Legislature(2023 - 2024)BARNES 124
01/24/2023 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB22 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 22 | TELECONFERENCED | |
HB 22-PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS
8:19:49 AM
CHAIR MCCORMICK announced that the first order of business would
be HOUSE BILL NO. 22, "An Act relating to participation of
certain peace officers and firefighters in the defined benefit
and defined contribution plans of the Public Employees'
Retirement System of Alaska; relating to eligibility of peace
officers and firefighters for medical, disability, and death
benefits; relating to liability of the Public Employees'
Retirement System of Alaska; and providing for an effective
date."
8:20:40 AM
REPRESENTATIVE ANDY JOSEPHSON, Alaska State Legislature,
introduced HB 22, as the prime sponsor. He paraphrased the
sponsor statement [included in the committee packet], which read
as follows [original punctuation provided]:
HB 22 creates a new hybrid retirement plan option for
state and municipal peace officers and firefighters
under the Alaska Public Employees' Retirement System
(PERS) with new protections for the state against
unforeseen future liabilities.
Alaska ended the Defined Benefit Plan in 2006 after
discovering that the accounts were too underfunded to
meet anticipated retiree obligations. Since these
plans were eliminated, one of Alaska's greatest public
safety challenges has become employee retention and
recruitment. Alaska is one of the few jurisdictions
that does not presently offer a defined benefit
retirement for new public safety employees.
Additionally, many municipal public employees do not
participate in Social Security or the Supplemental
Annuity Plan (SBS-AP). HB 22 is crafted to retain and
attract quality peace officers and firefighters while
protecting the state from unnecessary financial risks
in the future.
The proposed option would allow future peace officers
and firefighters under the PERS system and current
ones under the PERS Tier IV plan to join the defined
benefit plan. The proposal includes several safeguards
modeled after the most fiscally responsible plans in
the nation. These safeguards provide stability and
would provide the state with fiscal certainty about
its ability to maintain adequate funding for this plan
into the future. These provisions include a minimum
retirement age of 55 with 20 years of service,
flexibility setting employee contribution rates,
minimum 12 percent employer contribution rates,
mechanisms to prevent costly "pension spiking," and
the ability to withhold post-pension retirement
adjustments should the plan's funding drop below 90
percent. This hybrid tier will closely mirror Tier III
of PERS for public safety employees, with the
exception of two cost saving measures: the continued
inclusion of the Tier IV Defined Contribution
Retirement health reimbursement arrangement (HRA) and
the absence of cost-of-living adjustments.
HB 22 is a step toward making Alaska more attractive
to public safety employees. The nature of the jobs
that peace officers and firefighters hold are unique,
physically demanding, and hazardous compared to other
public employees, and all Alaskans pay the cost for
understaffed public safety agencies.
8:26:48 AM
REPRESENTATIVE JOSEPHSON discussed prior efforts to reform the
retirement plan for public safety employees in Alaska. He
detailed House Bill 55, which he sponsored during the Thirty-
Second Alaska State Legislature, emphasizing the bipartisan
support for the legislation. Ultimately, he said, the bill
"died" in the Senate Finance Committee, as there was not enough
time left in the legislative session to pass it out of committee
and on to the Senate floor. He noted that HB 22 was identical
to House Bill 55 except for one change. Further, he
characterized the bill as "conservative," as it posed no threat
to the existing unfunded liability.
8:33:53 AM
REPRESENTATIVE JOSEPHSON explained that currently, the state's
unfunded liability was paid based on a per-capita calculation of
all public employees; additionally, the state and city
governments "steered" money towards the unfunded liability to
drive it down. He indicated that under HB 22, the cohort of
individuals covered by the plan would also be paying off the
unfunded liability; however, two percent of what they would have
otherwise paid would be shifted back to their pension trust. He
acknowledged that these individuals did not themselves create
the unfunded liability; therefore, the proposed legislation
sought to lift their burden by moving a small percentage to
their retirement trust, which would have otherwise gone towards
the unfunded liability. As a result of this shift, it would
take the state six months longer to pay off the existing
unfunded liability, resulting in a fiscal note of $5 million to
$6 million. He posited that the current practice of training
new people [due to poor retention and high rates of turnover]
eclipsed the cost of the fiscal note "with great ease."
8:39:46 AM
REPRESENTATIVE JOSEPHSON concluded by discussing the
constitutionality of creating a new retirement plan for public
safety employees. He assured the committee that the public
employees had always been treated differently in terms of their
retirement system. He indicated that, ultimately, it was a
policy call for the legislature to make. He cited a memo from
Legislative Legal Services that supported this position.
CHAIR MCCORMICK invited questions from committee members.
8:43:54 AM
REPRESENTATIVE MCCABE requested the data that put the cost of
training for each firefighter at $200,000. He contended that it
did not cost $200,000 to train a 747 pilot.
REPRESENTATIVE JOSEPHSON offered to provide the data.
REPRESENTATIVE MCCABE said, "I mean actual data, not just
PowerPoint slides. Do you have actual data from the state or
even from the firefighters ? that says it takes that amount of
money?"
REPRESENTATIVE JOSEPHSON answered yes and offered to follow up
with the requested information. He clarified that he had
reported the cost of training at $100,000 to $200,000.
REPRESENTATIVE MCCABE asked whether the 20 years of service
included time spent working [as a public safety employee] in
another state.
REPRESENTATIVE JOSEPHSON shared his belief that the Division of
Retirement and Benefits (DRB), Department of Administration
(DOA), in combination with each agency, would compute a unique
calculation for each employee. He conveyed that the
stakeholders believed that the retirement age should be reduced
to 50 due to the hardship on their bodies. He welcomed further
discussion on that issue.
8:47:10 AM
REPRESENTATIVE MEARS inquired about the proportionality between
age of retirement and length of service. She sought to confirm
that anyone with 5-20 years of service would retire at age 65,
whereas a person with 20-plus years of service could retire at
age 55.
REPRESENTATIVE JOSEPHSON answered, "Correct."
REPRESENTATIVE RUFFRIDGE asked what would stop an employee under
the proposed retirement system from receiving a pension at age
60 and still choosing to leave [the state.]
REPRESENTATIVE JOSEPHSON asked Representative Ruffridge to
restate the question.
8:48:44 AM
REPRESENTATIVE RUFFRIDGE shared his understanding that under the
current defined contribution plan, employees were choosing to
leave after becoming vested at the five-year mark. He suggested
that under HB 22, an individual could also leave after five
years while still being credited with a pension at age 60.
REPRESENTATIVE JOSEPHSON acknowledge the accuracy of
Representative Ruffridge's statement; however, he said it would
be "horrible" financial planning on the individual's behalf.
REPRESENTATIVE RUFFRIDGE asked the bill sponsor why it would be
a bad decision to leave after five years.
REPRESENTATIVE JOSEPHSON responded that the benefit for five
years of service would not be significant.
REPRESENTATIVE MEARS pointed out that a person's retirement
benefit was proportional to length of service.
8:49:59 AM
REPRESENTATIVE MCKAY stated his support for public service
employees. He asked whether this cohort of employees underwent
a third-party exit interview process that verified their reasons
for leaving the state. He expressed a desire to authenticate
the statement that people were leaving because of the retirement
plan.
REPRESENTATIVE JOSEPHSON stated that the data existed in the
Department of Public Safety (DPS) reports, which he offered to
provide to the committee. He added that collectively, the data
supported the anecdotal information [that public safety
employees were leaving because of the existing retirement
system].
8:52:04 AM
REPRESENTATIVE MCCABE directed attention to Section 21 of the
bill, which provided that a terminated employee who first became
a member after June 30, 2006, would be eligible for a normal
retirement benefit. He inquired about the retroactive component
for firefighters who left the state during that 16-year period.
REPRESENTATIVE JOSEPHSON stated that there would be a 90-day
window in which the state invited a transition from Tier IV to
Tier V. He shared his understanding that a person who left in
2016 would not be eligible to claim a defined benefit without
reapplying for inactive service.
REPRESENTATIVE MCCABE anecdotally reported that Tier I employees
had returned to state employment after 25 years to qualify for
the retirement and benefits. He asked whether HB 22 would
account for a similar situation. Additionally, on the topic of
constitutionality, he asked what would stop teachers from suing
the state for equal benefits.
REPRESENTATIVE JOSEPHSON pointed out that a former employee who
wanted to return to state service would need to prove that
he/she could still be an effective public safety officer. He
emphasized that the bill had been vetted by both the
firefighter's actuary, William ("Flick") Fornia, and the state's
actuary, [Buck Global LLC]. In response to the question
regarding the potential for teachers to sue the state, he said,
"you can sue over anything." He highlighted a disincentive for
suing, known as, "Rule 82," which speaks to the risk of losing
and paying for the other side's attorney fees. He assured
committee members that if teachers were to bring litigation
against the state, the state would assign an assistant attorney
general to fight the case, "and they would win," he said.
8:58:39 AM
REPRESENTATIVE MCKAY suggested that the bill, should it pass,
would open the door for all state employees and teachers in the
state of Alaska to demand the same benefits, which would be a
tremendous financial burden on the state, he said. For that
reason, he stated that he was hesitant to advance the bill.
REPRESENTATIVE JOSEPHSON clarified that the 22,000 figure,
[which captured the total number of state employees], included
teachers. Further, he emphasized that teachers were already
demanding better benefits, indicating that the proposed
legislation wouldn't change anything in that regard.
9:01:16 AM
REPRESENTATIVE HIMSCHOOT, in response to Representative McKay,
estimated a total of 13,000 teachers in Alaska. She remarked
that the education sector was facing the same issues as the
public safety sector. She inquired about the purpose of "age 60
with 5 years of credited service, as opposed to just having age
55 with 20 years of service."
REPRESENTATIVE JOSEPHSON was unsure of the answer. He shared
his understanding that age 60 with 5 years of service was,
effectively, the "floor." He deferred to his staff, Anneliese
Roberts.
9:02:35 AM
ANNELIESE ROBERTS, Staff, Representative Andy Josephson, Alaska
State Legislature, on behalf of Representative Josephson, prime
sponsor of HB 22, clarified that an employee would become fully
vested after five years of service.
REPRESENTATIVE HIMSCHOOT surmised that an employee could work a
minimum of five years at any point in his/her life; however,
that individual would not receive any benefit until age 60.
MS. ROBERTS answered yes.
9:03:12 AM
REPRESENTATIVE MCCABE asked whether a state could declare
bankruptcy under [Chapter 9, Title 11, of the United States Code
(U.S.C.)].
REPRESENTATIVE JOSEPHSON said he did not know the answer.
REPRESENTATIVE MCCABE shared his belief that the question was
germane because defined benefit plans had driven many companies
into bankruptcy.
REPRESENTATIVE HIMSCHOOT pointed out that the state was not a
company.
REPRESENTATIVE MCCABE agreed; however, similar to a large
company, he said, the state was a financial entity that paid
employees money. He asked how Alaska would reconcile if the
proposed retirement plan, in addition to the existing unfunded
liability, became too burdensome.
REPRESENTATIVE JOSEPHSON asserted that the scenario posed by
Representative McCabe would never come to pass, as the plan had
been vetted multiple times. He reiterated that HB 22 was more
modest than Tier III and included levers, which would require
retirees and active workers to increase payments to the system.
He said it was highly unlikely that the proposed legislation
would create fiscal instability.
9:07:03 AM
MS. ROBERTS presented a PowerPoint presentation, titled "House
Bill 22." She highlighted noteworthy sections in the bill on
slide 2, which read as follows [original punctuation provided]:
Section 14: Allows employee contribution rate to be
increased from 8% to 10% if needed.
Section 18: Sets employer contribution at 22%- 12% to
employee and 10% remaining to unfunded liability.
Section 21: Establishes age of retirement at 55 years
with 20 years of service or 60 years with 5 years of
service.
Section 25: Allows for the post retirement pension
adjustment to be withheld in the plan if unfunded
liability on the new tier is greater than 10%.
Section 29: New section outlines medical benefit
eligibility for the new tier.
Section 30: Outlines the "high five" rule for the new
tier.
Sections 35 and 36: Uncodified sections that outline
process for current employees to buy in to the new
tier.
9:08:17 AM
MS. ROBERTS continued to slide 3, which illustrated the history
of legislation put forward to address the "public safety pension
fix." Slide 4 detailed Tier IV, which read as follows [original
punctuation provided]:
401(a) is made up of 13% of payroll: Employee=8%,
Employer=5%
HRA = 3% of average PERS salary
Medicare coverage with 25 years of service for Public
Safety
Disability similar to Tier III
Most municipal employees not covered by Social
Security or SBS
9:08:55 AM
MS. ROBERTS proceeded to slide 5, which pictured a tabled
comparison of existing Tiers. Slide 6 featured media headlines
to emphasize the retention issues with Tier IV. The headlines
read: "Police union urges city action amid dwindling number of
officers;" "OPINION: First responder retirement reforms will
help Alaska retain talent, save money;" and "With Alaska
struggling to hire, state legislators consider revived pension
plans for public employees."
9:09:36 AM
MS. ROBERTS listed additional issues with Tier IV
retirement on slide 7, including: recruitment difficulties,
retention costs, workers' compensation costs, operational
capabilities, and unforeseen costs. She conveyed further
inadequacies of Tier IV on slide 8, which read as follows
[original punctuation provided]:
William Fornia of Pension Trust Advisors says Tier 4
will replace 31% of income after 25 years.
DOA estimated 38.5% income replacement-Used a fixed
time frame of 30 years.
Bob Mitchell, the CIO of the State of Alaska put the
probability of a 25-year Public Safety employee
replacing 70% of income for 30 years at 6% and a 30-
year employee at 22%.
9:10:25 AM
MS. ROBERTS, referring to slide 9, noted that HB 22 would affect
the 2,358 peace officers and firefighters, as opposed to all
22,129 state employees. She highlighted cost containment
measures in HB 22 on slide 10, which read as follows [original
punctuation provided]:
Reduces benefits significantly from Tier III
Plan built on more conservative assumptions with
reasonable costs
Requires a steady level of contributions from both
employee and employer
Includes mechanisms for dealing with adverse
experience
Shares risk between employees, employers, and retirees
9:11:25 AM
MS. ROBERTS referred to slide 11 and listed the following
benefit reduction in Tier V: No pre-Medicare coverage;
elimination of the 10 percent COLA [cost of living adjustment]
on pensions; final calculation based on five years as opposed to
three years; requires a minimum age of 55 with 20 years of
service to collect benefits. She concluded by outlining best
practices on slide 12, which read as follows [original
punctuation provided]:
Built on a lower expected rate of return-7%
Require steady contribution from employees and
employers
Allow the employee contribution to go up to 10% but
not fall below 8%
Allow the PRPA (inflation proofing) to be withheld
when funding falls below 90%
Replicates Tier IV defined contribution medical
Reasonable employer costs
CHAIR MCCORMICK invited questions from committee members.
9:12:34 AM
REPRESENTATIVE MCCABE shared his understanding that at age 65, a
Tier I retiree was covered by Medicare. He asked whether that
would stand under HB 22 and sought clarification on the gap in
benefits that the bill sponsor had referenced.
REPRESENTATIVE JOSEPHSON considered the example of a firefighter
who began working at age 22. He explained that at age 42, the
firefighter would need to wait 13 years to draw retirement. He
stated that the bill would not solve the retirees' health
insurance problem; it would, however, act as a gesture towards
finding a solution.
REPRESENTATIVE MCCABE inquired about [the average monthly
compensation based on the highest five consecutive payroll years
during the employee's career] and asked whether the purpose was
to smooth or reduce the average.
REPRESENTATIVE JOSEPHSON indicated that in contrast to the "high
three," the "high five" rule was generally a cost reducer and a
method for retaining workers, as it would disincentivize an
employee from leaving after peak earnings.
9:16:11 AM
REPRESENTATIVE RUFFRIDGE, referring to medical coverage, asked
whether an employee could stay enrolled in the state plan after
retiring if he/she paid for the cost of the plan.
REPRESENTATIVE JOSEPHSON confirmed. He added that the
employee's HRA might pay for three years of premiums; however,
the employee would need to find another job or be added onto a
spouse's plan if he/she wanted to maintain coverage.
REPRESENTATIVE RUFFRIDGE sought to confirm that the gap in
benefits still existed at age 55 or 60; however, the employee
could draw from retirement to pay for premiums. He asked
whether that was correct.
REPRESENTATIVE JOSEPHSON acknowledged that it was a possibility,
but paying for premiums would drain the employee's retirement
plan.
REPRESENTATIVE RUFFRIDGE pointed out that the proposed
legislation would encourage retired public safety employees to
find another career in state service to gain access to health
coverage [during the gap years]. He described this as "the
career after the career."
9:20:58 AM
REPRESENTATIVE HIMSCHOOT sought to confirm that there was
evidence of public safety workers leaving because of the current
retirement and benefits plan. She asked the bill sponsor to
distribute the supportive data to the committee.
REPRESENTATIVE JOSEPHSON offered to follow up with the requested
information.
9:21:39 AM
The committee took an at-ease from 9:21 p.m. to 9:24 p.m.
9:24:27 AM
CHAIR MCCORMICK introduced invited testifier, Dominic Lozano.
9:24:39 AM
DOMINIC LOZANO, President, Alaska Professional Fire Fighters
Association, directed attention to a PowerPoint presentation,
titled "Costs of Maintaining the Status Quo." He believed that
Alaska was in this position today because of the unfunded
liability. He explained that initially, the defined
contribution retirement system was believed to be a portable
option for public safety workers; however, shortly after 2006, a
significant number of employees began to leave the state, which
was negatively impacting important factors, like the number of
experienced officers and time on the job. He indicated that the
decrease in retention and recruitment started to create a hole,
or "hollowing out." He cited a study conducted in 2020 by DPS,
which looked at why people were leaving the state. He reported
that retirement was among the top reasons. He directed
attention to slide 2, which listed the following unintended
consequences of Tier IV for public safety: recruitment
difficulties, retention costs, workers compensation costs, and
unforeseen costs.
9:28:16 AM
MR. LOZANO referred to slides 3 and 4, which featured statements
from police and fire chiefs that highlighted issues with
recruitment and retention. Slides 3-4 read as follows [original
punctuation provided]:
RECRUITMENT DIFFICULTIES
"Alaska cannot compete with agencies offering defined
benefit plans. This has left us with vacancies in
multiple academies as applicants decide to pursue
careers elsewhere." APD Police Chief Justin Doll,
Ret.
"The number of individuals wanting to work at the
Fairbanks Fire Department has declined drastically
over the last several years" FFD Fire Chief Jim
Styers
Our firefighter alumni populate most Alaska career
fire departments. The 42 young men and women in my
program are far more aware of financial planning and
retirement concerns than I was at their age. It is
troubling that the majority of them are testing and
interviewing for jobs in other states." - Former UFD
Fire Chief Doug Schrage
RETENTION
"? the inability to provide a defined benefit
retirement system have placed the department at
critically low staffing levels." DPS Recruitment and
Retention Plan Overview 2018-2023
"We are seeing our highly trained, qualified, and
experienced officers leave APD to work out of state
for other law enforcement agencies offering
competitive defined benefit retirement systems." APD
Police Chief Justin Doll
"The turnover of career staff appears to be higher
compared with other clients. Turnover not only has a
financial effect on the department, but it also loses
valuable experience." Fitch & Associates consultant
report Capital City Fire and Rescue
MR. LOZANO indicated that the new hybrid retirement plan option
proposed in HB 22 was constructed from best practices in other
states.
9:32:00 AM
MR. LOZANO conveyed that one of the unforeseen consequences of
Tier IV was that it created older public safety officers. He
detailed workers compensation costs on slide 5, which read as
follows [original punctuation provided]:
Firefighters particularly prone to musculoskeletal
disorders (MSDs)
"Firefighters age 55 and older have an MSD injury rate
that is more that double that of youngest
firefighters, and more than ten times greater than
that of private-sector workers of same age
"It is apparent that older firefighters are associated
with much higher rates of reported workplace injuries
than both younger firefighters and private sector
workers.
"This is consistent with the notion that the rigorous
physical demands of firefighting subject them to
trauma throughout their working lives, making them
more subject to MSDs in later years.
Rand Corporation study on California fire fighter
workers' compensation injuries
9:33:44 AM
MR. LOZANO continued to slide 6, which listed additional
unforeseen costs, including increased overtime costs due to
inadequate staffing; increased training costs; loss of
operational capabilities; loss of experience and future
leadership; rise in organizational stress levels.
9:35:10 AM
MR. LOZANO emphasized that recruitment and retention problems
would only increase. He referred to slide 7, which read as
follows [original punctuation provided]:
Current recruitment & retention difficulties
highlighted by DPS, DOC, and Chief Officers from
across the state are occurring with 40-50% of
workforce in DB system
Tier 4 currently makes up 50-60% of public safety
workforce
The problems will be magnified as the Tier 4 workforce
population grows
A 100% portable public safety workforce is a
frightening thought for Chief Officers around the
state
9:36:12 AM
MR. LOZANO advanced to slide 8, reporting that the number of
public safety employees in Alaska was 3,400 and the average
training cost for each was $120,000. He noted that the cost of
training varied by agency. He discussed the cost of maintaining
the status quo on slide 9, which read as follows [original
punctuation provided]:
DPS & DOC have testified to the Legislature of non-
retirement separations greater than 6%
This is at a time when Tier 4 makes up less than 60%
of overall public safety workforce
Here we will examine costs of Alaska losing 1%, 2% and
3% of a Tier 4 public safety workforce each year
We will use a conservative training cost of $120,000 ,
not increased for inflation over a 20-year period
MR. LOZANO, referring to slides 10-12, calculated the cost to
the state if 1 percent, 2 percent, or 3 percent of the workforce
were to leave. Slides 10-12 read as follows [original
punctuation provided]:
1% of Workforce Leaving
3,400 x 0.01 = 34 employees
34 x $120,000 = $4,080,000 cost per year
5 x $4,080,000 = $20,400,000 5-year cost
20 x $4,080,000 = $81,600,000 20-year cost
2% of Workforce Leaving
3,400 x 0.02 = 68 employees
68 x $120,000 = $8,160,000 cost per year
5 x $8,160,000 = $40,800,000 5-year cost
20 x $8,160,000 = $160,200,000 20-year cost
3% of Workforce Leaving
3,400 x 0.03 = 102 employees
102 x $120,000 = $12,240,000 cost per year
5 x $12,240,000 = $61,200,000 5-year cost
20 x $12,240,000 = $244,800,000 20-year cost
9:41:09 AM
MR. LOZANO proceeded to slide 13, indicating that the
aforementioned costs only represented one aspect of the problems
that would result from non-retirement separation of public
safety employees. He emphasized that the cost of employees
leaving greatly outweighed the cost of HB 22. He noted that
after facing similar experiences, other jurisdictions across the
country had restored a system of defined benefits. He concluded
on slide 14, highlighting the shared interest in ensuring that
quality employees filled the ranks of Alaska's public safety
institutions. He posited that adopting an adequate retirement
plan with reasonable costs, fair benefits, and a shared risk,
would help the mission.
9:43:11 AM
CHAIR MCCORMICK invited former Representative Chuck Kopp, who
sponsored a previous version of the legislation in the Thirty-
First Alaska State Legislature, to provide additional comments.
9:43:26 AM
CHARLES KOPP, Owner, Winfluence Strategies, shared his
background in public safety. He spoke to the gap in experience
and age in departments across Alaska due to high turnover within
0-7 years on the job. He discussed pervasive problems in
society and the nature of a career public safety, which entailed
risk of injury and even death, suggesting that dangerous jobs
were becoming less appealing. He cited a joint op-ed by the
commissioner of DPS and the governor that recognized the
statewide recruitment and retention issues in the public safety
sector. He concluded by emphasizing that the bill was fiscally
conservative and pointed out that a police officer or
firefighter who retired in his/her late forties would still have
to wait 13 years to draw from the pension.
9:48:57 AM
CHAIR MCCORMICK invited questions from committee members.
9:49:04 AM
REPRESENTATIVE MCCABE sought to confirm that Mr. Lozano had
stated that the attrition rate was 6 percent.
MR. LOZANO clarified that 6 percent was a figure provided by DPS
in 2020 that pertained to nonretirement separations.
REPRESENTATIVE MCCABE share his belief that the "churn" [gap in
age and experience] was emblematic of a younger generation that
was less loyal than his generation. He inquired about the
attrition rate in the 1990-2000s and requested a graph of that
data. Additionally, he considered the example of Detroit filing
for bankruptcy and questioned what would happen if Alaska were
to run out of money.
MR. LOZANO responded, emphasizing the solvency of the proposed
retirement plan. He reiterated the importance of the levers
included in HB 22, such as withholding the post-pension
retirement adjustments (PRPA) below 90 percent and increasing
the employee contribution rates, which would function as
safeguards to ensure adequate funding if the state were in
trouble by spreading the risk over multiple generations. He
indicated that the smoothing effect was a benefit of a defined
benefits system to withstand market fluctuations.
9:56:49 AM
REPRESENTATIVE HIMSCHOOT inquired about the impact to rural
Alaska from the lack of a defined benefit system.
MR. LOZANO stated that smaller departments were
disproportionately impacted. He indicated that a defined
benefit system would incentivize employees to stay in those
small communities for the entirety of their career without the
financial pressure of low pay and poor benefits. He cited the
results of a state-run study, which found that firefighters who
worked a 25-year career had a 6 percent chance of retirement
stability.
9:59:38 AM
REPRESENTATIVE MCKAY inquired about alternative options for
addressing the problem, such as increased pay or more vacation
time.
MR. LOZANO reiterated that Alaska was the only state with a
defined contribution plan for all employees. He pointed out
that Utah, for example, had a defined contribution system that
offered a 12 percent contribution rate to the employee, which
was not enough. He reported that ultimately, Utah returned to a
defined benefit system. He cited findings from a thinktank that
analyzed retirement incentives, indicating that for a defined
contribution retirement system to succeed in the public safety
sector, the contribution rate would need to be 25-30 percent due
to the shortened career span. He pointed out that increasing
pay by 25-30 percent would be more expensive than the proposal
outlined in HB 22.
10:02:24 AM
CHAIR MCCORMICK [announced that HB 22 would be held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 22 Sponsor Presentation.pptx |
HCRA 1/24/2023 8:00:00 AM |
HB 22 |
| HB 22 Sectional Analysis CRA.pdf |
HCRA 1/24/2023 8:00:00 AM |
HB 22 |
| HB 22 Sponsor Statement CRA.pdf |
HCRA 1/24/2023 8:00:00 AM |
HB 22 |
| HB 22 Supporting Document - Retention Cost Presentation - Dominic Lozano.pptx |
HCRA 1/24/2023 8:00:00 AM |
HB 22 |