Legislature(2005 - 2006)HOUSE FINANCE 519

04/12/2006 08:30 AM House FINANCE


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 04/11/06 --
+= HB 390 PROPERTY ASSESSMENT APPEAL FEE TELECONFERENCED
Moved CSHB 390(FIN) Out of Committee
+= HB 475 PUB EMPLOYEE & TEACHER RETIREMENT & SBS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 475                                                                                                            
                                                                                                                                
     An   Act   describing  contributions   to   the   health                                                                   
     reimbursement arrangement  plan for certain teachers and                                                                   
     public employees; clarifying  eligibility for membership                                                                   
     in that health reimbursement  arrangement plan; relating                                                                   
     to  the   'administrator'   of  the  Public   Employees'                                                                   
     Retirement  System  of  Alaska;  and  providing  for  an                                                                   
     effective date.                                                                                                            
                                                                                                                                
Co-Chair  Chenault MOVED  to ADOPT  work draft  #24-LS1685\S,                                                                   
Wayne, 4/11/06,  as the version  of the committee  substitute                                                                   
before  the Committee.    There being  NO  OBJECTION, it  was                                                                   
adopted.                                                                                                                        
                                                                                                                                
9:34:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PAUL   SEATON,  SPONSOR,  updated   Committee                                                                   
members on the process to date.   He stated that HB 475 was a                                                                   
clean up bill to the Retirement  Security Act (SB 141) passed                                                                   
in 2005.   Due to the length  of SB 141, a handful  of errors                                                                   
and oversights  were  made that  need to be  changed for  the                                                                   
transition  to Tier  IV.   HB  475 is  a  technical bill  and                                                                   
intended to include any policy change.                                                                                          
                                                                                                                                
Revisions encompassed in HB 475:                                                                                                
                                                                                                                                
   · Clarifies the procedure for an appeal to the Office of                                                                     
     Administrative Hearings                                                                                                    
   · Requires employer to contribute at least the normal                                                                        
     cost rate starting in 2008                                                                                                 
   · Changes the requirements to receive a conditional                                                                          
     service benefit                                                                                                            
   · Clarifies   provisions  regarding  Personnel   Employees                                                                   
     Retirement System (PERS) and Teachers Retirement System                                                                    
     (TRS) death and disability benefits including how those                                                                    
     benefits would be funded:                                                                                                  
          Funding death and disability                                                                                          
          The structure of death and disability benefits                                                                        
          The survivor benefit                                                                                                  
   · Clarifies  the  eligibility   requirements  for  medical                                                                   
     benefits                                                                                                                   
   · Clarifies  requirements for non-vested  Tier II  or Tier                                                                   
     III employees who wish to transfer to Tier IV                                                                              
   · Clarifies   the    basis   for   calculating    employer                                                                   
     contribution rates                                                                                                         
   · Gives regulatory authority to the appropriate party                                                                        
   · Changes   the  basis   for   calculating  HRA   employer                                                                   
     contributions to meet the Internal Revenue Service                                                                         
     (IRS) tax qualifications                                                                                                   
   · Definitions                                                                                                                
   · Disallows    employment    with    National    Education                                                                   
     Association (NEA) as counting towards Tier IV                                                                              
     retirement eligibility                                                                                                     
   · Establishes  provisions   for  employer  termination  of                                                                   
     participation in the plan                                                                                                  
   · Clarifies  defined  benefit   and  defined  contribution                                                                   
     components of the plan                                                                                                     
   · Establishes adherence to IRS limitations                                                                                   
                                                                                                                                
The changes are not absolutely  necessary for Tier IV to come                                                                   
on line July 1, 2006.  The revisions  clarify many aspects of                                                                   
the  statutes,  providing a  benefit  both  to the  plan  and                                                                   
members.   If changes  are not  made, many crucial  decisions                                                                   
would  be  left to  the  Administrator  of the  plan  without                                                                   
proper guidance from the Legislature.                                                                                           
                                                                                                                                
9:42:19 AM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch noted  that  the sponsor  statement                                                                   
was written  to version  \L and that  the Committee  had just                                                                   
adopted  version\S.   Representative  Seaton  noted the  only                                                                   
substantive  change  to  version\S  is located  on  Page  33,                                                                   
Sections  73 &  77,  the contribution  amount  for death  and                                                                   
disability.  The amount that employers  would have to provide                                                                   
was recalculated; it found that  Mercer had not calculated in                                                                   
the Cost-of-Living-Allowance  (COLA) over  time for  those in                                                                   
Tier III.                                                                                                                       
                                                                                                                                
9:44:32 AM                                                                                                                    
                                                                                                                                
In  response  to  Representative   Weyhrauch  regarding  over                                                                   
funding,   Representative   Seaton   explained   it   was   a                                                                   
retroactive date listed  on Page 33.  The amount  was backed-                                                                   
out and  given  two years  to catch  up.  He  added that  the                                                                   
Division of  Retirement and Benefits  had assured  his office                                                                   
that  under no  circumstance would  they  allow drawing  from                                                                   
over-funded to under-funded status.                                                                                             
                                                                                                                                
9:47:49 AM                                                                                                                    
                                                                                                                                
Representative  Holm observed  the clause  that a "period  of                                                                   
death"  counts  toward  retirement,   questioning  what  that                                                                   
meant.      Representative   Seaton  replied   that   it   is                                                                   
occupational  death  and  disability  and  if  a  member  was                                                                   
working  for a PERS  or TRS  employer and  died, their  heirs                                                                   
would receive the survivor's benefit.                                                                                           
                                                                                                                                
9:49:22 AM                                                                                                                    
                                                                                                                                
Representative  Seaton observed  that the  bill would  change                                                                   
the requirement to receive a conditional  death benefit until                                                                   
2010, clarifying that the employee could buy-back years.                                                                        
                                                                                                                                
Representative  Kerttula asked  the  explanation of  refunded                                                                   
contributions  being   creditable.    Representative   Seaton                                                                   
clarified  that after  2010, a  member  who was  in PERS  and                                                                   
withdrew their funds and then  returns, they would be able to                                                                   
fully  buy-back the  funds  and be  eligible  for a  deferred                                                                   
compensation (DC)  plan.  They would  not be able to  do that                                                                   
after 2010.   The employee  would need the employers  consent                                                                   
to  buy into  a DC  plan.   If  the employee  was a  Deferred                                                                   
Benefit (DB) employee, they would  still be able to buy-back.                                                                   
                                                                                                                                
KATIE  SHOWS, STAFF,  REPRESENTATIVE  SEATON, explained  that                                                                   
there are  a number  of sections  that deal with  conditional                                                                   
service benefits.  The first one  clarifies that the employee                                                                   
has until 2010 to payback service  to be where they left off,                                                                   
which represents  a large unfunded  liability to  the system.                                                                   
The  intent of  SB  141 made  that  change;  HB 475  provides                                                                   
further clarification.  The transfer is a separate section.                                                                     
                                                                                                                                
Representative Kerttula concluded  that a member could refund                                                                   
their  service until  2010.   Ms.  Shows  clarified that  the                                                                   
employee could  still do it until  2010.  If the  service was                                                                   
not refunded,  the employee  could do  it at  any time.   The                                                                   
buy-back must be initiated before  2010 in order to return to                                                                   
their previous  retirement plan if  they are reemployed  on a                                                                   
PERS or TRS plan.                                                                                                               
                                                                                                                                
9:56:07 AM                                                                                                                    
                                                                                                                                
Representative  Seaton  reviewed  the  death  and  disability                                                                   
aspect,  which looks at  funding, structure  of the  benefits                                                                   
and  the survivor  benefits.   The  bill  also clarifies  the                                                                   
eligibility for medical  benefits.  The member  does not have                                                                   
to be continuously insured for their eligibility.                                                                               
                                                                                                                                
Representative   Kerttula   questioned    current   practice.                                                                   
Representative  Seaton observed  that the provision  pertains                                                                   
to early retirement.   He noted that under the  new plan, the                                                                   
medical  benefits apply  at the  age of retirement.   If  the                                                                   
member returns  to work,  and shows  that they were  eligible                                                                   
during  that   period  of  unemployment,  they   would  still                                                                   
qualify.                                                                                                                        
                                                                                                                                
Representative Kerttula  mentioned the "letter  of coverage".                                                                   
Currently,  if the person  retires early,  they receive  full                                                                   
medical  benefits.    Representative  Seaton  responded  that                                                                   
currently, the medical benefits  start at retirement age.  He                                                                   
added  that 75%  of  all medical  expenses  are happening  on                                                                   
early retirees not on the very elderly.                                                                                         
                                                                                                                                
HB 475 was HELD in Committee for further consideration.                                                                         

Document Name Date/Time Subjects