Legislature(2017 - 2018)BUTROVICH 205
03/20/2018 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): Commissioner, Department of Administration; Personnel Board | |
| SB192 | |
| SB159 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 159 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 192 | TELECONFERENCED | |
SB 159-PERS/TRS DISTRIBUTIONS
4:58:19 PM
CHAIR MEYER announced the consideration of SB 159.
4:58:56 PM
COMMISSIONER-DESIGNEE LESLE RIDLE, Alaska Department of
Administration, Juneau, Alaska, explained that SB 159 was a
straight forward bill that Kathy Lea, chief pension officer,
will discuss with the committee.
4:59:15 PM
KATHY LEA, Deputy Director and Chief Pension Officer, Division
of Retirement and Benefits, Alaska Department of Administration,
Juneau, Alaska, disclosed that the bill comes at the request of
the Alaska Retirement Management Board (ARMB). She explained
that the board is considering options for distribution from the
defined contribution plans that will enhance the retirement
readiness for members.
She referenced slide 2 in her presentation, "Proposed Change" as
follows:
• The Alaska Retirement Management Board (ARMB) must be able
to add or change distribution options easily and in a
relatively short timeframe.
• The proposal is to move disbursement options from the
Alaska Public Employees' Retirement System (PERS) and the
Teachers' Retirement System (TRS) defined contribution
statutes into regulation to allow for a faster response to
participant needs.
• The ARMB unanimously approved the proposal.
She referenced slide 3, "The Issue" as follows:
• The PERS/TRS DCR (Tier IV) plans to use the statutes as the
plan document.
• Any changes to modernize options or to meet new Internal
Revenue requirements require a statutory change.
• Statutory changes can take several sessions to accomplish,
if at all.
• Meanwhile, participants' needs are not being met.
• This bill would give the DCR plans the same flexibility as
the supplemental benefits system (SBS) and Deferred
Compensation plans.
MS. LEA summarized that the bill will move the referenced
statutes into regulation, provide the board with more
flexibility to add, change or delete options. She noted that the
referenced flexibility already exists in the SBS and Deferred
Compensation plans where their statutes authorize the plan, but
they are governed by a plan document.
5:01:25 PM
She referenced slide 4, "PERS/TRS Need," as follows:
• The PERS/TRS DCR plans have vested employees who are
retiring and need help facing the challenges of retirement.
• The ARMB Defined Contribution Subcommittee is exploring
options that will help participants:
o Not outlive their retirement savings,
o Address purchasing power over time, and
o Protect against market uncertainty.
She commented as follows:
These are in the form of what's called a Qualified
Longevity Annuity Contract that addresses the
longevity risk when spending down a defined
contribution plan by deferring payment to age 80 or
85, a portion of the assets can be a maximum of
$125,000 or 25 percent of the assets of the account,
and it is to ensure that you don't out live your
assets; however, that type of a plan is not included
in the current statute.
Another type of withdrawal is a Guaranteed Lifetime
Withdrawal Option, and what this does is the
participant can elect to enter that anytime between 10
years prior to their retirement and they pay an
insurance premium and they insure their balance and
this deals with the uncertainty of how much money am I
going have to live on, because with that insurance
whatever is their highest balance during that tenure
period or beyond is what their monthly withdrawal
benefit is based on. So, it protects them from the
downside of the investments, but allows them to have
the benefit of the upside, this is also not an option
that is covered by the statutes.
MS. LEA explained that by moving the statutory requirements into
regulation, the public process will remain. She referenced slide
4, "Transparent Process for Change," as follows:
• Discussions regarding disbursement options are done in a
public forum during the selection process.
• Participants and groups representing participants will have
input during subcommittee and ARMB committee meetings.
• The process remains public and transparent but allows for
faster adoption of needed change.
• All interested parties are notified of any changes through
the regulation process.
She pointed out that when regulations are noticed, the notice
must be for 30 days. She detailed that the notices will occur in
newspapers and online on the department's website. She
emphasized that the change will allow for a faster process for
needed change. She summarized that approximately 60 days would
be needed to implement a change after ARMB adoption rather than
one or two legislative sessions.
5:04:28 PM
CHAIR MEYER asked if the bill will result in everything being
done by regulation rather than having to come before the
Legislature.
MS. LEA answered correct. She specified that the department
would proceed through regulation on the recommendation from
ARMB.
SENATOR WILSON asked if she knew the percentage of people that
retire and take their entire balance in a lump sum.
MS. LEA answered that she will get back to Senator Wilson with
an answer.
SENATOR COGHILL asked if the bill would provide departmental
regulatory authority and put ARMB in charge of policy makeup.
MS. LEA answered correct. She detailed that ARMB would make
recommendations for changes in options and the department would
do the regulations and public notice. She added that for
visibility reasons the Legislature would receive notice for all
regulations that the retirement system promulgates.
SENATOR COGHILL asked what the difference was in how the
supplemental benefit system management works outside of ARMB.
MS. LEA explained that the SBS works the way that the bill
proposes for the defined contribution retirement plan and added
that ARMB has oversight for those as well as the public
employee's deferred compensation plan.
SENATOR COGHILL pointed out that a practicing, working model
exists. He asked if there have been pushback issues.
5:07:07 PM
MS. LEA replied that she is not aware of any pushback items. She
said the department's intent is to improve the defined
contribution retirement plans and improving the options for
spend-down. She noted that the options can be added as soon as
ARMB approves them into the SBS plan.
SENATOR COGHILL explained that his first thought was the
Legislature would give up authority; however, he noted that
flexibility might be required for management purposes. He said
he has not heard of problems within the Legislature regarding
SBS. He continued as follows:
The other thing is in the management style, this will
probably fall into the question of diminished benefit
issues and as long as it is done through a management
to look out for the best interest of that particular
fund, is that how you get out of problem there?
MS. LEA replied that there would not be a diminishment of
benefits because the option is a dispersement, dispersement to
the participant is not being denied. She summarized as follows:
What we are doing is trying to add dispersement
options to them, but even if we in the future were to
take away a dispersement option, that still would not
be a diminishment of their benefit, they are still
allowed to take their whole benefit.
SENATOR COGHILL replied as follows:
I was searching for a way that it might happen, but I
just couldn't think of one, so it's just the options.
5:09:09 PM
SENATOR WILSON said he had a similar question on the
dispersement. He noted that there was a recent study showing
that in the PERS Tier IV options that most folks would not
receive enough to live upon. He asked if drawing down over a
longer period would still allow a person to accumulate more in
their savings. He inquired if the department has an actuarial
study or numbers on the stress test of the Tier IV program for
current retirees.
MS. LEA replied that the department has done analysis on the
PERS and TRS defined contribution plans. She detailed as
follows:
What our analysis showed was that if a participant was
participating in either social security or the SBS
that they would have sufficient means to have a
dignified retirement. The problem areas come in with
those groups that do not participate in social
security or SBS and that problem has been identified
and that is something that ARMB is also looking at as
well as the administration.
SENATOR WILSON asked her to verify that the bill does not
address the other need of giving more dispersement options.
MS. LEA answered as follows:
The plan is a little over 10 years old so it's hard to
say what it will be doing at the end of a career for a
person. What we are trying to do is put in place
options for those who are going to look at a lifetime
income from this at some point in the future. So, we
are trying to improve those options so that they have
more choices to address whether they feel it's a
longevity risk, a market risk at the time they retire,
or if they just want to take their money and do
something else with it.
SENATOR WILSON replied as follows:
I appreciate that, speaking as the only millennial
senator in the building and for other future staffers,
this is a concern for folks that would like to make a
career of any Tier IV governmental type of job. I do
recognize the concern and appreciate the different
options of looking at different strategies.
CHAIR MEYER asked if the bill only pertains to the defined
benefit plan.
MS. LEA explained that the bill only applies to the PERS and TRS
defined contribution plan. She specified that the other plans,
the defined benefit plans, already have guaranteed lifetime
benefits.
5:13:09 PM
CHAIR MEYER held SB 159 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Commissioner of Administration Leslie Ridle.pdf |
SSTA 3/20/2018 3:30:00 PM |
Confirmation Hearing |
| Personnel Board Al Tamagni.pdf |
SSTA 3/20/2018 3:30:00 PM |
Confirmation Hearing |
| SB 159 Tranmsittal Letter PERS and TRS.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Version A.PDF |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Hearing Request.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 DOA Presentation in SSTA 3.20.18.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Fiscal Note.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| CS SB 192 Version D.pdf |
SSTA 3/20/2018 3:30:00 PM |
SB 192 |
| SB 192 Amendment 1.pdf |
SSTA 3/20/2018 3:30:00 PM |
SB 192 |