Legislature(2007 - 2008)BELTZ 211
03/13/2008 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB284 | |
| SB153 | |
| HB296 | |
| HB286 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 153 | TELECONFERENCED | |
| + | HB 296 | TELECONFERENCED | |
| + | HB 286 | TELECONFERENCED | |
| + | HB 88 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 284 | ||
SB 153-PEACE OFFICERS/FIRE FIGHTER RETIREMENT
CHAIR MCGUIRE announced the consideration of SB 153.
9:40:18 AM
SENATOR FRENCH said SB 153 gives peace officers and firefighters
the opportunity - not the obligation -- to buy five years of
medical benefits when they buy five years of retirement
benefits. Former members of the armed forces who work as peace
officers or firefighters in Alaska and are eligible for
retirement can buy five more years of retirement. The problem is
that the people buying that retirement believe that they are
buying medical benefits as well. Current law allows them to
count five years of military service toward their public
employee retirement system (PERS) if the employee isn't eligible
for a federal retirement benefit. The legislation corrects what
many with former military service assume when purchasing
military time, and that is that the time purchased will be
credited to their medical benefits as well as to their
retirement. The bill simply allows for the same purchase of
years to count toward retirement and medical benefits. It
doesn't allow double-dipping because the potential state retiree
must not be eligible for federal military benefits. SB 153
recognizes the military and civilian service of these employees.
SENATOR STEVENS asked about the qualifying issue.
SENATOR FRENCH said for Tier I it is one set of rules. For the
next two tiers, a person has to be 60 years old or work for 25
years. He supplied a chart to clear any confusion.
9:43:50 AM
SENATOR GREEN said she has just been through the most difficult
bill to try and restore the PERS and TRS system to make it a
funded program. Does the buy-in fully pay for "what would have
been in and any interest that [it] would have created for those
five past years?"
PAT SHIER, Director, Division of Retirement and Benefits,
Department of Administration, said there has been a discussion
about a mechanism to have individuals pay for the health care,
but the current bill adds about $5.3 million to the unfunded
liability. That is why the administration is not excited about
it. There are issues that may deserve consideration, but the
administration won't support a measure that adds that liability.
9:45:38 AM
SENATOR GREEN said she cannot possibly support creating more
debt for those programs.
SENATOR BUNDE asked about the fiscal note of $350,000.
MR. SHIER said it represents the first five years. There are 203
individuals who have already elected to use their military time
in order to qualify for increased retirement benefits, and they
are either paying for those or they are saving money right now
in other places like SBS in order to pay for that when they step
out the door. He assumes that those 203 people would also go for
this additional enhancement. The fiscal note is the current
year's cost of the $5.3 million. The unfunded liability is
amortized over 25 years. The fiscal note represents a small
portion of the service costs, and most of it is in the beginning
to amortize the significant addition to the liability. It
flattens out at 2013, "we're assuming that that percentage of
individuals, which is around 8 percent, would grow to as much as
15 percent of the police/fire population. We don't know who
those people are. They're not required to tell us who they are
when they walk in the door and take a job." There are other
things associated with declaring military time under the current
law, but some do it right away and others wait until they are
walking out the door.
9:48:13 AM
SENATOR BUNDE assumed that new hires would not be affected.
MR. SHIER said yes, except for rehires who are in the system.
SENATOR FRENCH asked the cost for buying that retirement.
KATHLEEN LEA, Retirement Manager, Division of Retirement and
Benefits, said the calculation for military service is about 8.5
percent of the vesting-year salary for each year that is
claimed. A military claim right at five years would be about
$25,000. It will gain interest as long as it is unpaid. Interest
begins the year after they vest. The amount would grow even if
they claimed it later. At retirement they have the choice of
making the payment in full or taking it as a lifetime reduction
to their retirement benefit.
9:50:32 AM
MS. LEA said when people retire and claim military service, they
can still see an increase to their retirement benefit without
making a payment at all. They can take a lifetime reduction.
SENATOR FRENCH said the payment is mortgaged.
MS. LEA said yes.
SENATOR FRENCH asked about the medical costs.
MS. LEA said the way SB 153 is structured there is no additional
cost to the members.
SENATOR BUNDE said there would be an additional cost to the
state, and that is the fiscal note.
MR. SHIER said this fiscal note is for adding the medical
benefit that doesn't exist in statute. "We have the old law,
which still allows an individual with military time to present
that retirement and without writing a check at all, simple say
'oh I would get $400 if I wrote the check, but I can get [$200]
if I do nothing. Pay me the [$200] - I'm happy'." That is
stacked on top of their underlying pension benefit. Whatever the
medical benefit they have remains constant. There is a subtlety.
There are two things the state calculates at retirement. One is
the years of service for eligibility to vest. The other is years
of service in dollars for the pension amount.
9:53:13 AM
MR. SHIER said, "So in this case what we're talking about is
years of service for eligibility to even have access to the
medical, not what amount it might be."
SENATOR GREEN asked if they automatically receive this benefit
at age 65.
MS. LEA said they would receive system-paid medical premiums at
age 60 unless there was 25 years of membership service in the
police or fire work.
9:53:55 AM
SENATOR GREEN said, so, the bar is very much lower than the
average person in the world. "You could essentially do this at
age 50" with five years of military and 20 years of state
service, and then pay these fees and qualify for full benefits
for the rest of your life. "It's not quite like you get to the
qualifying year and don't get health insurance ever."
SENATOR FRENCH said at age 65 they go on Medicare. Nobody stays
on state insurance past that age.
MR. SHIER said Medicare becomes primary [at that age], but the
state still has significant obligations to pay what Medicare
doesn't pay. The state pays $384 million a year in retiree
medical benefits.
SENATOR FRENCH asked if that was for people over 65.
MR. SHIER said it was for all retirees.
9:55:22 AM
SENATOR FRENCH asked about the retirees on Medicare.
MR. SHIER said "We are always aware of how many people are out
there right now or who could present themselves for retirement
prior to age 65 or Medicare age." There is a benefit to retire
before age 65.
SENATOR FRENCH noted that the $384 million figure is not for
people over 65.
MR. SHIER said the figure is for all retirees.
SENATOR FRENCH asked if it becomes more or less expensive when a
person goes on Medicare.
MR. SHIER said it becomes less expensive. He will find out.
CHAIR MCGUIRE said the bill will be held over until this
information is provided.
SENATOR GREEN said the calculation for the person that will buy
in should go back to their date of coming into the program.
Normally anyone who is going to qualify for a future program
would be paying their share and watching it grow over those 20
years. What would be the difference for the person who buys in
on their way out and the one who is in from the beginning? She
is concerned about the cost to the state.
9:58:05 AM
MR. SHIER said actuaries have estimated that the average cost
per member per year of claimed military service to add this
additional year of medical coverage, for which they would not
otherwise be eligible, is $6,292 per year. That will be looked
at every year as medical costs change. If someone wants to buy
several years of military service, this is the amount that the
state would attempt to collect. The language in SB 153 doesn't
provide a mechanism for collecting that money from the
individual for medical care. It does for retirement service.
9:58:57 AM
SENATOR GREEN asked what the calculation would be if they had
bought in early, "and you had the expectation for their 20 years
of service what they were accruing, just like any other
employee." It is hard to say a person doesn't have to
participate fully for 20 years of service, only for the five.
"But if you had to calculate what the value of that would be
early on -- that's all I want."
MR. SHIER said he needs clarification and can get those numbers.
MAURICE HUGHES, Law Enforcement Officer, Kodiak, said he is also
a veteran and a Tier II employee. SB 153 is good for law
enforcement and firefighters who have served their country. It
allows them to have medical benefits when buying their military
service. Public safety workers are under tremendous stress on a
daily basis, and the medical component is very important for
retirement. It is an appropriate thing for our veterans. He said
to look at the on-going problem of retention and recruitment in
these jobs. SB 153 could keep past military employees in the
job. It can be used for recruiting previously hired personnel,
and it shows support for Alaska's veterans.
10:02:31 AM
PAUL FUSSEY, Alaska State Trooper, Kodiak, said he is a Tier III
employee, and SB 153 will benefit him. He has had nine years in
the air national guard. He has purchased five years under the
assumption that it would count for his medical too. The average
lifespan of police officers is 66, based on a 40-year study by
John Volanti. This bill will help the police and fire personnel.
10:03:55 AM
CHAIR MCGUIRE set SB 153 aside.
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