Legislature(2005 - 2006)
04/28/2005 02:50 PM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HB 217 | |
| 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 non-vested members of the teachers'
retirement system defined benefit plans to transfer
into the teachers' retirement system defined
contribution plan and for non-vested 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.
2:53:17 PM
Representative Hawker MOVED to ADOPT work draft #24-
LS0637\C, Craver, 4/26/05, as the version of the bill before
the Committee. Representative Joule OBJECTED in order to
hear the changes.
SUZANNE CUNNINGHAM, STAFF, REPRESENTATIVE KEVIN MEYERS,
explained the changes made between the proposed version
("C") and the House State Affair version ("X") of the
legislation.
2:55:28 PM
Ms. Cunningham pointed out that in version "C", the first
change made was contributions of the employers. The medical
percentage was reduced to 1.75%, Page 15, Lines 14-24,
pertaining to the Teacher's Retirement System (TRS).
Ms. Cunningham referenced Pages 82-83, which lists
contributions by employers in the Public Employee Retirement
System (PERS).
2:57:52 PM
Ms. Cunningham commented on the changes made to the medical
component of the bill, eliminating the requirement that the
person retire directly from the system. That information is
located on Page 25.
2:58:48 PM
Representative Croft asked about the change made on Page 58.
Ms. Cunningham explained that was the increase from 2% to 3%
to the Health Care Reimbursement Account (HRA).
2:59:18 PM
Ms. Cunningham pointed out that Page 25, Line 13, indicates
the eligibility requirements for receiving medical benefits.
In version "C", the requirement that the person retire
directly from the system was eliminated.
3:01:13 PM
Ms. Cunningham referenced access to medical coverage and the
normal retirement age as listed on Page 26.
AT EASE: 3:02:46 PM
RECONVENE: 3:03:23 PM
Ms. Cunningham stated that there were no changes made under
the defined contribution retirement account.
Representative Croft understood that it increased the
contribution by 1%. Ms. Cunningham reiterated that there
had been no changes to the defined contribution account.
3:04:36 PM
Ms. Cunningham highlighted the changes made to the
contribution details, made by the employers, listed on Pages
15 & 83. That language decreases the medical contribution
from 3.75% to 1.75% and increases the HRA contribution from
2% to 3%.
3:05:24 PM
Representative Croft pointed out that the proposed bill
would keep the existing employee contribution and that the
employer contribution rate would change. He asked if the
3.7% was determined on base salary. Ms. Cunningham said
yes.
3:06:26 PM
Representative Croft inquired why the change was made from
3.75% to 1.75%. Ms. Cunningham advised that pertained to
another part of the bill. The House State Affairs (STA)
version (X) established the eligibility age, 60 months prior
to age eligibility of Medicare. A person would be eligible
at age 60 to receive retirement and medical benefits. It
could be more beneficial to a retiree, who retires at age 65
that the benefit actually comes at the age of 65 and not at
age 60.
3:08:09 PM
Representative Croft questioned if the total contributed
amount was for medical only or medical and retirement
purposes.
3:09:28 PM
Ms. Cunningham noted that the vesting details did not
change. (Copy on File). The medical program section
removed the requirement to retire directly from the system.
Additionally, it changed the age back to 65, the Medicare
eligible age with ten years service.
Representative Croft asked why the language was used that
Medicaid eligible age is 65 years old. Ms. Cunningham
requested that Representative Seaton testify to that as the
change was made in the House State Affairs Committee.
3:11:08 PM
Ms. Cunningham pointed out the change of the retiree share
of the medical premium increased from 3% to 5%.
Representative Croft asked if the intent was to ask the
retiree to pay a premium for insurance, which would decrease
depending on the number of service years. Ms.
Cunningham said yes.
3:12:24 PM
Ms. Cunningham commented on an amendment made in the House
State Affairs Committee, which provided that a dependant
child, born to an eligible recipient, would be the only one
eligible for qualifying for dependant coverage.
Representative Croft advised that did not make a substantive
change.
3:14:28 PM
Discussion occurred between Representative Weyhrauch and Ms.
Cunningham regarding that language.
3:15:16 PM
Ms. Cunningham stated that the employer would contribute 3%
of the annual average of the employer's compensation to the
health reimbursement arrangement (HRA).
3:16:13 PM
Ms. Cunningham stated that the version in front of the
Committee would allow a 10-year window for terminated, non-
vested people to return to service eligible to receive their
HRA.
Co-Chair Meyer thought that it would be an administrative
burden to retain them longer than 10-years. Ms. Cunningham
pointed out that the Senate Finance Committee version had a
5-year window. The House State Affairs Committee removed
that window, keeping it unlimited. The House Finance
Committee version is the compromise.
3:17:20 PM
Ms. Cunningham explained the changes to the board structure,
from three non-beneficiaries to one from PERS and one from
TRS. Both PERS and TRS could submit a list of names to the
Governor for appointment.
Representative Croft pointed out the use of "may" and asked
if the Governor would be required to select from that pool.
Ms. Cunningham said he would. Representative Croft inquired
if there was a requirement for legislative confirmation.
Ms. Cunningham stated that it would be only appointments by
the Governor.
Representative Croft pointed out that in the prior versions,
the appointments included those employees. Current language
does not mandate from that list. Ms. Cunningham replied
that was correct. Co-Chair Meyer interjected that the
"hope" was to choose someone with expertise in those areas.
3:19:46 PM
Representative Croft addressed the recognition of confidence
and asked if it had been included in the proposed version.
Ms. Cunningham said it was.
3:20:02 PM
Ms. Cunningham added that language was put back in and that
appointees must be eligible to receive a Permanent Fund
Dividend.
Ms. Cunningham pointed out in the proposed version, there
were four-year terms with a maximum of two consecutive terms
with a one-year break required between.
3:20:46 PM
Ms. Cunningham said additionally, there is a requirement for
the board to annually evaluate the employer's right for
medical insurance including a per diem increase from $150 to
$400 per day.
3:21:18 PM
Ms. Cunningham highlighted the differences in the proposed
committee substitute, pointing out the language for penalty
for false statements, AS 14.25.10.
3:22:48 PM
REPRESENTATIVE PAUL SEATON spoke to the changes between the
two versions of the legislation. The House State Affairs
Committee attempted to address ways for eliminating future
unfunded liabilities. Unfortunately, the House Finance
Committee substitute ads a number of those liabilities back
in and are mostly are related to the medical system.
The "C" (House Finance Committee) version creates
liabilities because it will not generate enough funds to pay
for future benefits. The Mercer group made their
calculations based on the assumptions that people would be
retiring directly from the system. In the "C" version,
employees would not have to retire out of the system and
would expand the pool of potential retirees.
3:24:40 PM
Representative Weyhrauch inquired why that had not been
calculated. Representative Seaton replied that the version
before the Committee eliminates the language that retirees
have to retire directly from the system. The pool of people
that have ten years service and who would be able to retire
would expand. The House State Affairs version stipulates
that the person would have to retire directly from the
system after 10 years of service.
Representative Seaton addressed unfunded liabilities,
pointing out that medical benefits were significantly higher
post 65-years than those in the previous version.
3:26:50 PM
Representative Croft spoke to retiring from the system. He
was concerned that someone beginning at 30 years old, knew
that they would not be covered at all if they did not retire
from the State system, would consider other options.
Representative Seaton reiterated that the employee would
need 30 years to retire from the system or 10 years in
reaching retirement age. If the person had less than 30-
years service, they would have to retire directly from the
State system. The "C" version states that at age 65, the
person who worked from 10 years on, would be covered. He
pointed out that Mercer calculations had not been based on
that.
Representative Seaton stressed there was a large difference
in the two plans. The philosophical intent is to create a
plan more like a defined contribution plan (DCP). The "C"
version clarifies that the employee would loose their 10
years DCP. He thought that the health care reimbursement
and the medical plan should work together. The medical
component provides an insurance plan, covering regular
medical. The DCP becomes dollars assigned to a personal
account by the employee.
3:30:29 PM
Representative Croft asked what the interaction would be
between the HRA and the medical-set-aside by the employer.
Representative Seaton explained that the HRA provides money,
which could be used for any qualified health care expense.
An employee could retire at 60 and use that money for
covering their premiums. That language is not contained in
the "C" version, in which the person would have to be 65
before they could receive medical benefits.
3:31:58 PM
Representative Croft asked if at retirement age, there would
be an account covering ordinary items such as premiums from
another account. Representative Seaton explained that the
person would need to have major medical plan.
3:33:04 PM
Representative Croft inquired how major medical would be
different from the current available medical coverage.
Representative Seaton replied the major medical plan portion
would be the same. The difference is that presently, the
State pays 100% and under the proposed plan, there would be
a cost share. There would be premiums paid by the employee.
Under SB 141, there would be no subsidy base. He preferred
the House State Affairs "X" version, as it identifies future
liabilities.
3:34:43 PM
Representative Croft pointed out the change from 3.75% to
1.75%, representing how much of the employees salary was
withdrawn for the medical care reimbursement.
Representative Seaton advised that medical is actually a
percentage of the salary. The health care reimbursement
account (HCRA), because of the federal anti discrimination
laws, is based on the average salary of the PERS and TRS
members. They would have to work as a unit payment, 2% of
the average salary of those people paid by the employer.
The employer is the only contributor to the HRA and the
medical.
3:36:09 PM
Representative Seaton added that SB 141 allows new dependant
coverage after service. He commented that language could
potentially have a substantial financial drain on the State.
Given a person employed at this time, that cost in 30 years
is estimated to be an average of $54 thousand dollars per
year. The House State Affairs STA version placed
constraints, identifying such things as adoption of
grandchildren. It is possible there could be a huge cost
associated with adoptions. He stressed that healthcare is
an expensive item. Healthcare has been identified as the
most important item in the employee's retirement package.
3:38:14 PM
Representative Croft thought that both the House State
Affairs and the House Finance Committee versions used
similar language. He asked where in the "C" version was the
language that addressed the issue of dependent children.
Ms. Cunningham said on Page 26, Lines 5-7.
3:39:05 PM
Representative Croft asked if the language was not
satisfactory because it did not specify dependent children
at the time of retirement. Representative Seaton said the
language does not indicate that the surviving spouse or the
dependent children had any relationship to the working
history of the employee. He thought that would be an
unfunded liability to the system.
3:39:54 PM
In response to a query by Representative Croft pertaining to
death and disability benefits for peace officers and law
enforcement agents, Ms. Cunningham referenced Page 93, Lines
21-23. She pointed out the language was intricate to
addressing benefits of a surviving spouse and dependents.
3:41:13 PM
Representative Seaton thought there was a big difference
between a surviving spouse and dependent children.
Representative Holm questioned the concept of "a great
liability". He pointed out that most retirees do not have
dependent children. Survivor-benefits are different.
Representative Seaton referenced the escalation in health
care costs and in paying premiums; the State needs to be
careful in what is being allowed with situations such as
grandparents adopting grandchildren and marriages happening
late in life.
3:44:55 PM
Representative Croft thought that the "C" version was fairer
and asked about the impacts. Representative Seaton
commented that they had requested that from the Mercer
analysis. Their calculation was based on retirement
directly from the system. They are presently reassessing it
to determine the projected figures. He stated that if it
was a defined contribution program, as far as the retirement
benefit, it would not matter, however, a medical benefit
creates a risk.
3:48:02 PM
Representative Croft did not agree the concern was "huge".
Representative Seaton referenced Page 2 of the comparison, a
substantial change to the "subsidy by the system" increase
is indicated. Previously, it increased from 30% to 90%
coverage by the system. It was changed to 30% share by the
retiree. Under the House State Affairs version, the
employer would pay 30%, which would increase by 3% each
year. He stressed that the proposed structure was very
different. Under the "C" version, there would be a minimum
of a 70% subsidy. Both the employers and employees wanted
more benefits to come to long-term employees. The "C"
version provides for a 70% subsidy after working only ten
years.
3:51:19 PM
Representative Croft was confused with the percentages
proposed and asked clarification if for those working 10
years, the employer would only pay 30% of medical.
Representative Seaton said yes. Representative Croft
understood that in the original Senate version, the employee
would be responsible for paying out only 30%.
Representative Seaton acknowledged it had been a large
change. A long-term employee receives higher coverage,
creating a larger incentive to stay working in the system.
Representative Weyhrauch asked how the change developed.
Representative Seaton did not know, but thought it was the
result of the tier committee structure. The proposal is
similar to that of the State of Colorado.
3:53:42 PM
Representative Seaton spoke to the health care reimbursement
(HRA) arrangement and hoped the arrangement would act as an
incentive for employees to want to come back and work for
the State so as to receive the retirement package.
3:54:25 PM
Representative Seaton explained moving the window to 10-year
HRA contribution change. If an employee left the system for
move than 10-years, they would loose their contribution. He
thought the action would act as an incentive for the
employee to return to State service. Representative Croft
asked about the difference between the original Senate
version and the House State Affairs "X" relationship with
the HRA.
3:58:05 PM
Representative Seaton referred to consideration of the board
members. The "X" version does not eliminate the competency
requirements required by the Governor. He commented on how
the bargaining members would be elected.
Representative Croft asked about language on Page 46, Line
4, regarding who could be a board member. Representative
Seaton replied that the House State Affairs version provided
for one member with no association with PERS and TRS
service, plus one member each from PERS and TRS.
4:02:11 PM
Representative Seaton expounded that they wanted the board
terms to be as political as possible. The "X" version went
to six-year terms with a maximum of two consecutive terms.
4:05:15 PM
Representative Hawker voiced his gratitude for all the work
done by Representative Seaton and the House State Affairs
Committee. He pointed out that the options presume a change
to a defined contribution plan. He requested a
characterization of the differences between the "C" and the
"X" versions.
Representative Seaton responded that the proposed committee
substitute does not address potential unfunded liability to
the State. Additionally, testimony from employers indicates
concern regarding rate escalation. The retirement and
benefit program has one purpose - to attract and retain
people. Employees and employers agree that medical benefits
are the most important aspect. With a defined contribution
program, adequate funding is necessary.
4:09:54 PM
Representative Hawker pointed out the challenge resulting
from escalating costs driven by medical benefits. He asked
if the House State Affairs Committee had considered
alternatives to the issue.
4:11:36 PM
Representative Seaton said the Committee had looked at tier
models. The State is under a severe constraint regarding
their inability to change the benefit package because of
constitutional obligations.
Representative Hawker asked if anything within the defined
benefit model had been considered, such as a new tier and if
that could be incorporated into the defined benefit model.
Representative Seaton responded that the "X" version was not
based on a defined contribution. The HRA portion is an
element of the defined contribution plan, yet has aspects of
the defined benefit model.
4:15:16 PM
SENATOR BERT STEADMAN, SPONSOR, added that there had been no
change to the contribution formula for the retirement
portion. He discussed the conceptual differences,
addressing health care and the board structure. The Senate
Finance version intended that health care would be available
during working years and in retirement. The tier structure
defines who pays which costs. He referenced Page 2 of the
handout. The Senate version would be more expensive in
dealing with post employment health care with more risk
shifted to the employer after the age of 65.
4:19:22 PM
Senator Steadman commented on the 65-year age portion, at
which time, it is assumed that person had been an employee
and had 30 years service, then the State would pick up 90%
of the premium. At that age, the person is unlikely to go
back into the labor force and at that age, health care costs
should not be shifted to the employee. Regardless of what
happens to insurance growth rates in retirement, the State
will pick up 90% of the amount if the employee has worked 30
years. It makes no difference, the split would be 90% for
the State and 10% to employee. If the burden were shifted
to the employee, the employee would not be able to cover it.
An employee needs their health insurance after they retire.
Before 65 years of age, the Senate version has the employee
paying the premium.
Senator Steadman continued, the Senate version began with a
1%, moving to 2%; the "C" version has it at 3%. That is a
crafted benefit to the employee; it needs to be attractive
to the employee. He did not recommend that it be lowered.
4:22:31 PM
Senator Steadman continued, the cost of the Senate version
is a little more for post employment health care because of
the way in which it is handled after age 65. He referenced
the defined contribution plan.
4:23:43 PM
Representative Croft asked about the 30-year retirement
system and how that would affect employees currently in the
system. Senator Steadman responded that the changes
proposed in health care would not be for the current tiers
and employees. The defined contribution would only be for
the new tiers, coming into the system for the first time.
Currently, there are no employees in that tier. The board
would establish that rate. The Senate version established a
five-year window after termination; the "C" version extended
that window to ten years.
Representative Croft understood that the account would have
no significant liabilities for a long period of time.
4:25:26 PM
Senator Steadman clarified that there would be no liability
applied to the health reimbursement arrangement. It would
be like an employer funded savings account for the
employee's health care costs.
4:25:54 PM
Representative Croft pointed out that the unfunded liability
of the current system would continue. He asked if the
savings account from the new tier could be used to pay off
the unfunded liability. Senator Steadman said it could not.
None of those monies can be used against the unfunded
liability. The unfunded liability is the responsibility of
the employer.
Representative Croft questioned how the legislation would
fix the State's current problem.
4:27:10 PM
Senator Steadman stated that the $5 billion dollar under
funding was not intended to recapitalize the unfunded
liability. That is a separate concern. Representative
Croft misunderstood the intent.
4:27:47 PM
Representative Weyhrauch inquired if the intent was to
establish a benchmark for a different class of employee at
the Tier 4 level. Senator Steadman said yes, while
restructuring the board.
Representative Weyhrauch pointed out that the "X" version
does not address the unfunded liability and he thought it
could create a separate unfunded liability. Senator
Steadman thought that was inaccurate.
4:28:52 PM
Senator Steadman explained that the way in which an unfunded
liability results is by not funding or under funding it.
There is a liability for an employee that retires for his
health care insurance costs at age 65. That would be funded
as the plan moves forward. It is funded every year. The
magnitude of a new tier and health insurance costs that are
required for the employees when they reach 65 is
substantially different from what exists at this time.
Representative Weyhrauch questioned the divergence. He
asked if the State needed something more than statutory
language to create a constitutional requirement. Senator
Steadman pointed out that an under funded mandate already
exists and that it was misleading to say that the State
would have a health insurance obligation for the new
employees at age 65 without having an unfunded liability.
4:31:18 PM
Senator Steadman commented that the only way in which to
guarantee that there was no unfunded liability would be to
not offer health insurance. All versions of the proposal
offer health insurance.
4:31:59 PM
MILES BARKER, STAFF, SENATOR BERT STEADMAN, added that
because the House Finance Committee substitute changed the
medical contribution from 3.75% to 1.75%, lowering it by the
2% will not pay for the medical benefit currently in the
bill and is not a valid interpretation of the run numbers.
4:33:31 PM
Senator Steadman added that the benefit would be from age 65
onward and the split will always be 80% for the State and
20% for the employee to co-pay. The "X" version included a
pre-65 requirement.
Senator Steadman discussed the composition of the board
structure. Currently, the PERS and TRS boards spend 80% of
their time on appeals. The appeal process would be moved to
an administrative area. The current board sets the employer
contribution rate and accepts the actuarial recommendations.
The new board would address those two items. The new board
would take care of assets and monitor liabilities, balancing
them with cost containments.
4:36:45 PM
Senator Steadman added that the there would be professional
standards required of the board members and that they would
need to have a more in depth understanding of the impact of
their decisions. He noted that there would be three board
members not from PERS and TRS.
4:38:45 PM
Senator Steadman added that most of the members would be
from PERS and TRS. He suggested there was confusion in the
"X" version regarding the responsibilities of the board.
Currently, there are over 100,000 employees in the current
tier system. When the employer [State of Alaska] has to
meet such an obligation, they need a "strong" seat at the
table, as it affects the State's good faith.
4:40:20 PM
Representative Croft asked if there was an established
interest rate for the defined contribution. Senator
Steadman explained that the structure would be similar to
the Supplemental Benefit System (SBS) and the board's
responsibility would be to steer employees toward financial
success.
4:43:12 PM
Representative Croft emphasize it would be relevant to the
employee if the board made wrong decisions as it would
affect their retirement funds.
4:44:03 PM
Senator Steadman agreed. The employee should have the
ability to influence the selection in a defined contribution
plan. There is no intent to have a defined contribution
plan with no representation from the employees in the
investment selections. Representative Croft recommended
that all employees should be on the board.
Senator Steadman noted that the Senate Finance Committee
(SFC) thought that the structural problem should be
addressed first and then the new board could come back to
the Legislature with cost control recommendations to deal
with funding challenges.
4:46:11 PM
Representative Croft was confused how the State intended to
build up a savings account to address the debt. He asked if
SB 141 did not cure the current retirement system financial
debt, what was the solution. Senator Steadman indicated
that the first matter to address was a "structural fix"
because the challenge is so large. After that, the State
could go after the $5.7 billion dollar debt concern.
4:48:18 PM
Senator Steadman advised that last year, the State lost $700
million dollars while gaining 15% on their portfolio.
4:48:58 PM
Representative Hawker clarified that the first priority is
the structural fix. He asked if the State knew for certain
that the past structural fixes were not substantial enough
to address these concerns.
4:49:54 PM
Senator Steadman pointed out that Tier 1 is more challenging
than Tier 2 because it is more expensive. The issue is
having a defined benefit plan that is so "unmovable" that
the State cannot respond easily to the changing market
conditions.
4:51:52 PM
Representative Hawker questioned how "broken" Tier 3 was.
He pointed out that the Committee does not have the benefit
of Mercer as a resource. He questioned how the Mercer group
had been financed. Senator Steadman explained how the State
secure Mercer, paying roughly $450 thousand dollars a year
for that service. Representative Hawker recommended it
would be more responsible for the Committee to get a second
opinion.
4:54:35 PM
Senator Steadman offered to share Mercer's findings. He
reported that he has used models other than Mercer and he
assumed that the other findings would obtain the same
results. He suggested that distortions come into play
unless one point in time is used.
4:57:27 PM
Representative Hawker discussed the compounding numbers in
the medical industry could cause serious problems in the
future. Senator Steadman pointed out that on the national
level, health care costs are excessive. He acknowledged
that he could not argue for a financial fix of $5.7 billion
dollars. Representative Hawker agreed, emphasizing that the
problem is the medical cost component. Senator Steadman
related the philosophical position of the Senate Finance
Committee.
5:00:42 PM
Co-Chair Meyer advised that Ms. Millhorn was available to
provide the requested numbers.
5:01:06 PM
Representative Kelly thanked Senator Steadman and
Representative Seaton for their hard work. He voiced
concern that if a new plan were not adopted, then 15% of the
Alaska workforce would suffer. He opined that the versions
before the Committee were close enough to work out the
differences. He argued that attracting and attaining new
employees under the new system could be done and encouraged
supporting a compromise between the two versions.
5:05:52 PM
MELANIE MILLHORN, DIRECTOR, DIVISION OF RETIREMENT AND
BENEFITS, DEPARTMENT OF ADMINISTRATION, offered to provide
data and answer any questions of the Committee.
5:07:39 PM
Representative Croft inquired how to best address the
current $5.7 billion liability. Ms. Millhorn said the
defined benefits plan could provide a long-term solution
because the employee contribution rate would decrease after
14 years. The 25-year amortized schedule would help
eliminate the unfunded liability. The proposed plan would
bring in a new tier and would deal with the volatility of
investment returns and health care costs.
Representative Croft understood that the assets collected
from the defined contribution would be used to pay off what
is currently owed. Ms. Millhorn explained that the money
would come from the employer. The employer would be paying
for the past service cost of the unfunded liability. They
own that obligation. The new tier would solve the problem
by paying off the past service rate. She described the
expectations of the new plan.
5:11:32 PM
Representative Croft interjected that it would not be
eliminated, only transferred.
5:12:04 PM
ROSE KALAMARIDES, (TESTIFIED VIA TELECONFERENCE),
ADMINISTRATOR FOR TEAMSTERS MEDICAL & RETIREMENT PLAN,
ANCHORAGE, clarified that SB 141 would not impact her. She
recommended that there be a distinction between funding for
the retirement plan and the medical plan. She thought that
the benefit package for retirees under the proposed plan
still appears "generous" compared with that of the private
sector.
Ms. Kalamarides commented that it should be carefully
considered whether the State wants to change the retirement
benefits for public employees from a defined benefit to a
defined contribution plan. The funding issues should be
separated from the costs of the medical benefits.
Ms. Kalamarides suggested that the risk was simply being
shifted from the employer to the employee. In a defined
benefit plan, the risk is smoothed out. Most people do not
have enough information to make good investment choices.
5:15:47 PM
Ms. Kalamarides cautioned that the Legislature should look
at what the private sector is doing with retirement health
plans. She recommended leaving the defined benefit plan in
place for future hirees, as it would attract better State
employees. Most teachers would pick the defined benefit
plan over a defined contribution plan.
Ms. Kalamarides applauded the work done by the House and the
Senate. She stated that ultimately, the decision is a
philosophical one regarding what type of employer does the
State of Alaska want to be. She reiterated that the health
benefits should be a different issue from the retirement
plan.
5:18:14 PM
Co-Chair Meyer agreed that there could be a solution on the
matter, acknowledging the tremendous amount of work done on
the bill.
Co-Chair Meyer stated that the bill would be placed in a
work group including consultation with Representative
Seaton, Senator Steadman and Ms. Millhorn. SB 141 was
placed into the work group with members: Chair,
Representative Kelly and with members Representative Hawker,
Representative Weyhrauch and Representative Croft.
Representative Hawker maintained that the task of addressing
the concerns would be a "huge undertaking" for the work
group to provide in two days.
5:21:38 PM
SB 141 was HELD in Committee for further consideration.
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