Legislature(2007 - 2008)
03/30/2007 07:17 AM House W&M
| Audio | Topic |
|---|---|
| Start | |
| HB204 | |
| HB206 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 204-PUBLIC EMP./TEACHERS/JUDGES EMP. BENEFITS CHAIR HAWKER announced that the first order of business would be HOUSE BILL NO. 204, "An Act relating to the public employees' and teachers' defined benefit retirement plans; relating to the public employees' and teachers' defined contribution retirement plans; relating to the judicial retirement system; relating to the health reimbursement arrangement plan for certain teachers and public employees; relating to the supplemental employee benefit program; relating to the public employees' deferred compensation program; relating to group insurance for public employees and retirees; making conforming amendments; and providing for an effective date." 7:19:37 AM ANNETTE KREITZER, Commissioner Designee, Department of Administration (DOA) addressed some prior questions by committee members. First, she noted DOA has requested the Department of Law (DOL) further review of the need for any retroactivity provisions in HB 204. Second, she confirmed that there are currently no statutory provisions that empower the state to intercept funds of employers who fail to contribute to the unfunded liabilities. Third, she provided the committee with a chart that compares HB 204 with House bill 475 [from the 24th Legislative session]. Last, she stated they have requested an opinion from tax counsel about when elected officials are considered employees of the governmental entity they are elected to serve. 7:22:57 AM KATHLEEN LEA, Acting Director, Retirement Manager, Division of Retirement and Benefits (DRB), Department of Administration, responded to a query regarding the exclusion of National Education Association Alaska (NEA-Alaska) members from the state's retirement plans by confirming that the Internal Revenue Service (IRS) does not allow private non-profit entities to participate in a governmental retirement plan. REPRESENTATIVE ROSES noted that it has been at least 25 years since the NEA-Alaska inclusion has been an issue. 7:23:59 AM REPRESENTATIVE SEATON asked for clarification of the chart provided to the committee by DOA and titled "Comparison of Former HB 475 and HB 204." MS. LEA explained that the intent of the chart was to set forth sections that are in HB 204 that were not in House bill 475. 7:26:42 AM REPRESENTATIVE FAIRCLOUGH expressed concern that if the state switches to a cost share basis for retirement contributions, some communities will receive debt relief for their portions of the unfunded pension plan liabilities. She asked for further information regarding those employers that are in arrears in making their payments under the Public Employees' Retirement System (PERS) defined benefits (DB) plans. COMMISSIONER DESIGNEE KREITZER noted that the issue of unfunded liabilities is not a new one. She acknowledged that some communities would benefit greatly should the state move to a cost share plan. She stated that DOA has offered some suggestions for how to help communities that would be adversely affected by a cost share plan. She recognized that some communities, such as Fairbanks, would essentially be relieved of a debt, but stated that "what we are trying to do is go forward." She explained that DOA has prepared a "heroes list" which sets forth communities that received rate relief, but applied it towards their unfunded liabilities. She offered that it is a policy call of the legislature how to treat communities that are differently affected by imposition of a cost share system. The committee took an at ease from 7:29:59 AM to 7:32:45 AM. 7:33:41 AM COMMISSIONER DESIGNEE KREITZER said that when viewing the chart comparing HB 204 and House bill 475, it may be most useful to ignore the column to the far left and focus instead on the table that lists the new sections that were not in House bill 475. MS. LEA confirmed that DOL advised that some sections listed in the chart were in House bill 475, but that they have been modified in HB 204. REPRESENTATIVE ROSES requested details on which sections of HB 204 codify existing practices that are not in statute. 7:39:16 AM CHAIR HAWKER asked about the practice of codifying an existing agency practice and the requirement, if any, that the codification be made retroactive. COMMISSIONER DESIGNEE KREITZER opined that it is common to codify regulatory practices and opined that DOA has broad regulatory authority. She stated that it would provide clarity to include these provisions in statute. REPRESENTATIVE GRUENBERG commented that it is riskier if the practice being codified is controversial, but cautioned that careful consideration will help avoid any legal issues. COMMISSIONER DESIGNEE KREITZER emphasized that HB 204 was crafted by the DOL in accordance with independent tax counsel, and she said she does not believe there are any retroactivity provisions in this bill. 7:42:51 AM CHAIR HAWKER said that while he is generally comfortable with the substance of the bill, he would like additional explanation of the reasons for exclusion of elected municipal officials. COMMISSIONER DESIGNEE KREITZER noted there had been extensive discussion of the aforementioned issue, but that she would need to review this issue to provide the committee a more detailed explanation of the reasons for exclusion of municipal officials. MS. LEA said that the section regarding which elected officials are included in the Defined Contribution Retirement (DCR) plan is contained in HB 204, section 110 under the definition of "employee." REPRESENTATIVE CISSNA expressed concern that exclusion of other elected officials could have unintended consequences. COMMISSIONER DESIGNEE KREITZER reiterated she will review her notes on this issue so she can recall the reasons for the policy choice to recommend exclusion of elected municipal officials. CHAIR HAWKER requested that review consider whether it is feasible or appropriate to contemplate an opt-in provision for municipalities. 7:47:39 AM REPRESENTATIVE SEATON noted there is a huge difference between a cost sharing plan and one where an employer has responsibility for only its own employees. He referenced that difficulties occur when persons are paid less than the average employee base, because that employee's liability can be substantial despite not contributing much to the wage base. The result can be that an elected public employee can accumulate a huge liability that must be paid by contributions from other employees. He said that in his district, many municipalities have opted out of including their elected officials in retirement plans due to the high cost. He explained that Senate bill 141 [from the 24th legislative session] disallowed new employees from participation in the defined benefit plans, but employees that had previously been elected to a city or state government position prior to Senate bill 141 would come under the provisions of the existing defined benefit plans. He expressed concern that a cost share system would allow municipalities to include their elected officials in the retirement plans, and that other employers would be responsible for payment of costs. 7:51:55 AM REPRESENTATIVE WILSON asked about the prospective nature of HB 204 and whether it applies to persons who have already served as an elected official. MS. LEA said that the bill's provisions would apply from the effective date of the bill forward. 7:52:48 AM REPRESENTATIVE FAIRCLOUGH stated she would like further information regarding the possible liability that would result from inclusion of municipal elected officials. MS. LEA stated that currently municipalities can choose whether to have their elected officials participate in defined benefit plans. However, there are concerns in the cost share bill [HB 206] about allowing municipalities to include elected officials in the defined benefits plans. She reminded the committee that elected municipal officials are currently not allowed to participate in the defined contribution retirement plan. REPRESENTATIVE FAIRCLOUGH predicted there may be financial reasons as to why municipal officials are excluded from participation in the DCR plan and that it would help her consideration of this issue to see the fiscal implications of this policy decision. [HB 204 was held in committee.] 7:59:37 AM
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