees, we're
operating in a vacuum to some extent here."
CHAIR SEATON said he agrees. Furthermore, he said
Representative Gardner is talking about today, while the
committee is trying to project the retirement life of new
employees coming in over the next 25 years. He said there are
employee/employer surveys available. He mentioned other issues
that need to be considered.
10:51:57 AM
REPRESENTATIVE GRUENBERG mentioned a related bill that he
thought moved out of committee too fast and said he thinks it's
important to give this important issue careful consideration so
that constituents are happy with the outcome.
CHAIR SEATON assured Representative Gruenberg he doesn't think
[HB 238] is anywhere near ready to be moved out of committee.
10:55:56 AM
REPRESENTATIVE ELKINS directed attention page 15, [lines 28-29],
which shows one category eligible for major medical insurance as
follows:
(3) a member who reaches the normal
retirement age as provided in AS 14.25.470, has at
least 10 years of service, and retires directly from
the plan;
REPRESENTATIVE ELKINS asked if that would affect those who
already qualified at 5 years.
10:56:58 AM
CHAIR SEATON reminded Representative Elkins that the plan before
the committee is for a new tier level and would not affect those
in Tier I.
10:57:32 AM
REPRESENTATIVE ELKINS responded as follows:
I understand what you're saying. But I still believe
that school board members, city council members, and
people in that category contribute such a small amount
in. ... I'm one of those people, and I can tell you
I've taken out of the system 50 or 100 times more than
was ever paid out on my behalf. And I think it's
wrong. I love the system, but I think to protect the
health of any future system, ... those people who
serve on those governing bodies should be excluded.
I've always thought that; when I was on the borough
assembly I fought against it and kept it off for the
three years I was there - we didn't join. But I'd
like to see us address that in detail ....
10:58:32 AM
CHAIR SEATON said Representative Elkins is right regarding
medical eligibility.
10:58:53 AM
MS. MILLHORN reported that, currently, "elected officials" need
to have 10 years of service in order to be eligible for medical
benefits. She indicated that there are currently 375 active
members of the retirement system who are elected officials, and
she surmised that many of those may be in Tier III and would
have to serve 10 years of service in order to be eligible. That
group of 375 represents .003 percent of the total active PERS
and TRS members.
CHAIR SEATON said he thinks Representative Elkins' concern is
that the design of that system means that "you have somebody
getting a free lunch," because hardly anything is being
collected from their employment status "at 50 bucks a month,"
but they receive the same benefits.
11:00:13 AM
REPRESENTATIVE ELKINS clarified his point as follows:
The way the system works, if I understand it right,
even under the 10-year plan, if they put 10 years on
the school board, for example, and come out and go to
work driving [a] truck for the state for three years -
their high three - then the ... municipality pays the
biggest portion of the premium, based on that higher
salary. That's why, in my opinion, the municipalities
can't afford to be in this system for the nonregular
employees.
11:00:59 AM
MS. MILLHORN told Representative Elkins that right now employers
have the opportunity - through their participation agreement -
to exclude those parties from membership, so they have total
control over the cost.
11:01:22 AM
CHAIR SEATON noted that at least one of the cities in his
district has taken the option to exclude any future city council
members from participation in the system. He indicated that
this is in response to the bills the cities are finally getting
totaling hundreds of thousands of dollars owed to the employees
who did not contribute much.
11:01:53 AM
REPRESENTATIVE ELKINS stated one of his pet peeves is that the
legislature opens the door and gives the responsibility [to the
municipalities] to opt out and close that door. He said he
thinks that onus should be on the legislature.
CHAIR SEATON indicated that he would accept an amendment to that
effect as the committee moves forward with the bill.
11:02:26 AM
REPRESENTATIVE ELKINS, in response to a question from
Representative Gruenberg, said he would not then allow the
municipal employers to opt in.
11:02:45 AM
CHAIR SEATON said he would like to know at this point whether
the committee is in general agreement regarding the normal
retirement age being set at 60 months [less than the age set for
Medicare eligibility].
REPRESENTATIVE GATTO said he agrees philosophically and wants to
see the intentions put in "bold print" so that there are no
surprises to new employees.
11:04:11 AM
REPRESENTATIVE LYNN said, "I don't want to be surprised when
retirement time comes."
11:04:24 AM
CHAIR SEATON reviewed page 15, subsection (d), which read as
follows:
(d) A member who continues in the employ of the
employer after reaching normal retirement age shall
continue to participate in the plan and to have
contributions allocated to the member's account.
CHAIR SEATON directed attention to page 15, lines 17-21, which
read as follows:
Sec. 14.25.480. Medical benefits. (a) The medical benefits
available to eligible persons are access to the retiree major
medical insurance plan and to the health reimbursement account.
Access to the retiree major medical insurance plan means that an
eligible person may not be denied insurance coverage except for
failure to pay the required premium.
11:06:08 AM
MS. MILLHORN requested on behalf of the division that the
committee strike the word "insurance" [throughout subsection
(a)], because the plan is self-funded and the use of the word
insurance may denote that the Division of Insurance would have
regulatory authority. She also asked that the word "medical" be
inserted after "denied".
11:07:19 AM
REPRESENTATIVE GRUENBERG said he thinks there should be
notification to members and the legislature if the federal age
for Medicare changes. He said the question is whether the
presumption is "that the state will go along with it" and at
that point will "decouple," or whether it would not and would
have to "couple."
11:09:12 AM
CHAIR SEATON said he would oppose that because the decision has
to be made at this point in time. The committee is designing a
plan and, under the Alaska state Constitution, the legislature
sets the parameters and the employees have the ability to
understand those parameters "throughout their lifetime of
employment."
11:11:05 AM
MS. MILLHORN said she would like to address the issue of
notification. She said the division has the responsibility to
educate, counsel, and notify members about plan benefits at the
time those members are employed, and at any time in the future
in which the plan changes. She said the division takes that
responsibility seriously and would endeavor to ensure that
members, the legislature, and any interested parties would know
about changes with adequate notice. She said the information is
also listed on the division's Web page.
11:12:09 AM
REPRESENTATIVE GATTO noted that the word insurance also appears
on page 15, line 22.
11:13:07 AM
CHAIR SEATON continued reviewing Version L, on the rest of page
15, and on to page 16.
11:14:02 AM
MS. MILLHORN directed attention to page 16, [lines 4-6], which
read as follows:
(d) Retiree major medical insurance plan coverage
elected by a surviving spouse of a [sic] eligible
member under this section covers the surviving spouse
and the dependent children of the surviving spouse.
MS. MILLHORN asked that line 6 be changed to read, "dependent
children of the eligible member who are dependent on the
surviving spouse."
11:15:36 AM
REPRESENTATIVE GRUENBERG stated:
At least for tax purposes ..., I think you can be a
dependent of somebody if you're living in their
household and you're dependent upon them. You don't
have to be a child. Here, if you want to limit it to
... the child who is the child by ... blood or
adoption of both the surviving spouse and the deceased
eligible member, then you should say it a little
differently. I think ... what you should say is,
"dependent children of the surviving spouse and the
eligible member."
CHAIR SEATON proffered, "Therefore, if they were children of the
spouse who had married the member, they would not be eligible,
because they weren't children of the member and spouse."
REPRESENTATIVE GRUENBERG said that's exactly his point.
11:18:10 AM
CHAIR SEATON indicated that, regarding the health care
reimbursement account, there are projections of premiums going
up $28-30,000 "in the time-frame of when somebody comes into
this system and retires." He illustrated that it is one thing
to cover the spouse and dependents of a retired active employee,
yet quite another to cover the spouse and any adopted children
from a marriage that occurs after the member retires. He said,
"This is totally a policy call." As health care premiums start
increasing to $30,000, there could be many types of structures
within the system. For example, he said, "We could have
grandparents adopting their grandchildren for coverage, and they
would be covered for 20-some years." He offered other examples
of how people could work the system to their advantage.
11:21:24 AM
MS. MILLHORN responded that there is a tax-qualified plan for
medical benefits. She emphasized the importance of having a
clear definition of who is eligible, and said that definition
must comport with 26 U.S.C. 152. She said, "We have looked at
this issue very carefully and we understand the consequences of
not being clear with that language."
CHAIR SEATON asked if there is any language in the U.S. code
that states that coverage must be provided for a spouse who was
not a spouse during active employment.
11:23:32 AM
MS. MILLHORN offered her understanding that the code "doesn't
differentiate; it just defines 'spouse'."
CHAIR SEATON said he wants to get the opinion of the attorney
general and Legislative Legal and Research Services to find out
whether the legislature can restrict the definition of "spouse"
and "dependent" children to those spouses and dependent children
that existed during the period of the members active employment.
11:24:45 AM
REPRESENTATIVE GARDNER asked for confirmation that "when
somebody gets divorced they split the retirement benefits on
occasion" and "they can require as part of the divorce decree
that whoever has the medical coverage retain[s] the premiums so
that the other spouse retains medical coverage."
KATHY LEA, Retirement Manager, Health Benefits Section, Division
of Retirement & Benefits, Department of Administration, answered
Representative Gardner as follows:
Currently, an ... ex-spouse can have access only
through qualified domestic relations order. So, if
there is a divorce after the member has retired, all
that the alternate payee can get is access to the
medical plan; they have to pay full premium for it,
regardless of what the member's eligibility for
system-paid premiums are.
MS. LEA, in response to a question from Chair Seaton, said that
is the case after a member's death, as well. She clarified,
"Any alternate payee only has access to the medical plan.
Regardless of whether the member is living or ... the domestic
relations order becomes effective upon the member's death, they
must pay the full premium for medical coverage.
11:26:29 AM
REPRESENTATIVE GRUENBERG offered his understanding that there is
"even COBRA [Comprehensive Omnibus Budget Reform Act] coverage
for three years." He concluded that the ex-spouse is eligible
for that coverage but has to pay the premium for three years.
11:26:48 AM
REPRESENTATIVE GATTO made up a scenario in which an 85-year-old
retired active member has lost his wife and children, has been
told he has three months to live, and marries the woman next
door who has a dozen adopted children. He asked if the plan
would cover them all.
11:27:50 AM
MS. LEA answered that a member who retires unmarried can remarry
and cover that spouse and dependent children while he/she is
living; however, once that person dies that coverage ends.
11:28:58 AM
CHAIR SEATON said he doesn't think that language is in [HB 238].
He asked Ms. Lea to pull that language out of existing statutes
and get it to the committee.
11:29:09 AM
REPRESENTATIVE GARDNER asked for clarification that the
committee is proposing that the spouse and dependents that exist
for an active member before retirement would be covered after
the member's retirement and after the member's death. However,
if the member is not married at the time his/her retirement, but
marries a spouse with children after retirement, that spouse and
children are covered while the retiree is alive, but not after
he/she dies.
CHAIR SEATON responded yes. He offered his understanding that
"the spouse and dependents that come on after retirement are
access only." He asked if that is correct.
MS. LEA responded as follows:
Currently, they come under the retiree's eligibility.
So, if the retiree is living, they can cover them with
system-paid premiums if the retiree's eligible for
system-paid premiums. After death, if it's an after-
death coverage, that would end in the current system.
And that's principally because, in the [defined
benefit (DB)] plan, you're required to elect a joint
and survivor option if you want medical coverage to
continue after your death for your spouse and
dependent children. So, that's the mechanism by which
you pay it under the DB plan. If no joint and
survivor option is elected, regardless of whether the
spouse was a spouse at the time of retirement, the
coverage would end at the end of the member's life,
because there was no provision for continuing benefit.
So, that's the mechanism we're using currently in the
DB plans.
The difference with this [defined contribution (DC)]
plan is ... you've broken off the medical from really
any tie to a retirement pension benefit.
11:31:32 AM
REPRESENTATIVE GATTO revisited his previous scenario and asked
if the member who was 85 and had three months to live gets
himself appointed to the school board just before dying, would
the wife with the dozen adoptees retain the benefits?
11:32:01 AM
MS. LEA responded as follows:
Under the current system, if you had not retired, or
if you had elected to stop your benefit and
participate again in the retirement system, you could
elect a joint survivor, and yes, you could provide
that coverage for the new spouse and new children.
Under the way this is currently written, they also
would be covered, because you would have a surviving
spouse, and if you adopted the children they would be
your legal, dependent children.
REPRESENTATIVE GATTO said the purpose of the current
conversation of the committee is to prevent the state from
sinking under the weight of "things that we've never
anticipated."
CHAIR SEATON reminded Representative Gatto that Representative
Elkins had suggested exempting those types of employees that
don't put in sufficient time to help cover the cost of their
benefits, such as a school board member or city council member.
11:34:56 AM
MS. MILLHORN asked:
Is it accurate to say that your intent would be to
change the language to ensure that the member who was
married, and those dependents, would ... have coverage
at the time that they were appointed to retirement,
but if they were to divorce, that future coverage for
those dependents would ... not exist. Is that
accurate?
CHAIR SEATON replied:
It would be that the dependents and spouse acquired
after active service would not be covered.
MS. MILLHORN said that was her understanding.
11:35:39 AM
REPRESENTATIVE GARDNER, in reference to Ms. Millhorn's question,
clarified:
If there's a divorce, children who are covered at any
time - the natural children, biological children -
should retain coverage.
CHAIR SEATON added that "dependents are only through their term
of dependency." He offered further clarification.
11:36:36 AM
REPRESENTATIVE GRUENBERG added that a child who is adopted
during a member's employment would have the same legal rights as
a biological child.
MS. MILLHORN confirmed that's correct.
11:37:47 AM
CHAIR SEATON asked Ms. Millhorn to shed light on [subsection
(g)], page 16, which read as follows:
(g) The medical and optional insurance premiums
owed by the person who elects coverage under (b) of
this section shall be deducted from the health
reimbursement account. If the amount of the health
reimbursement account becomes insufficient to pay the
premiums, the person who elects coverage under (a) of
this section shall pay the premiums directly.
11:38:57 AM
MS. MILLHORN said [subsection (g)] allows for the premium amount
to be deducted from the health reimbursement account. In
response to a remark from Chair Seaton, she confirmed that if
the health reimbursement account runs out and the person wants
to maintain coverage, he/she would have to pay the premium.
11:39:25 AM
MS. MILLHORN, in response to Representative Gardner, said if a
person fails to make a premium payment, he/she would be given
approximately a 60-day notice period that coverage is about to
lapse. She added, "It would go back to the date they need to
make the premium and it would go back to the date to ensure
there's no break in coverage. But ... if they go beyond that
point, then they would not receive coverage." In response to a
follow-up question from Representative Gardner, she clarified
that if a person exceeds that period and the coverage completely
lapses, that person would not be able to reinstate coverage.
11:41:14 AM
REPRESENTATIVE GATTO asked, "If my HRA is exhausted, as you
mentioned, and January and February are the months when I don't
have any money in there, and I haven't paid anything, but I've
accumulated expenses, do you pay those with that 60-day
extension, or not?"
MS. MILLHORN answered yes, "so long as you're within that time
period and if you did have medical expenses that were incurred
during that time period, you would ... pay your premiums and it
would reinstate your coverage. It would go back to the last
date that you were covered, and it would pay those expenses."
11:42:01 AM
REPRESENTATIVE GATTO clarified, "I was rather thinking in terms:
You really don't care; you're not going to pay them ever. You
still cover me for those two months?"
MS. MILLHORN answered yes.
CHAIR SEATON directed attention to subsection (h), which read as
follows:
(h) The administrator shall set separate retiree
health coverage premiums for participants who are
Medicare eligible and for participants who are not yet
Medicare eligible. An increase in the premium amount
may not exceed five percentage points annually. A
participant's share of the applicable premium shall be
determined according to (i) of this section.
CHAIR SEATON said, "My understanding was that the 5 percent ...
limit on escalation was on what the system would pay, but as I
read this you're saying that we're capping the whole premium and
just telling Aetna, 'Eat it,' because you're going to provide
these medical benefits and we're limiting to 5 percent growth.
Do we have this 5 percent in the wrong place?"
MS. MILLHORN said it sounds like there may be an issue there.
11:44:21 AM
CHAIR SEATON said the intent is to say that a premium subsidy is
provided based on the number of years served, but that premium
subsidy is capped so that it cannot grow at over 5 percent a
year.
MS. MILLHORN responded that's correct.
CHAIR SEATON said, "And so, don't ... believe this language here
because it's in the wrong place."
11:45:17 AM
MS. MILLHORN, in response to a question from Representative
Gruenberg, repeated her previous explanation of the notification
period someone would receive if he/she failed to make a payment.
In response to a follow-up questions from Representative
Gruenberg, she said this is not a change from current law. She
said she supposes there would be discretion by the PERS and TRS
Boards; however, if a person was given a longer period of time,
the plan would be exposed to additional costs. She said it
would be a policy call of the legislature if it wanted the
division to adopt a regulation to look at circumstances on a
case-by-case basis. That could be done through statute or by
making a recommendation to the division. She said she has not
had the personal experience whereby she has witnessed injustice
occurring because that provision does not currently exist.
11:49:54 AM
MS. LEA noted that there currently is a situation involving an
alternate payee who did not make a premium payment. That person
appealed to the board. The board did not find extenuating
circumstances for that person not to have made the premium
payment and upheld the administrator. That person then took the
case to superior court. Ms. Lea said she believes the court
found in favor of the division, as well.
REPRESENTATIVE GRUENBERG concluded, "So, currently the board
does have jurisdiction to consider such a claim."
MS. LEA answered that's correct. She said the board can
consider any health claim other than one regarding [that which
is] "usual and customary."
REPRESENTATIVE GRUENBERG asked if that would continue to be the
case under [HB 238].
MS. LEA offered her understanding that HB 238 would not change
the authority of the board.
REPRESENTATIVE GRUENBERG asked that Ms. Lea and Ms. Millhorn let
him know if, during the discussion of the bill, they see that
that provision would be changed.
11:51:27 AM
REPRESENTATIVE GARDNER asked if, for example, the board can step
in for someone who is mentally ill and has gone beyond the time
allowed to miss payment.
MS. LEA answered that's correct.
11:52:22 AM
CHAIR SEATON directed attention to subsection (i), which read as
follows:
(i) The portion of the cost of premiums payable
by the participant is 70 percent if the member had 10
years of service; for each additional year of service
after the member's 10th year of service, the cost of
premiums decreases by three percentage points;
however, the minimum employee portion of the premium
is 10 percent if the member has 30 or more years of
service.
CHAIR SEATON said this is a bit of a change from some of the
other schedules. He said, "I incorporated this in here because
I have trouble with the policies that jump and ... make people
make decisions based on, 'Oh, I've got to stay four years to get
to the next category,' or 'I may as well quit because I have to
be here three more years before I can get any more health care
benefits.'" He said this is a policy call.
REPRESENTATIVE GRUENBERG said he supports Chair Seaton in this
matter.
REPRESENTATIVE ELKINS echoed that support.
11:54:23 AM
MS. MILLHORN, in response to a question from Chair Seaton, said
the division doesn't have a problem with the benefits, as a
matter of policy, because it is the purview of the legislature
to make that decision. She said, "We would ... re-cost that, so
that the members know what that change may be as far as [an]
increase or monetary cost associated with that."
REPRESENTATIVE GRUENBERG surmised that there would be a more
positive fiscal note under Version L than the current system.
MS. MILLHORN stated her understanding of the language in Version
L is that a member would pay 3 percent less for each year of
service. She asked if that is accurate.
REPRESENTATIVE GRUENBERG said, "So, you're saying it actually
would cost the system more."
MS. MILLHORN answered that's correct.
CHAIR SEATON said, "It would have kept the person at the higher
contribution level until they reached the step."
MS. MILLHORN concurred.
11:57:31 AM
CHAIR SEATON directed attention to subsection (j), which read as
follows:
(j) The eligibility for retiree major medical
insurance coverage for an alternate payee under a
qualified domestic relations order shall be determined
based on the eligibility of the member to elect
coverage. The alternate payee shall pay the full
monthly premium for retiree major medical insurance
coverage.
REPRESENTATIVE GRUENBERG said he would like to have additional
conversation regarding this issue.
CHAIR SEATON said the intent in this language is to ensure that
the premium paid does not exceed the premium that would have
been paid through to the member.
11:59:45 AM
MS. MILLHORN said she and Ms. Lea found the first sentence in
subsection (j) to be confusing and did not know if, based on a
member's eligibility to elect coverage, it somehow might denote
that the cost to the member would be attached to the eligibility
portion for the member, and, if so, if it would be based on the
criteria set out for the member. She added, "Because to us, the
alternate payee would be fully responsible for 100 percent of
the premium."
CHAIR SEATON asked if this language would jive in court.
12:01:22 PM
REPRESENTATIVE GRUENBERG said that first sentence is a matter of
who owns [the major medical insurance coverage] and whose
eligibility triggers it. He said, "This is a very important
issue in family law." He stated there are two ways a qualified
domestic relations order (QDRO - pronounced "qua-dro") can be
done. One way is to access the former spouse's benefits. The
other is to have a separate account and eligibility at the time
the QDRO is entered. He said this becomes important when, for
example, a bitter spouse won't retire so a former spouse can't
access the retirement benefit.
12:03:04 PM
CHAIR SEATON asked Representative Gruenberg to draft a white
paper outlining the options.
12:03:54 PM
CHAIR SEATON directed attention to [page 17, lines 11-14], which
read as follows:
(2) "retires directly from the plan" means
that the member is an active member at the time that
the member applies to the administrator for
appointment to retirement and that the member
continues as an active member up through the day
before the day the member is appointed to retirement.
CHAIR SEATON indicated that there had been a question in the
past about perhaps requiring that a person coming back to work
do so for 12 months before retiring, so that somebody couldn't
come back to work for just one day and have his/her [plan]
reactivated. He asked if language to that effect should be
added to line 13.
MS. MILLHORN deferred to Ms. Lea.
12:06:23 PM
MS. LEA addressed the language: "and that the member continues
as an active member up through the day before the day the member
is appointed to retirement." She said, "Since retirement
appointments are the first of the month, that would require
everyone to terminate on the last day of the prior month and not
earlier."
12:06:55 PM
CHAIR SEATON indicated that that portion of [paragraph (2)]
could be deleted and in its place could be inserted, "and was an
active member for the previous 12 months."
MS. LEA said that would take care of that.
CHAIR SEATON asked if any committee member would have a problem
with doing that, and he said he would flag that language.
12:07:29 PM
REPRESENTATIVE LYNN asked for a definition of "qualified
domestic relations order".
CHAIR SEATON explained it's when a court decides that a person
who has been with a spouse for a significant amount of time is
entitled to part of that spouse's retirement benefit.
12:08:42 PM
CHAIR SEATON directed attention to Section 13, page 18, which
read as follows:
*Sec.13. AS 39.30.090(a) is amended to read:
(a) The Department of Administration may
obtain a policy or policies of group insurance
covering state employees, persons entitled to coverage
under AS 14.25.168, 14.25.480, AS 22.25.090, AS
39.35.535, 39.35.870, or former AS 39.37.145,
employees of other participating governmental units,
or persons entitled to coverage under AS 23.15.136,
subject to the following conditions:
12:09:22 PM
REPRESENTATIVE GARDNER asked if the use of the word "insurance"
is okay.
MS. MILLHORN answered yes.
12:09:42 PM
REPRESENTATIVE GRUENBERG directed attention to Section 12, page
18, which read as follows:
*Sec.12. AS 14.40.671(e) is amended to read:
(e) An employee whose rights to transfer
assets out of a state retirement system are subject to
a qualified domestic relations order is entitled to
transfer assets from the state retirement system to
the program only if the requirements for receiving a
refund under AS 14.25.150(b), 14.25.400, [OR] AS
39.35.200(c), or 39.35.790, as appropriate, are met.
REPRESENTATIVE GRUENBERG stated he thinks it's important that
QDROs cover all types of benefits and he asked, "Is there
anything that's being omitted?"
MS. MILLHORN said she doesn't think so.
MS. LEA concurred, because she said, "It's talking about
transferring assets out of the DC plan."
REPRESENTATIVE GRUENBERG asked, "Do any of these people ever
have ... any benefits that are in any of the other state
retirement systems - the National Guard retirement system or a
judicial retirement system?"
12:11:40 PM
MS. LEA responded that currently there are members of PERS who
also have entitlements under the National Guard retirement
system or the judicial system, who also have benefits rights in
TRS. The only two systems that will recognize service in the
other systems are TRS and PERS; the judicial and National Guard
systems have no provisions for any benefits that are being paid
out of the other systems. In response to a question from
Representative Gruenberg, she explained that PERS and TRS have
that recognition mostly because a lot of schoolteachers begin as
aides or non-teaching positions and then go into a teaching
position. She said that ability to cross over is called,
"conditional service retirement benefit."
12:13:18 PM
CHAIR SEATON moved on to new language added in Section 13,
beginning on page 18, line 25, and continuing through page 19,
line 3, which read as follows:
(B) require the insurance plan to provide a
preferred drug list or formulary and must provide that
beneficiaries use the appropriate medication on the
preferred drug list or pay the difference in cost
between the medication listed on the preferred drug
list and the cost of a nonformulary medication;
however, if a medication is not on the preferred drug
list as a generic or nongeneric drug, the insurance
plan shall cover the cost of the medication. For
purposes of this subparagraph, a nonformulary
medication is one that is not listed on the formulary,
such as a nongeneric form of the medication when a
generic form of the medication is in the formulary.
CHAIR SEATON said there are savings through use of generic drugs
that the PERS and TRS Boards have been voluntarily trying to
stimulate. The savings could be up to $6.5 million a year.
There have been indications that putting this language in the
bill might be seen as limiting. He noted that there is a letter
included in the committee packet from the Department of Health &
Social Services that lists 12 possibilities for savings. The
question, he explained, is whether a letter of intent should be
drafted, directing the administrator to accomplish all savings
applicable rather than designating it in statute. He asked Ms.
Millhorn for feedback on this issue.
12:15:34 PM
MS. MILLHORN said the commissioner currently has the authority
to make changes to the active and retiree plans, and two
vehicles are used to accomplish that: One is through a health
benefits evaluation committee, which is a group comprised of
management and labor that looks at the plan provisions. In the
past several years, the group has, to a large degree, considered
cost containment issues. After review by the group, those
particular issues come through the division and go to the
commissioner for final approval. She said the process is
effective, because it allows the commissioner an ongoing process
available for making plan changes, and that discretion is
something that the division would like to retain. The second
vehicle is a similar process done through a retiree health group
that considers initiatives and comes forward with
recommendations. She said the last time that group met it
addressed approximately six initiatives, one of which speaks to
the issue of generic drugs and a closed formulary. She
reiterated that she thinks it works well to allow the
commissioner the final authority and flexibility to make
changes.
MS. MILLHORN said the commissioner has tasked the division to
look at cost initiatives, including positive open enrollment.
She stated her intent to provide information to the committee
members regarding all the initiatives that have happened in the
last couple of years for the active and retiree plans. She
reported that the positive open enrollment should produce a cost
savings of $4 million to the active plan and $16 to the retiree
plan.
12:18:29 PM
REPRESENTATIVE GRUENBERG indicated that [the previously noted
subparagraph (B)] is not something that the House State Affairs
Standing Committee should get into, but it is a matter for the
House Health, Education and Social Services Standing Committee.
CHAIR SEATON said the House Health, Education and Social
Services Standing Committee recently passed a preferred drug
list, but the House State Affairs Standing Committee is the one
that looks at the issues of retirement and benefits. He
indicated that the potential for savings could be increased if
the use of generic drugs were made a requirement rather than a
voluntary action.
12:21:20 PM
MS. MILLHORN responded that the division has looked at this
issue, has worked with the boards, and is ready to implement
something that "looks very much like this."
12:21:39 PM
CHAIR SEATON said he doesn't have a problem maintaining the
flexibility, but he thinks the committee is in agreement that it
wants cost efficiencies implemented in the system as soon as
they are applicable and the division has the authority to do so.
REPRESENTATIVE GATTO related that when a pharmaceutical company
comes out with new drugs, generic drugs are soon to follow.
CHAIR SEATON noted that there is a letter [included in the
committee packet] from [Commissioner Joel Gilbertson],
Department of Health and Social Services, which lists a dozen
ways to save money through a comprehensive pharmacy program. He
suggested that the committee could include a letter of intent
asking the administrator to consider and implement good
alternatives as soon as possible.
12:23:40 PM
REPRESENTATIVE GARDNER suggested replacing [subparagraph (B)]
with "shall participate in cost-saving measures recommended by
the administrator and approved by the board."
12:24:05 PM
REPRESENTATIVE GRUENBERG suggested a third approach, which would
be to add a temporary section that would "basically have the
same kind of a concept and a report to the legislature on the
implementation of these reforms at the beginning of the next
session."
12:25:00 PM
MS. MILLHORN, in response to Chair Seaton, said all the ideas
are good and the division could do what the committee desires.
Regarding Representative Gardner's suggestion, she said:
The board meets every so often and the division
actually can implement cost-savings measures on a
faster order. It's good to have the board involved
because they can look at that issue, as well. But
just for example, there's an issue that they have been
studying for some period of time: ... disease
management is an area that right now the federal
government is going to have a pilot project on for
Medicare to look at .... And I think that that pilot
project is approximately three years.
Well, with disease management, when the board studied
that for some period of time - a year and a half,
almost two years - Aetna looked at what the cost was
and the cost to the plan would be $260,000 or $300,000
a year. And it was a two-year pilot project that we
would not have a return on investment for that
expenditure, so about $600,000 for that two-year
period. And then what happens is that ... - because
it was on a voluntary basis for diabetes and heart
conditions - ... if the person was Medicare eligible,
the savings would accrue to Medicare. And we can't
treat our population pre-65 any differently than we
would post-65.
12:26:51 PM
So, when that recommendation was studied, the analysis
was done, [and] the cost was determined, we put that
forward, and the board recommended that we enter into
that particular initiative. However, when the
commissioner looked at that, he looked at the cost to
the plan; he looked at the two-year pilot project; he
looked at the savings possibly never coming to the
division, but actually accruing to Medicare; [and] he
said, "No, not at this time." That's an initiative
the board still wants to pursue. And I think that by
looking at the pilot project that Medicare has now
established, and letting that run its course, it will
determine what the research concludes on the cost-
savings to plans. So, perhaps if Medicare ends up
finding that accrued savings and has that plan
available, then other plans would benefit from that,
as well.
So, I guess my point is that sometimes by leaving the
board with the final approval, ... there's timing
kinds of issues, and there may be some disagreement.
12:28:08 PM
CHAIR SEATON asked Ms. Millhorn to draft language for the
committee based on Representative Gardner's idea.
12:30:25 PM
CHAIR SEATON, in response to a comment from Representative Lynn
regarding two items in the previously mentioned letter from the
commissioner of the Department of Health and Social Services,
indicated that the committee's level of expertise does not
include addressing the items in detail.
12:30:50 PM
REPRESENTATIVE GRUENBERG suggested taking the concept in
[subparagraph (B)] and putting it in a separate bill. He said
it's important, but it goes a little bit beyond HB 238.
CHAIR SEATON responded that the committee could talk about that
at a different time.
12:32:40 PM
MS. MILLHORN, in response to a question from Chair Seaton, said
she thinks the language on page 19, paragraph (2) is fine.
CHAIR SEATON, in response to a question from Representative
Gardner, said he thinks "children chiefly dependent" relates to
the Internal Revenue Service's way of saying a majority of
dependency.
12:33:34 PM
MS. MILLHORN said the division uses that terminology. In
response to a question from Chair Seaton regarding the meaning
of "dual choice requirement" on page 19, line 18, she said she
would have to research an answer.
12:34:45 PM
CHAIR SEATON turned to page 20, lines 13-16, which read as
follows:
(7) A person receiving benefits under AS
14.25.110, AS 22.25, AS 39.35, or former AS 39.37 may
continue the life insurance coverage that was in
effect under this section at the time of termination
of employment with the state or participating
governmental unit.
CHAIR SEATON asked if that is existing statute.
MS. LEA answered yes. She said that current language applies to
the state's optional life insurance plan.
CHAIR SEATON, in response to a question from Representative
Gardner, clarified the state and employee division of the
contribution rate shown on page 20, lines 19-22.
12:37:56 PM
CHAIR SEATON pointed out language that was not transferred
correctly from the prior version to Version L: On page 20,
lines 25-26, "persons over 65" should read "Medicare eligible
persons", and "age 65" should read "Medicare eligible age".
12:38:39 PM
CHAIR SEATON turned to page 21, lines 5-7, which read as
follows:
(12) Each licensee holding a current
operating agreement for a vending facility under AS
23.15.010 - 23.15.210 shall be covered by the group
policy that applies to governmental units other than
the state.
CHAIR SEATON said he would like to know why this language is in
the bill.
REPRESENTATIVE GRUENBERG read the statute, which he said has to
do with vocational rehabilitation.
12:40:24 PM
KATHERINE SHOWS, Staff to Representative Paul Seaton, Alaska
State Legislature, on behalf of Representative Seaton, sponsor,
said the drafter of the bill informed her that the language is
in the bill in order to include "a certain type of employees
that the state hires, ... usually developmentally disabled or
blind." She offered an example. She explained, "It doesn't
refer to the retirement plan, per se, but it refers to the group
insurance that the state contracts for all active ... and
retired employees. So, it's just ... language that needs to be
included, but doesn't impact the retirement system."
12:41:12 PM
CHAIR SEATON asked Ms. Millhorn to address the next portion of
the bill on page 21.
12:42:08 PM
MS. MILLHORN directed attention to line 11, where a provision
establishes that new members enrolled under the plan would have
a health reimbursement arrangement. She highlighted the
language beginning on line 19, which read:
(a) The purpose of the plan is to allow medical care
expenses to be reimbursed from individual savings
accounts established for qualified participants.
12:42:52 PM
CHAIR SEATON asked everyone to review this portion of Version L.
He said it would be good to get the previously flagged
areas/ideas for amendments in writing. He characterized the
biggest issues as encompassing health benefits, including pre-
Medicare, post-Medicare, and the decisions related to health
reimbursement accounts.
12:44:17 PM
MS. MILLHORN, in response to a question from Representative
Gatto, confirmed that health reimbursement accounts (HRAs) are
accounts into which members can deposit pre-tax money to spend
on an as-needed basis.
CHAIR SEATON noted that available to the committee are printouts
that show different contribution amounts over 20, 30, and 40
years, how they would grow, and what the expected premiums would
cost for health care plans. He said his staff would distribute
those printouts to committee members.
[House Bill 238 was heard and held.]
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
12:45:40 PM.
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