Legislature(2005 - 2006)
05/02/2005 02:33 PM House FIN
| Audio | Topic |
|---|---|
| Start | |
| SB141 | |
| SB147 | |
| SB16 | |
| SB139 | |
| SJR11 | |
| SB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 141(FIN)
"An Act relating to the teachers' and public employees'
retirement systems and creating defined contribution
and health reimbursement plans for members of the
teachers' retirement system and the public employees'
retirement system who are first hired after July 1,
2005; relating to university retirement programs;
establishing the Alaska Retirement Management Board to
replace the Alaska State Pension Investment Board, the
Alaska Teachers' Retirement Board, and the Public
Employees' Retirement Board; adding appeals of the
decisions of the administrator of the teachers' and
public employees' retirement systems to the
jurisdiction of the office of administrative hearings;
providing for nonvested members of the teachers'
retirement system defined benefit plans to transfer
into the teachers' retirement system defined
contribution plan and for nonvested members of the
public employees' retirement system defined benefit
plans to transfer into the public employees' retirement
system defined contribution plan; providing for
political subdivisions and public organizations to
request to participate in the public employees' defined
contribution retirement plan; and providing for an
effective date."
Co-Chair Meyer noted that the Committee would discuss the
fiscal impact of the amendments to SB 141 later in the
meeting.
Representative Croft asked for an analysis of the
Committee's previous action and suggested that the Committee
check to be sure that the pensions are not over or under-
funded.
SB 141 was held till later in the meeting.
CS FOR SENATE BILL NO. 141(FIN)
"An Act relating to the teachers' and public employees'
retirement systems and creating defined contribution
and health reimbursement plans for members of the
teachers' retirement system and the public employees'
retirement system who are first hired after July 1,
2005; relating to university retirement programs;
establishing the Alaska Retirement Management Board to
replace the Alaska State Pension Investment Board, the
Alaska Teachers' Retirement Board, and the Public
Employees' Retirement Board; adding appeals of the
decisions of the administrator of the teachers' and
public employees' retirement systems to the
jurisdiction of the office of administrative hearings;
providing for nonvested members of the teachers'
retirement system defined benefit plans to transfer
into the teachers' retirement system defined
contribution plan and for nonvested members of the
public employees' retirement system defined benefit
plans to transfer into the public employees' retirement
system defined contribution plan; providing for
political subdivisions and public organizations to
request to participate in the public employees' defined
contribution retirement plan; and providing for an
effective date."
CO-CHAIR CHENAULT MOVED to ADOPT revised fiscal note #10.
Representative Joule OBJECTED for discussion purposes.
5:16:27 PM
MELANIE MILLHORN, DIRECTOR, DIVISION OF RETIREMENT AND
BENEFITS, DEPARTMENT OF ADMINISTRATION, explained that the
fiscal note represents the fiscal costs that the division
anticipates will accompany the new defined contribution
plan. The state of Alaska's tax attorney indicated that all
costs associated with the defined contribution plan must be
separated and accounted for in various funds, according to
their components. Assets and accounting must be separated.
She explained that the fiscal note separates the start-up
costs.
5:18:03 PM
Representative Croft asked if the statutory required backup
for SB 141 was being compiled. Co-Chair Meyer confirmed.
5:18:42 PM
Representative Croft asked if the 5 percent being set aside
for the defined contribution plan would be sufficient for
individuals to retire on. Ms. Millhorn referred to modeling
in the plan contained in slide 74. Slide 74 shows the
accrual of non-medical benefits. The modeling is based on an
individual that comes into the system at age 40. The design
looked at a defined benefit component with an employer
contribution of 3.5 percent. The current version is at 5
percent. An individual, who enters the system at age 40
under alternative 2, which was based on was a DB component
of 3.5 percent, would have a higher benefit the the current
Tier 2 TRS component until age 55 compared. Graphing for a 5
percent contribution was not available. Mercer would have to
run the caluculations. The average years of service for TRS
is 10 years. She maintained that for 80 percent of the
population the benefit would be a higher under TRS.
5:23:06 PM
Representative Croft asked how the wages are broken down for
low paid employees vs. high. Ms. Millhorn replied that the 5
percent is based on their salaries. She explained that the
graph is based on one individual at age 40 based on a salary
of $35,000, which is lower than the average salary for PERS.
5:25:31 PM
Representative Croft asked the cost and funding source for
the disability benefit allowance. Ms. Millhorn noted that
the benefit is currently unfunded. The contribution would be
placed in the medical component, with an employer
contribution of between 2.5 and 3.75 percent. The added
death and disability benefit would be included on top of the
medical costs. Ms. Millhorn had not had a chance to get the
cost estimates from Mercer.
5:28:29 PM
Representative Croft asked about the death and disability
benefit. He gave an example of firefighters and asked who
would pay the benefit, the state or the city. Ms. Millhorn
noted that the proposal by Representative Kelly would have
been a fixed amount paid by the employer. Representative
Croft noted that the proposed amendment in the House Finance
Committee version would also be paid by the employer. Ms.
Millhorn agreed and added that the funding source and costs
were unknown.
5:31:30 PM
Representative Joule WITHDREW his objection to ADOPT the
fiscal note. There being NO further OBJECTION, it was so
ordered.
Co-Chair Chenault MOVED to report HCSSB 141 out of Committee
with individual recommendations and with the accompanying
fiscal notes.
Representative Croft OBJECTED. He argued that the Committee
cannot estimate within a million dollars the obligation to
the state or the funding mechanism.
5:34:27 PM
Representative Holm pointed out that the Committee deals
daily with issues that are unknown.
5:35:17 PM
Co-Chair Meyer noted that bills are often passed out with
indeterminate fiscal notes.
5:35:35 PM
Representative Kelly explained that the current version
maintains the status quo [in relation to death and
disability benefits for certain employees]. He argued that
the Mercer letter clarifies that under the DC plan the
action is positive and it puts the amendment in context.
5:36:40 PM
Representative Croft emphasized that no one would be paying
into the DB system for the death and disability benefit. He
questioned how it would be funded. He opined that there
would be an additional fiscal impact. He suggested that the
law is being violated.
5:38:28 PM
Representative Hawker expressed concern that the Committee's
action was out of compliance with AS 24.08.036. He spoke
against the legislation.
5:39:40 PM
Representative Kelly related that the dying rate and the
costs are known and can be managed. He felt that the
Committee responded to the actuarial request.
Representative Croft MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Holm, Kelly, Moses, Stoltze, Foster, Hawker,
Meyer, Chenault
OPPOSED: Joule, Croft
The MOTION PASSED (8-2).
HCSSB 141 (FIN) was REPORTED out of Committee with a "no
recommendation" with the following fiscal impact notes: #1
ADM, #3 REV, #4 REV, #5 REV, #6 REV, #7 REV, #9 FIN.
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