05/11/2007 08:30 AM House FINANCE

CS FOR SENATE BILL NO. 125(FIN)                                                                                               
                                                                                                                                
     An  Act  relating  to  the  accounting  and  payment  of                                                                   
     contributions under  the retirement plans  of the Public                                                                   
     Employees'   Retirement   System  of   Alaska  and   the                                                                   
     Teachers'   Retirement   System,  to   calculations   of                                                                   
     contributions  under  those  retirement  plans,  and  to                                                                   
     participation in,  and termination of and  amendments to                                                                   
     participation  in, the  defined benefit  plans of  those                                                                   
     systems;  relating  to  employer  contributions  to  the                                                                   
     health    reimbursement    arrangement   plan;    making                                                                   
     conforming  amendments; and  providing for an  effective                                                                   
     date.                                                                                                                      
                                                                                                                                
ANNETTE     KREITZER,     COMMISSIONER,     DEPARTMENT     OF                                                                   
ADMINISTRATION,  observed that  Amendment #2  would speak  to                                                                   
concerns by the Department of Law.                                                                                              
                                                                                                                                
Co-Chair  Meyer  MOVED to  ADOPT  Amendment #2.    Vice-Chair                                                                   
Stoltze OBJECTED.                                                                                                               
                                                                                                                                
Michael Barnhill,  Assistant Attorney General,  Department of                                                                   
Law,  explained that  the  HCS CSSB  125  (FIN) provides  new                                                                   
sections for  additional state contributions to  the PERS/TRS                                                                   
systems.  Review  of  these  sections  with  outside  counsel                                                                   
uncovered concern  to which a  statute in AS 09.17.070  might                                                                   
be used to  characterize payments as offsets  to any eventual                                                                   
recovery, if there  should be a recovery against  the state's                                                                   
actuarial:  Mercer.    The  purpose of  Amendment  #2  is  to                                                                   
clarify that  AS 09.17.070 will  not apply to  offset against                                                                   
any  recovery  against  Mercer   based  on  additional  state                                                                   
contributions under the bill.                                                                                                   
                                                                                                                                
In  response  to  a  question  by  Representative  Gara,  Mr.                                                                   
Barnhill  explained that  the  department  intends to  pursue                                                                   
litigation  and funding  for the litigation.  No funding  has                                                                   
been provided to date.                                                                                                          
                                                                                                                                
9:15:04 AM                                                                                                                    
                                                                                                                                
Vice-Chair Stoltze  WITHDREW his  OBJECTION.  There  being NO                                                                   
further OBJECTION, Amendment was adopted.                                                                                       
                                                                                                                                
Co-Chair Meyer MOVED  to adopt New Amendment  #3.  Vice-Chair                                                                   
Stoltze  OBJECTED.   Ms.  Kreitzer explained  the  amendment.                                                                   
She noted the backup included with the amendment.                                                                               
                                                                                                                                
VIRGINIA RAGLE,  ASSISTANT ATTORNEY GENERAL, LABOR  AND STATE                                                                   
AFFAIRS,  DEPARTMENT OF  LAW,  explained  that the  technical                                                                   
amendments were  introduced to make  sure that the  two bills                                                                   
conform.                                                                                                                        
                                                                                                                                
9:17:01 AM                                                                                                                    
                                                                                                                                
Ms. Ragle observed  that HCS CSSB 125 (FIN)  contains all the                                                                   
substantive provisions  of SB 123 except the  requirement for                                                                   
employers  to separately  compute  medical retiree  benefits.                                                                   
The benefits would be deposited  into the new employee health                                                                   
trust established  under AS  39.30.097(a). This  provision is                                                                   
important to assure tax compliance.                                                                                             
                                                                                                                                
Commissioner  Kreitzer   provided  members  with   backup  to                                                                   
Amendment  #3 (copy  on file),  which  further explained  the                                                                   
amendment would supersede SB 123 amendments.                                                                                    
                                                                                                                                
9:18:57 AM                                                                                                                    
                                                                                                                                
Ms. Ragle  and Commissioner  Kreitzer reviewed amendments  to                                                                   
the  Revisor's Instructions.  Ms.  Ragle  explained that  the                                                                   
Revisor Instructions would resurrect repealed sections.                                                                         
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
9:22:41 AM                                                                                                                    
                                                                                                                                
Representative  Gara  originally  understood  that  the  PERS                                                                   
rate of 22% and  the TRS rate of 12% would  continue into the                                                                   
future.  He  concluded  that  these  numbers  could  increase                                                                   
according to investment performance.                                                                                            
                                                                                                                                
9:24:06 AM                                                                                                                    
                                                                                                                                
KEVIN    BROOKS,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                   
ADMINISTRATION,  clarified that the  rates are set  and fixed                                                                   
in Statute  at 22%  and 12.56%.   He acknowledged  that there                                                                   
is a  remote chance  the rates could  increase if  the normal                                                                   
costs  exceed the  rates  in  statute, since  statutes  state                                                                   
"the greater  of". He  did not think  the normal  costs would                                                                   
grow to the  rate set in statute. The difference  between the                                                                   
normal  costs and  22% for PERS  is intended  to offset  past                                                                   
service  costs.     It  would   take  a  dramatic   shift  of                                                                   
assumptions  and would  grow overtime.  It would take  action                                                                   
by the Legislature to change the rate.                                                                                          
                                                                                                                                
9:25:52 AM                                                                                                                    
                                                                                                                                
Representative  Foster MOVED to  REPORT HCS  CS SB  125 (FIN)                                                                   
out  of Committee  with individual  recommendations and  with                                                                   
the accompanying fiscal notes.   There being NO OBJECTION, it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
HCS CS SB 125  (FIN) was reported out of Committee  with a "a                                                                   
"do pass"  recommendation and  with indeterminate note  #1 by                                                                   
the Department  of Administration and  fiscal note #2  by the                                                                   
Department of Administration.