02/11/2000 10:11 AM Senate FIN

CS FOR SENATE BILL NO. 85(L&C)                                                                                                  
"An Act relating to credited service in the public                                                                              
employees' retirement system for temporary                                                                                      
employment."                                                                                                                    
                                                                                                                                
Co-Chair Torgerson opened up the discussion by noting that                                                                      
a motion to adopt Amendment #1 was pending, which would                                                                         
combine Public Employees' Retirement System) PERS and                                                                           
Teachers' Retirement System (TRS) together.  He had                                                                             
requested a pertinent draft fiscal note and referenced the                                                                      
third paragraph from the bottom.  "There will be no                                                                             
measurable impact on employer contributions on the total                                                                        
funding of PERS and TRS.  There is a small impact, a total                                                                      
liability of $700,000."  He noted that this liability is                                                                        
not small in amount and wondered where this money would                                                                         
come from.                                                                                                                      
                                                                                                                                
GUY BELL, Director, Division of Retirement and                                                                                  
Benefits, Department of Administration noted that this                                                                          
legislation affects only 22 individuals of an overall                                                                           
number of 80,000 retired employees statewide.  The                                                                              
Department has not assumed any liability for these                                                                              
individuals because they are eligible for a benefit as the                                                                      
law presently stands.  With this change, this small group                                                                       
of 22 people would be eligible for retirement benefits,                                                                         
adding a liability to the system.  Between PERS and TRS,                                                                        
the total assets are approximately $12 billion.  He added                                                                       
that this $700,000 liability, as a percentage, constitutes                                                                      
five one hundreds of one-percent of an increase in                                                                              
liabilities.  This is a very small increase in liabilities,                                                                     
which will have no affect on employer rates since this can                                                                      
effectively be absorbed in the overall asset/liability mix                                                                      
of the system.  This is why the Department states that                                                                          
there is no related fiscal impact.  The $700,000 is                                                                             
effectively the net present value of those future benefits.                                                                     
It is necessary to preserve an amount to cover the benefits                                                                     
for the expected lifetime of these 22 individuals, hence;                                                                       
the annual cost will be much less than this on a year to                                                                        
year basis.                                                                                                                     
                                                                                                                                
Co-Chair Torgerson asked if this takes into account the                                                                         
amount paid in and accumulated over the years.                                                                                  
                                                                                                                                
Mr. Bell confirmed that these individuals have paid into                                                                        
the system over the years, along with the employers.  The                                                                       
system has also earned interest on this money too, so the                                                                       
funds are effectively available for use.  The proposed                                                                          
amendment to this legislation states that if there is a                                                                         
difference for any one individual, this person is                                                                               
responsible for paying the acturarial cost.  This makes it                                                                      
a net zero fiscal impact for the system.  A person is                                                                           
entitled, once they leave employment, to take out their own                                                                     
contributions.  Once this money is pulled from the system                                                                       
and an employee decides to rejoin the workforce, they must                                                                      
repay the money taken out for an accumulated retirement                                                                         
benefit.  This type of situation does not apply to the                                                                          
present 22 individuals that this legislation affects.                                                                           
                                                                                                                                
Co-Chair Torgerson, hearing no objection Amendment #1 was                                                                       
ADOPTED.                                                                                                                        
                                                                                                                                
Senator Wilken made a motion to move SB 85, version 1-                                                                          
LS0373\H from committee with individual recommendations and                                                                     
attached fiscal notes.  Hearing no objection SB 85 was                                                                          
MOVED FROM COMMITTEE with a forthcoming fiscal note from                                                                        
the Administration.