04/27/1999 01:55 PM House FIN

CS FOR SENATE BILL NO. 9(HES)                                                                                                   
                                                                                                                                
"An Act relating to the calculation of employee                                                                                 
contributions and credited service in the public                                                                                
employees' retirement system for noncertificated                                                                                
employees of school districts, regional educational                                                                             
attendance areas, the special education service agency,                                                                         
the Alaska Vocational Technical Center, and the state                                                                           
boarding schools; and providing for an effective date."                                                                         
                                                                                                                                
SENATOR GARY WILKEN, sponsor testified in support of SB 9.                                                                      
He noted that Representative Brice offered similar                                                                              
legislation in the previous session. He explained that the                                                                      
legislation affects noncertificated or classified school                                                                        
district employees such as custodians, cafeteria workers and                                                                    
administrative assistants and teachers aides. Under current                                                                     
law, these employees work nine months a year, which are                                                                         
contributed to their retirement plans. After 30 years of                                                                        
service they would have approximately 22 years of retirement                                                                    
credit. The legislation allows these school employees to pay                                                                    
into their retirement accounts in order to obtain full year                                                                     
retirement credit for each year that they work. It has no                                                                       
cost outside of a one-time $72 thousand dollar startup fee.                                                                     
The individual employee pays the increased benefit. School                                                                      
districts across the state have shown support.                                                                                  
                                                                                                                                
In response to a question by Co-Chair Therriault, Senator                                                                       
Wilken explained that there is no employer match. The                                                                           
employee would have a 1.25 premium added to their benefit                                                                       
cost during their nine months of employment. He noted that                                                                      
it would not affect the university.                                                                                             
                                                                                                                                
BILL CHURCH, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT                                                                    
OF ADMINISTRATION noted that there is no long term cost to                                                                      
the retirement system. It is structured to leave the extra                                                                      
component open. The rate can be increased or decreased as                                                                       
needed based on the actuaries' determination.                                                                                   
                                                                                                                                
Vice-Chair Bunde asked if the legislation represents a one                                                                      
time opt-in provision and what it would cost an average                                                                         
employee.                                                                                                                       
                                                                                                                                
Mr. Church stated that the election to increase the                                                                             
retirement contribution is irrevocable. There is no cost                                                                        
outside of the surcharge of an additional 1.4-percent. He                                                                       
stated that testimony indicated the additional 1.4-percent                                                                      
surcharge would not be a burden.                                                                                                
                                                                                                                                
Representative Austerman noted that the bill is not                                                                             
retroactive. Mr. Church stated that the employees could not                                                                     
buy up past service.                                                                                                            
                                                                                                                                
Representative J. Davies questioned why the option would be                                                                     
irrevocable. Mr. Church stated that it would be difficult to                                                                    
administer the program if it were not irrevocable. He                                                                           
stressed that the choice would be a career path that would                                                                      
allow them to retire at the end of thirty years.                                                                                
                                                                                                                                
Co-Chair Therriault noted that there is a fiscal note that                                                                      
would be paid by the retirement system.                                                                                         
                                                                                                                                
Representative Foster MOVED to report CSSB 9 (HES) out of                                                                       
Committee with the accompanying fiscal note. There being NO                                                                     
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSSB 9 (HES) was REPORTED out of Committee with a "do pass"                                                                     
recommendation and with fiscal impact note by the Department                                                                    
of Administration dated 3/10/99.