Legislature(2005 - 2006)CAPITOL 106
04/20/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HJR 12 | ||
| = | SB 141 | ||
| = | HB 238 | ||
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 20, 2005
8:11 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Carl Gatto, Vice Chair
Representative Jim Elkins
Representative Bob Lynn
Representative Jay Ramras
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 141
"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; 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; and providing for an effective date."
- MOVED HCS CSSB 141(STA) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 12
Proposing amendments to the Constitution of the State of Alaska
relating to the repeal of the budget reserve fund.
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 238
"An Act relating to contribution rates for employers and members
in the defined benefit plans of the teachers' retirement system
and the public employees' retirement system and to the ad-hoc
post-retirement pension adjustment in the teachers' retirement
system; requiring insurance plans provided to members of the
teachers' retirement system, the judicial retirement system, the
public employees' retirement system, and the former elected
public officials retirement system to provide a list of
preferred drugs; relating to defined contribution plans for
members of the teachers' retirement system and the public
employees' retirement system; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 141
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
SPONSOR(s): FINANCE
03/14/05 (S) READ THE FIRST TIME - REFERRALS
03/14/05 (S) FIN
03/16/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/16/05 (S) Heard & Held
03/16/05 (S) MINUTE(FIN)
03/17/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/17/05 (S) Heard & Held
03/17/05 (S) MINUTE(FIN)
03/21/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/05 (S) Heard & Held
03/21/05 (S) MINUTE(FIN)
03/22/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/22/05 (S) Heard & Held
03/22/05 (S) MINUTE(FIN)
03/23/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/23/05 (S) Heard & Held
03/23/05 (S) MINUTE(FIN)
03/29/05 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/29/05 (S) Heard & Held
03/29/05 (S) MINUTE(FIN)
03/30/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/30/05 (S) Heard & Held
03/30/05 (S) MINUTE(FIN)
03/31/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/31/05 (S) Heard & Held
03/31/05 (S) MINUTE(FIN)
04/01/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/01/05 (S) Heard & Held
04/01/05 (S) MINUTE(FIN)
04/02/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/02/05 (S) Heard & Held
04/02/05 (S) MINUTE(FIN)
04/03/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/03/05 (S) Heard & Held
04/03/05 (S) MINUTE(FIN)
04/04/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/04/05 (S) Scheduled But Not Heard
04/05/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/05/05 (S) Heard & Held
04/05/05 (S) MINUTE(FIN)
04/06/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/06/05 (S) Moved CSSB 141(FIN) Out of Committee
04/06/05 (S) MINUTE(FIN)
04/08/05 (S) FIN RPT CS 5DP 1DNP 1AM
NEW TITLE
04/08/05 (S) DP: GREEN, WILKEN, BUNDE, DYSON,
STEDMAN
04/08/05 (S) DNP: HOFFMAN
04/08/05 (S) AM: OLSON
04/12/05 (S) ENGROSSED
04/14/05 (S) TRANSMITTED TO (H)
04/14/05 (S) VERSION: CSSB 141(FIN)
04/14/05 (H) READ THE FIRST TIME - REFERRALS
04/14/05 (H) STA, FIN
04/14/05 (H) STA AT 8:00 AM CAPITOL 106
04/14/05 (H) <Pending Referral>
04/16/05 (H) STA AT 9:30 AM CAPITOL 106
04/16/05 (H) <Bill Hearing Canceled>
04/19/05 (H) STA AT 8:00 AM CAPITOL 106
04/19/05 (H) Heard & Held
04/19/05 (H) MINUTE(STA)
04/20/05 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
KATHERINE SHOWS, Staff
to Representative Paul Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered clarification on amendments to SB
141.
TRACI CARPENTER, Staff
to Senator Lyda Green
Alaska State Legislature
POSITION STATEMENT: During hearing of SB 141, answered
questions.
ACTION NARRATIVE
CHAIR PAUL SEATON called the meeting back to order at 8:11:28
AM. Present at the call back to order were Representatives
Gatto, Elkins, Lynn, Ramras, Gardner, Gruenberg, and Seaton.
SB 141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
CHAIR SEATON announced that the only order of business would be
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 nonvested members of
the teachers' retirement system defined benefit plans to
transfer into the teachers' retirement system defined
contribution plan and for nonvested 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."
8:11:56 AM
REPRESENTATIVE GRUENBERG [moved to adopt] Amendment 17, labeled
24-LS0637\L.12, Craver, 4/19/05. [A motion had previously been
made to adopt Amendment 17, during the 4/19 portion of this
meeting, but the motion was withdrawn]. Amendment 17 read as
follows:
Page 7, lines 9 - 30:
Delete all material.
Renumber the following bill sections accordingly.
Page 8, lines 9 - 10:
Delete "calculated under AS 14.25.052,"
Page 68, line 15, through page 69, line 13:
Delete all material.
Renumber the following bill sections accordingly.
Page 72, lines 5 - 6:
Delete "calculated under AS 39.35.162,"
Page 105, line 23:
Delete "sec. 59"
Insert "sec. 57"
Page 108, line 21, following "14.25.047,":
Insert "14.25.050(a),"
Page 109, line 19:
Delete "SECTIONS 139 AND 140"
Insert "SECTIONS 135 AND 136"
Page 109, line 20:
Delete "secs. 139 and 140"
Insert "secs. 135 and 136"
Page 109, lines 21 - 22:
Delete "secs. 139 and 140"
Insert "secs. 135 and 136"
Page 109, line 23:
Delete "Sections 11, 12, 14, 15, 20, 89 - 94,
107, 114, and 131"
Insert "Sections 6, 10, 12, 13, 18, 85 - 90, 103,
110, and 127"
Page 109, line 25:
Delete "Section 141"
Insert "Section 137"
Page 109, line 26:
Delete "secs. 142 and 143"
Insert "secs. 138 and 139"
REPRESENTATIVE GRUENBERG explained that the amendment would
remove provisions that provide for increases in the contribution
rate for members of both the Public Employees' Retirement System
(PERS) and the Teachers' Retirement System (TRS).
CHAIR SEATON reviewed Amendment 17, noting that it would
increase the contribution rate by 0.5 percent. He pointed out
that the committee had adopted an amendment by Representative
Ramras that limited the total contribution by an employee to 10
percent for current PERS employees. He explained that Amendment
17 would repeal any employee increase for current members of
PERS or TRS.
8:13:26 AM
CHAIR SEATON objected [to the adoption of Amendment 17].
REPRESENTATIVE GRUENBERG offered further details for Amendment
17; he said:
It rolls back the rate increase. Sections 7 and 8
currently provide for increases in the contribution
rate for TRS, [and] sections 87 and 88 provide for
increases in the contribution rate for PERS. And all
existing TRS and PERS ... members ... were hired with
the reasonable expectation that their contribution
rates to retirement systems were fixed at a
contractual rate. And, by the way, Article 12,
Section 7, of the constitution says that membership in
employee retirement systems ... shall constitute a
contractual relationship. And it's my contention
[that] to be certain that ... the bill is
constitutional, we need to keep that contribution,
rate, the same for existing employees, and therefore
this [amendment] deletes those provisions.
8:15:10 AM
A roll call vote was taken. Representatives Elkins, Lynn,
Gardner, and Gruenberg voted in favor of Amendment 17.
Representatives Ramras, Gatto, and Seaton voted against it.
Therefore, Amendment 17 passed by a vote of 4-3.
8:16:14 AM
CHAIR SEATON returned the committee's attention to Amendment 9,
as follows [original punctuation provided]:
p.8 line 10. Delete "less than" and insert "the lesser
of"
line 11 after "active members" insert "11 percent for
TRS employer and 10 percent for PERS employers"
The committee took an at-ease from 8:17:54 AM to 8:19:29 AM.
8:19:31 AM
CHAIR SEATON [moved to adopt Amendment 9].
REPRESENTATIVE GATTO objected for discussion purposes.
CHAIR SEATON explained:
Amendment 9 establishes a floor for the employer
contributions at 11 percent for TRS and 10 percent for
PERS. And this is the employer contribution only; it
does not affect the employee contribution. What
brought us into part of our unfunded liability at our
past service cost is that the systems lowered their
contribution rates ... as far as 6.75 [percent] in one
system. ... This does not affect the match; the
employee will still be required to match at 50 percent
of the normal cost rate. All this does is say that
the employer contribution can't go down less than
this. ... If we do go down to a low contribution rate
by the employer, we have a statutory limit of 5
percent, so then all of a sudden if we need to go up,
like we do now, we cannot return up. So this
[amendment] is a smoothing mechanism that keeps the
employer at a fairly constant contribution rate and
also doesn't dig us into holes when the stock market
goes up or down.
8:21:19 AM
REPRESENTATIVE GATTO removed his objection.
CHAIR SEATON asked if there was any further objection to
Amendment 9. There being none, Amendment 9 was adopted.
8:21:27 AM
CHAIR SEATON directed attention back to Amendment 11. [The
motion to adopt Amendment 11 was left pending from the 4/19
portion of this meeting. Amendment 11 read as follows:]
p. 32 line 10, insert "'member contribution account'
means the member's contributions to their defined
contribution account plus any accumulated interest."
CHAIR SEATON withdrew his motion from 4/19/05 to adopt Amendment
11.
CHAIR SEATON [moved to adopt Amendment 18 as a modified version
of withdrawn Amendment 11], as follows [original punctuation
provided]:
p.32 line 10, insert "'member contribution account'
means the member's contributions to their defined
contribution account plus any change in market value."
REPRESENTATIVE GRUENBERG noted that Amendment 11 had included
the phrase "accumulated interest". He moved to adopt an
amendment to Amendment 18, which would change Amendment 18 to
read:
p.32 line 10, insert "'member contribution account'
means the member's contributions to their defined
contribution account plus any change in market value
and any accumulated interest."
8:22:52 AM
REPRESENTATIVE GATTO objected to the amendment to Amendment 18.
He asked for clarification regarding the phrase "market value."
REPRESENTATIVE GRUENBERG pointed out that this question does not
address the friendly amendment to Amendment 18.
REPRESENTATIVE GATTO withdrew his objection.
[The amendment to Amendment 18 was treated as adopted.]
8:24:38 AM
REPRESENTATIVE GRUENBERG noted that this amendment includes
unrealized gains as well as realized gains.
8:25:03 AM
REPRESENTATIVE GARDNER commented that she was not exactly clear
where [Amendment 18, as amended] would insert into the bill.
CHAIR SEATON clarified his intent for the language in Amendment
18 [as amended] to be inserted as paragraph (3) in the location
specified in Amendment 18.
CHAIR SEATON asked if there was any objection to Amendment 18,
as amended. There being none, it was so ordered.
8:26:50 AM
CHAIR SEATON returned to Amendment 5, which was adopted on
4/19/05 and read as follows [original punctuation provided]:
p.46 line 30. After "system;" insert, "The member
shall be selected from no less than three and no more
than five nominees put forward by the appropriate
bargaining units."
p.46 line 31. After "system." Insert "The member shall
be selected from no less than three and no more than
five nominees put forward by the appropriate
bargaining units."
p.47 line 2. After "terms of" delete "three" and
insert "six". After "total of" delete "three" and
insert "two". Line 4. insert "full" between
"consecutive" and "terms".
p.105 line 26. After "AS 39.05.055(7)." Insert, "Upon
establishment of the board one finance officer will be
appointed to a three year term and one finance officer
will be appointed to a six year tem [sic], one
PERS/TRS member representative will be appointed to a
three year term and the other PERS/TRS member
representative will be appointed to a six year term."
CHAIR SEATON reviewed that Amendment 5 changed the term of the
boards to six years on a rotating schedule. Regarding the
system that uses nominees put forward by bargaining units, he
said the committee "adopted two amendments that change this
amendment." The first one was [Amendment 6], which changed the
number of non-public members from three to one and [designated]
two trustees from PERS and two from TRS. The second change was
made by adopting Amendment 16, which provided for "election of
those positions by those two systems." He concluded, "That
still leaves in place the staggered terms and the term limits."
8:29:02 AM
CHAIR SEATON returned to [Conceptual] Amendment 7, regarding the
health reimbursement arrangement (HRA).
The committee took an at-ease from 8:29:40 AM to 8:30:33 AM.
CHAIR SEATON noted that on April 19, 2005, the committee had
adopted Conceptual Amendment 4 and Conceptual Amendment 7. He
reminded the committee that Conceptual Amendment 7 dealt with
the HRA, while Conceptual Amendment 4 dealt with a medical plan
that the committee had adopted. He explained that Legislative
Legal and Research Services combined those two conceptual
amendments into one amendment, labeled 24-LS0637\L.7, Craver,
4/18/05 [what ultimately became Amendment 19]. [Original text of
Amendment 19 can be found at the end of this set of minutes].
REPRESENTATIVE GRUENBERG stated that he was unaware that the
committee had adopted [Conceptual Amendment 7]. He asked that
the committee adopt [the Amendment 19] and repeal [the adoption
of] Conceptual Amendment 4 and Conceptual Amendment 7.
8:33:17 AM
REPRESENTATIVE GRUENBERG moved to adopt the [Amendment 19,
labeled 24-LS0637\L.7, Craver, 4/18/05]. There being no
objection, Amendment 19 was adopted.
REPRESENTATIVE GRUENBERG [moved to rescind the committee's
action in adopting Conceptual] Amendment 4. [There being no
objection, Conceptual Amendment 4 was before the committee.]
CHAIR SEATON withdrew [Conceptual] Amendment 4.
8:35:06 AM
REPRESENTATIVE GRUENBERG moved to rescind the committee's action
in adopting [Conceptual] Amendment 7. There being no objection,
[Conceptual] Amendment 7 [was before the committee].
CHAIR SEATON withdrew [Conceptual] Amendment 7.
8:35:45 AM
CHAIR SEATON clarified the Amendment 19. He said:
When we're talking about retiring directly from the
system, such as on page 5, line 22 through 24 [as
numbered on the amendment], retiring from the system
means 12 months before application for retirement.
However, recall that if you work for 30 years you are
eligible to retire and you are retiring directly from
the system at that time - 30 plus years. Or, if you
reach normal retirement age and have at least 10
years, then you are retiring directly from the system.
8:36:40 AM
CHAIR SEATON continued:
There was one other clarification that we needed, and
that was on the HRA language on page 8, ... lines 11-
16 [as numbered on Amendment 19, labeled 24-
LS0637\L.7]. And that's [that] a member's eligible to
apply for reimbursement from the [HRA] plan after a
minimum of 10 years of service and does not have to
retire directly from the system. Just to clarify
this: if you worked for 10 years, you have
established an invested personal account in the HRA.
When you reach 60 months pre-Medicare, that account is
available to you, so you don't lose it, which is ... a
change ....
8:37:32 AM
REPRESENTATIVE GARDNER stated:
In the original sheet that numbered the amendments
4,5, and 7, it talks about if an employee terminates
employment before reaching the 10-year requirement for
medical eligibility and doesn't come back to work
within five years, they forfeit the accumulated
balance of the HRA. And that's not specifically ...
lined out in our new [Amendment 19], but that still
holds ...?
8:38:19 AM
KATHERINE SHOWS, Staff to Representative Paul Seaton, Alaska
State Legislature, explained that the intent of Amendment 7 was
to repeal the provision in SB 141 that stipulated that if an
employee left employment for five years, he/she would no longer
have any access to the HRA. Also, she noted that the amendment
would change the provision in SB 141 that said if the employee
does return to employment, the HRA would be reinstated without
the accumulation of any interest.
8:39:20 AM
REPRESENTATIVE GRUENBERG asked whether the language in the old
Amendment 7 matches the language in the Amendment 19.
MS. SHOWS replied, "I believe it does." She pointed out that
she was reading page 8, lines 11-16 of the Amendment 19.
8:40:16 AM
REPRESENTATIVE GARDNER interpreted the language to say that if a
person leaves employment, he/she won't ever have the right to
apply for reimbursement from the HRA.
CHAIR SEATON stated that was his interpretation as well. He
suggested removing the line [in the withdrawn Conceptual]
Amendment 7 that would delete "AS 14.25.470" on page 58, line
16, and insert "(b) of this section" and insert language that
would restore the balance of an [HRA] account plus any
accumulated interest to a person if he/she resumes employment.
[This language was already incorporated into Amendment 19.]
8:41:25 AM
REPRESENTATIVE GARDNER expressed her concern that employees who
are paying into an HRA and don't stay the 10 years would lose
their entire amount. She said, "I'm not sure that that's fair
or appropriate policy."
8:41:42 AM
MS. SHOWS pointed out that on page 5 of the Amendment 19, line 9
would delete "within five years after the date of termination"
and line 12 would delete "without interest or adjustment".
8:42:23 AM
REPRESENTATIVE GRUENBERG turned that committee's attention back
to the [Conceptual] Amendment 7 and said that he would like to
be certain that the intent in that amendment is also in the
final document.
8:43:32 AM
CHAIR SEATON again clarified the language in Amendment 19 [text
provided at the end of this set of minutes].
8:44:51 AM
CHAIR SEATON turned to a table in the committee packet labeled,
"State of Alaska, Division of Retirement and Benefits, Normal
Cost Rate and Actuarial Computed Rate from FY 1983 through FY
2006." He pointed out that the average normal cost rate for
employers under PERS between 1983 and 2006 is 10.86 percent, and
the average normal cost rate for employers under TRS between
1983 and 2006 is 11.16 percent.
CHAIR SEATON turned to another handout from the committee packet
that is not titled, but contains a conceptual amendment that
would increase the 1.75 percent contribution to major medical in
SB 141 to 3.75 percent for TRS employees and 3.5 percent for
PERS employees.
CHAIR SEATON [moved to adopt Conceptual Amendment 20], which
read [original punctuation provided]:
p.82, line 8 delete "1.75" and insert "3.5"
p. 16, line 10 delete "1.75" and insert "3.5" [sic]
REPRESENTATIVE GRUENBERG objected for discussion purposes. He
asked if this amendment would have any effect on Amendment 17.
CHAIR SEATON replied that it would not.
REPRESENTATIVE GRUENBERG withdrew his objection.
8:48:17 AM
CHAIR SEATON realized that the written copy of Conceptual
Amendment 20 contained a typographical error in the second line.
He clarified that the amendment should read:
p.82, line 8 delete "1.75" and insert "3.5"
p. 16, line 10 delete "1.75" and insert "3.75"
REPRESENTATIVE RAMRAS asked what the cost of that would be.
CHAIR SEATON replied that the difference between 1.75 and 3.75
is 2 percent.
REPRESENTATIVE RAMRAS asked, "How many millions of dollars does
that 2 percent represent?"
CHAIR SEATON deferred to the sponsor's staff.
8:50:05 AM
TRACI CARPENTER, Staff to Senator Lyda Green, Alaska State
Legislature, replied that the cost of that particular increase
is approximately $47 million.
8:50:24 AM
REPRESENTATIVE RAMRAS asked, "Does this mean that the employers'
contribution is increasing by $47 million annually?"
MS. CARPENTER answered, "That is correct."
REPRESENTATIVE RAMRAS asked Chair Seaton why the committee would
do this.
8:50:47 AM
CHAIR SEATON explained that there's a 2 percent HRA, and the
committee adopted a major medical policy that kicks in 60 months
before Medicare eligibility. He noted that the original SB 141
has no medical coverage or subsidy pre-Medicare eligible age.
He commented that the committee's version of the bill, with the
added medical components, has additional costs. He noted that
the medical portion [of the benefits] has been identified by
both employers and employees as the most important component of
the retirement and benefit package.
REPRESENTATIVE RAMRAS asked, "This references a mechanism to pay
for [Amendment 19]?"
CHAIR SEATON agreed and noted that the current normal cost rates
are 13.24 percent for PERS and 14.28 percent for TRS, and
therefore this bill would make a significant reduction of the
employer's contribution.
8:52:50 AM
REPRESENTATIVE GRUENBERG moved to adopt a friendly amendment to
Conceptual Amendment 20 to ensure that the amendment read as
follows:
p.82, line 8 delete "1.75" and insert "3.5"
p. 16, line 10 delete "1.75" and insert "3.75"
There being no objection, the friendly amendment to Conceptual
Amendment 20 was adopted.
REPRESENTATIVE GRUENBERG reiterated that he withdrew his
objection to the adoption of Conceptual Amendment 20. There
being no objection, Conceptual Amendment 20, as amended, was
adopted.
8:54:35 AM
REPRESENTATIVE GATTO moved to report CSSB 141(FIN), as amended,
out of committee with individual recommendations and the
accompanying fiscal notes.
8:54:54 AM
REPRESENTATIVE GARDNER objected. She commented:
The crux of the course is moving from a defined
benefit plan to a defined contribution plan. And I
think that there clearly are some benefits, and a
defined contribution plan I think could be constructed
in a way that really meets the needs of the state -
both employers and employees. I'm not convinced that
this plan does that, and part of my concern is that
this is all done in such a rush that I don't believe I
fully understand it. I don't believe that the
stakeholders fully understand it and have had every
opportunity to really participate. If we're going to
put in place a radical change and it has long-term
consequences once we put it in - there's no going back
for any employees hired under it - [then] I think it
merits more careful discussion. ... I think [the
committee chair has] done a really excellent job in
laying out the problem and trying to keep the process
moving forward. I think the amendments this committee
has offered are improvements over the original bill,
but I don't think we're ready to vote.
8:57:39 AM
REPRESENTATIVE LYNN stated:
I too would like to join in applauding the chair of
this committee for wading through some thirty pounds
of paperwork. ... I've had, and I continue to have,
some very serious concerns about this bill. The
intent is good, but the devil is in the details. I'm
concerned about poor souls who could outlive their
retirement .... I've had some concerns about the
makeup of the board and the process of putting someone
on the board, and concerns about changing the
contribution rates for people who are currently
covered. But those concerns have been addressed by
amendment .... It's helped me in my decision-making
process. That said, I was elected to make some very
hard decisions, and let the chips fall where they may.
This bill, like all bills, is an attempt to balance
the equities ... between the employees ... and the
taxpayers of the state .... It's a tough decision.
It's a tough medicine that we may have to take to help
address the financial health of the state. I join
some of my colleagues in being concerned about pushing
too fast on this bill, but every day we do delay
exacerbates the potential problems.
8:59:38 AM
REPRESENTATIVE GATTO noted that in 2003 the governor appointed a
subcommittee of the PERS and TRS Boards that was charged with
researching and evaluating the concept of a new retirement tier.
This subcommittee worked throughout 2004 as well. He said that
the Senate has done so much work to [prepare this bill], and the
House has been working on the issue since February. He
commented, "It may seem rushed, but everything we do, to some
degree is within timeframes, otherwise we would have HB 1 still
in front of us if we took all the time that was necessary, and
we would never get to HB 2 ...." He opined that [SB 141, as
amended] is an imperfect document. He noted that he is in Tier
1, and enjoys a good retirement, and he said, "I want everybody
to enjoy a good retirement, I do. But on the other hand, ... I
feel like I'm hired by the public to take care of the state's
business. And the state's business is, when everybody's walking
toward a cliff, somebody's got to put a barrier up there because
we will fall off the cliff."
9:05:19 AM
REPRESENTATIVE GRUENBERG commented on behalf of the minority
members of the committee as follows:
There is a statute that we discussed ... that provides
occupational death benefits: AS 39.35.430. I see
there is nothing in the bill that amends or repeals
that statute, and I would just like that on the
record. ... I just want it to be crystal clear that
that statute remains on the books.
9:06:36 AM
REPRESENTATIVE GRUENBERG stated, "I think what we've done has
improved [SB 141]... and I think that the work of the chair and
his staff has been really good, and we all appreciate them a
lot." He voiced two concerns:
I want to be certain that we are not too far ahead of
the population, because if people don't understand
what we've done and don't have the popular support,
that can be a real problem, and I don't want to see
that occur. ... I'm not going to vote to pass this
out because I think this is the committee that should
be making certain that whatever product we have has
the external support it needs to be the best bill it
can be, and that the people support what we've done on
a bipartisan basis. And secondly, I am concerned that
all of the work that's been done in this committee can
be undone farther down the line than the next 20 days.
And I think we should have some agreements before this
bill moves to make certain it's not instantly undone.
9:09:09 AM
CHAIR SEATON expressed appreciation for the entire committee's
work on this bill. He [moved to report] CSSB 141(FIN), as
amended, out of committee with individual recommendations and
the accompanying fiscal notes.
A roll call vote was taken. Representatives Lynn, Ramras,
Gatto, Elkins, and Seaton voted in favor of CSSB 141(FIN), as
amended. Representatives Gardner and Gruenberg voted against
it. Therefore, HCS CSSB 141(STA) was reported out of the House
State Affairs Standing Committee by a vote of 5-2.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
9:10:20 AM.
AMENDMENTS
The new Amendment 19, labeled, 24-LS0637\L.7, Craver, 4/18/05:
Page 2, following line 4:
Insert a new bill section to read:
"* Section 1. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE INTENT REGARDING RETIREE HEALTH CARE
COST SAVINGS IN SECS. 33 AND 121. It is the intent of
the legislature for the division of retirement and
benefits to implement by regulation cost-saving
measures appropriate to current and future retirees in
the health care system. This includes using
manufacturer's rebates, co-pay levels, and multi-
tiered co-payment structures; mandating the use of
generic drugs; determining the type of drug classes in
a formulary; dispensing fees; mandating or providing
incentives for mail order pharmaceuticals; using a
reduction in the average wholesale price; providing
case management services for certain users of
pharmaceuticals; capping the number of prescriptions
filled each month; and restricting the number of
refills that users can have at one time."
Page 2, line 5:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 26, line 3, through page 28, line 19:
Delete all material and insert:
"Sec. 14.25.470. Retirement. (a) In order to
obtain medical benefits under AS 14.25.480 a member
must retire directly from the plan. A member is
eligible to retire from the plan if the member has
been an active member for at least 12 months before
application for retirement and
(1) the member has at least 30 years of
service; or
(2) the member reaches the normal
retirement age and has at least 10 years of service.
(b) The normal retirement age is 60 months less
than the age set for Medicare eligibility at the time
the member retires.
(c) A member must apply to the administrator for
appointment to retirement. Application shall be made
on forms and in the manner prescribed by the
administrator.
(d) A member who continues in the employ of the
employer after reaching normal retirement age shall
continue to participate in the plan and to have
contributions allocated to the member's account.
Sec. 14.25.480. Medical benefits. (a) The
medical benefits available to eligible persons are
access to the retiree major medical plan. Access to
the retiree major medical plan means that an eligible
person may not be denied medical coverage except for
failure to pay the required premium.
(b) The following persons are eligible for the
retiree major medical plan provided under this section
and may elect coverage under it:
(1) a member with at least 30 years of
service and who retires directly from the plan;
(2) the surviving spouse of a member who
elected coverage under (1) of this subsection;
(3) a member who reaches the normal
retirement age as provided in AS 14.25.470, has at
least 10 years of service, and retires directly from
the plan;
(4) the surviving spouse of a member who
elected coverage under (3) of this subsection.
(c) Retiree major medical plan coverage elected
by an eligible member under this section covers the
eligible member, the spouse of the eligible member,
and the dependent children of the eligible member.
(d) Retiree major medical plan coverage elected
by the surviving spouse of an eligible member under
this section covers the surviving spouse and the
dependent children of the eligible member who are
dependent on the surviving spouse.
(e) A person other than an eligible member is
not eligible for coverage if, during the time the
eligible member was an active member, the person was
(1) not married to the member; or
(2) not a dependent child of the member.
(f) Major medical coverage takes effect on the
first day of the month following the date of the
election and stops when the person who elects coverage
under (b) of this section dies or fails to make a
required premium payment.
(g) The coverage for persons who are eligible
for Medicare is the same as that available for persons
who are not yet eligible for Medicare. The benefits
payable to those Medicare eligible persons supplement
any benefits provided under the Medicare program.
(h) The medical and optional insurance premiums
owed by the person who elects coverage under (b) of
this section shall be deducted from the health
reimbursement arrangement. If the amount of the
health reimbursement arrangement becomes insufficient
to pay the premiums, the person who elects coverage
under (b) of this section shall pay the premiums
directly.
(i) The administrator shall set on an annual
basis separate retiree health coverage premiums for
participants who are Medicare eligible and for
participants who are not yet Medicare eligible. An
increase in the premium amount may not exceed five
percentage points annually. A participant's share of
the applicable premium shall be determined according
to (j) and (k) of this section.
(j) Participants who have not attained normal
retirement age are required to pay the full amount of
the applicable medical health coverage premium.
(k) Participants who have attained normal
retirement age are eligible for a subsidy applicable
to the cost of the applicable premium. The subsidy
percentage applicable to the cost of premiums payable
by the participant is 30 percent if the member had 10
years of service; for each additional year of service
after the member's 10th year of service, the discount
increases by three percentage points; however, the
maximum discount is 90 percent if the member has 30 or
more years of service. The applicable subsidy
percentage shall be applied to the subsidy base to
determine the dollar amount of the subsidy which is
applied against the cost of the premium.
(l) Participants who are eligible for Medicare
will use the subsidy base for Medicare-eligible
premiums. Participants who are not yet eligible for
Medicare will use the subsidy base for non-Medicare
eligible premiums.
(m) The subsidy base for Medicare-eligible
participants will be the same as the premium amount
for Medicare-eligible participants in the first year
of this plan and the subsidy base for non-Medicare
eligible participants will be the same as the premium
amount for non-Medicare eligible participants in the
first year of this plan. Each subsidy base will
increase five percent each year or the rate at which
the actual premium amount increases for the
corresponding aged participants, whichever is less.
(n) The eligibility for retiree major medical
coverage for an alternate payee under a qualified
domestic relations order shall be determined based on
the eligibility of the member to elect coverage. The
alternate payee shall pay the full monthly premium for
retiree major medical coverage.
(o) The administrator shall establish monthly
group premiums for retiree major medical coverage.
Nothing in AS 14.25.310 - 14.25.590 guarantees a
person who elects coverage under (b) of this section a
monthly group premium rate for retiree major medical
coverage other than the premium in effect for the
month in which the premium is due for coverage for
that month.
(p) A member is eligible to apply for
reimbursement from the health reimbursement
arrangement plan after a minimum of 10 years of
service and does not have to retire directly from the
system.
(q) In this section,
(1) "health reimbursement arrangement"
means the plan established in AS 39.30.300;
(2) "retires directly from the plan" means
that the member has been an active member for at least
12 consecutive months immediately before the time that
the member applies to the administrator for
appointment to retirement and that the member
continues as an active member up through the day
before the day the member is appointed to retirement."
Page 35, line 31, following ""normal retirement age"":
Delete "means 65 years of age"
Insert "means 60 months less than the age set for
Medicare eligibility at the time the member retires"
Page 58, lines 19 - 20:
Delete "within five years after the date of
termination"
Page 58, line 21, following "trust":
Delete ", without interest or other adjustment."
Insert "with interest. The prior period of
employment with a participating employer shall be
credited towards eligibility for medical benefits."
Page 58, line 24, following "plan":
Insert ", except members do not have to retire
directly from the system"
Page 92, line 1, through page 94, line 18:
Delete all material and insert:
"Sec. 39.35.870. Retirement. (a) In order to
obtain medical benefits under AS 39.35.880 an active
member must retire directly from the plan. A member
is eligible to retire from the plan if the member has
been an active member for at least 12 months before
application for retirement and
(1) the member has at least 30 years of
membership service; or
(2) the member reaches the normal
retirement age and has at least 10 years of membership
service.
(b) The normal retirement age is 60 months less
than the age set for Medicare eligibility at the time
the member retires.
(c) A member must apply to the administrator for
appointment to retirement. Application shall be made
on forms and in the manner prescribed by the
administrator.
(d) A member who continues in the employ of the
employer after reaching normal retirement age shall
continue to participate in the plan and to have
contributions allocated to the member's account.
Sec. 39.35.880. Medical benefits. (a) The
medical benefits available to eligible persons are
access to the retiree major medical plan. Access to
the retiree major medical plan means that an eligible
person may not be denied medical coverage except for
failure to pay the required premium.
(b) The following persons are eligible for the
retiree major medical insurance plan provided under
this section and may elect coverage under it:
(1) a member with at least 30 years of
service and who retires directly from the plan;
(2) the surviving spouse of a member who
elected coverage under (1) of this subsection;
(3) a member who reaches the normal
retirement age as provided in AS 39.35.860, has at
least 10 years of service, and retires directly from
the plan;
(4) the surviving spouse of a member who
elected coverage under (3) of this subsection.
(c) Retiree major medical plan coverage elected
by an eligible member under this section covers the
eligible member, the spouse of the eligible member,
and the dependent children of the qualified member.
(d) Retiree major medical plan coverage elected
by the surviving spouse of an eligible member under
this section covers the surviving spouse and the
dependent children of the eligible member who are
dependent on the surviving spouse.
(e) A person other than an eligible member is
not eligible for coverage if, during the time the
eligible member was an active member, the person was
(1) not married to the member; or
(2) not a dependent child of the member.
(f) Major medical coverage takes effect on the
first day of the month following the date of the
election and stops when the person who elects coverage
under (b) of this section dies or fails to make a
required premium payment.
(g) The coverage for persons who are eligible
for Medicare is the same as that available for persons
who are not yet eligible for Medicare. The benefits
payable to those Medicare eligible persons supplement
any benefits provided under the Medicare program.
(h) The medical and optional insurance premiums
owed by the person who elects coverage under (b) of
this section shall be deducted from the health
reimbursement arrangement. If the amount of the
health reimbursement arrangement becomes insufficient
to pay the premiums, the person who elects coverage
under (b) of this section shall pay the premiums
directly.
(i) The administrator shall set on an annual
basis separate retiree health coverage premiums for
participants who are Medicare eligible and for
participants who are not yet Medicare eligible. An
increase in the premium amount may not exceed five
percentage points annually. A participant's share of
the applicable premium shall be determined according
to (j) and (k) of this section.
(j) Participants who have not attained normal
retirement age are required to pay the full amount of
the applicable medical health coverage premium.
(k) Participants who have attained normal
retirement age are eligible for a subsidy applicable
to the cost of the applicable premium. The subsidy
percentage applicable to the cost of premiums payable
by the participant is 30 percent if the member had 10
years of service; for each additional year of service
after the member's 10th year of service, the discount
increases by three percentage points; however, the
maximum discount is 90 percent if the member has 30 or
more years of service. The applicable subsidy
percentage shall be applied to the subsidy base to
determine the dollar amount of the subsidy that is
applied against the cost of the premium.
(l) Participants who are eligible for Medicare
will use the subsidy base for Medicare-eligible
premiums. Participants who are not yet eligible for
Medicare will use the subsidy base for non-Medicare
eligible premiums.
(m) The subsidy base for Medicare-eligible
participants will be the same as the premium amount
for Medicare-eligible participants in the first year
of this plan and the subsidy base for non-Medicare
eligible participants will be the same as the premium
amount for non-Medicare-eligible participants in the
first year of this plan. Each subsidy base will
increase five percent each year or the rate at which
the actual premium amount increases for the
corresponding aged participants, whichever is less.
(n) The eligibility for retiree major medical
coverage for an alternate payee under a qualified
domestic relations order shall be determined based on
the eligibility of the member to elect coverage. The
alternate payee shall pay the full monthly premium for
retiree major medical coverage.
(o) The administrator shall establish the
monthly group premiums for retiree major medical
coverage. Nothing in AS 39.35.700 - 39.35.895
guarantees a person who elects coverage under (b) of
this section a monthly group premium rate for retiree
major medical coverage other than the premium in
effect for the month in which the premium is due for
coverage for that month.
(p) A member is eligible to apply for
reimbursement from the health reimbursement
arrangement plan after a minimum of 10 years of
service and does not have to retire directly from the
system.
(q) In this section,
(1) "health reimbursement arrangement"
means the plan established in AS 39.30.300;
(2) "retires directly from the plan" means
that the member has been an active member for at least
12 consecutive months immediately before the time that
the member applies to the administrator for
appointment to retirement and that the member
continues as an active member up through the day
before the day the member is appointed to retirement."
Page 101, line 28, following ""normal retirement
age"":
Delete "means 65 years of age"
Insert " means 60 months less than the age set
for Medicare eligibility at the time the member
retires"
Page 105, line 23:
Delete "sec. 60"
Insert "sec. 61"
Page 107, following line 30:
Insert a new bill section to read:
"* Sec. 140. The uncodified law of the State of
Alaska is amended by adding a new section to read:
REPORT TO THE LEGISLATURE BY THE DIVISION OF
RETIREMENT AND BENEFITS. The division of retirement
and benefits will provide an annual report to the
legislature regarding the cost savings measures it has
implemented by regulation as described in sec. 1 of
this Act."
Renumber the following bill sections accordingly.
Page 109, line 19:
Delete "SECTIONS 139 AND 140"
Insert "SECTIONS 141 AND 142"
Page 109, line 20:
Delete "secs. 139 and 140"
Insert "secs. 141 and 142"
Page 109, lines 21 - 22:
Delete "secs. 139 and 140"
Insert "secs. 141 and 142"
Page 109, line 23:
Delete "Sections 11, 12, 14, 15, 20, 89 - 94,
107, 114, and 131"
Insert "Sections 12, 13, 15, 16, 21, 90 - 95,
108, 115, and 132"
Page 109, line 25:
Delete "Section 141"
Insert "Section 143"
Page 109, line 26:
Delete "secs. 142 and 143"
Insert "secs. 144 and 145"
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