Legislature(2015 - 2016)SENATE FINANCE 532
03/29/2016 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB207 | |
| SB208 | |
| SB209 | |
| SB210 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 207 | TELECONFERENCED | |
| *+ | SB 208 | TELECONFERENCED | |
| *+ | SB 209 | TELECONFERENCED | |
| *+ | SB 210 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 209
"An Act relating to increasing employer contributions
to the defined benefit plan in the Public Employees'
Retirement System of Alaska."
1:48:51 PM
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, introduced SB
209:
Senate Bill 209 proposes a gradual, multi-year
increase in the employer contribution rate for the
Public Employees Retirement System (PERS) from the
current level of 22 percent to 24.5 percent for FY
2017, 25.5 percent in FY 2018, and 26.5 percent in FY
2019.
In 2008, with the passage of Senate Bill 125, the
uniform rate was established at 22 percent, with the
State of Alaska paying the difference in costs between
the uniform rate and the actuarial cost, which was
determined by the Alaska Retirement Management Board
and the actuary consultants to the State of Alaska.
This made the PERS a cost sharing plan in which all
employers pay one uniform rate and share in the
liabilities and the assets of the plan. This allowed
the state to share in the payment of the unfunded
liability of the system with the employers.
The establishment of the 22 percent and the commitment
of the state to assist in costs over 22 percent was
made at a time when oil value was setting not only
record price, but generating record state revenue.
From FY2008 through FY2016, PERS appropriations ranged
from $108 million to $312 million annually. During
those nine years, a cumulative total of $1.708 billion
was appropriated to the PERS unfunded liability. In
addition to the state assistance payments, in FY 2015,
an appropriation was made to the PERS Fund in the
amount of $1,000,000,000 in order to improve the
health of the system and reduce the unfunded
liability. In total, state unrestricted general fund
assistance has exceeded $2.7 billion over the past
nine years.
Senate Bill 209 is a conservative approach to
balancing the state's current fiscal reality and its
commitment to assisting PERS employers with the cost
and the unfunded liability of the system.
This legislation provides a level of stability that
will assist the State of Alaska and PERS employers in
fulfilling the obligation to a healthy retirement
system for its members.
Co-Chair MacKinnon felt the sectional analysis was covered
in the bill introduction.
1:49:37 PM
Co-Chair Kelly recalled that the initiation of the 22
percent was at a period of time when the unfunded liability
obligation was approximately $4 billion. He remarked that
the stock market fell in 2008, which changed it to a $15
billion unfunded liability.
Co-Chair MacKinnon queried the desired information to
evaluate the bill.
Vice-Chair Micciche requested the history of the state's
contributions to municipalities He also wanted to
understand the true rate.
Co-Chair MacKinnon explained that the state covered above
the 22 percent, so municipalities covered the 22 percent.
Vice-Chair Micciche wondered what happened to the defined
contribution plan piece. He wondered if the new
contribution would be higher than 24.5 percent.
Co-Chair MacKinnon hoped to hear from Buck on the actuary
analysis.
Ms. Cramer stated that the system allowed for every
employee to be covered. She remarked that there was no
differentiation between the two plans. She stated that
there would be a more thorough discussion.
Co-Chair MacKinnon explained that if an average employee
made $100,000 under tier 1 with a cash call of 36 percent,
the state would contribute $36,000. A new employee under
the defined contribution, the state may contribute $12,000,
creating a disadvantage. The system looked at the employees
as a whole, so all employees were treated equitably when
applying for a job. She remarked that it would be unfair
for a new employee to outpace an older employee.
Vice-Chair Micciche wanted to clarify the burden to
municipalities and the state.
Senator Hoffman queried the annual costs over the course of
the five-year increment.
Senator Dunleavy wanted to examine the time of inception.
1:56:12 PM
Co-Chair MacKinnon shared that there was a new general
accounting rule, so the municipalities were working on
keeping up with the debt.
Co-Chair Kelly felt that there was not a connection between
the APS and the bill. He felt that the money would be used
as a "shock absorber" to the communities in SB 207 and SB
208.
Co-Chair MacKinnon stated that SB 207 and SB 208 were
linked in an effort to use a one-time funding source to
TRS.
Vice-Chair Micciche stressed that he wanted to best
research the municipalities who were in the most need of
relief.
Co-Chair MacKinnon stressed that SB 209 and SB 210 were
interrelated in order to share the financial
responsibility.
SB 209 was HEARD and HELD in committee for further
consideration.