Legislature(2015 - 2016)BELTZ 105 (TSBldg)

05/26/2016 08:30 AM STATE AFFAIRS

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08:30:35 AM Start
08:31:30 AM SB4002
10:02:34 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB4002 INS. FOR DEPENDS. OF DECEASED FIRE/POLICE TELECONFERENCED
Heard & Held
Presentation by Administration: Commissioner
Sheldon Fisher, Department of Administration
Department of Law, Presenter TBA
Buck Consultants, Presenter TBA
    SB4002-INSURANCE FOR DEPENDENTS OF DECEASED FIRE/POLICE                                                                 
                                                                                                                                
8:31:30 AM                                                                                                                    
CHAIR  STOLTZE  announced  the   consideration  of  SB  4002.  He                                                               
detailed that  the bill was  brought before the committee  by the                                                               
administration.                                                                                                                 
                                                                                                                                
He asked  Commissioner Fisher to  explain how SB 4002  became one                                                               
of the 11 bills that were on the special session's agenda.                                                                      
                                                                                                                                
8:32:03 AM                                                                                                                    
SHELDON    FISHER,    Commissioner,    Alaska    Department    of                                                               
Administration,  Juneau, Alaska,  explained  that  SB 4002  would                                                               
provide peace officers  and fire fighters that are  killed in the                                                               
line of duty with coverage  for their families and dependents. He                                                               
pointed out  that there were  gaps that the committee  would have                                                               
to address as  well as retirement-plan terms that  do not provide                                                               
coverage. He said  a number of high-profile  peace officer deaths                                                               
over the past few years brought  attention to gaps in the state's                                                               
current system. He  revealed that an initial version  of the bill                                                               
was introduced  by Governor Parnell,  but the bill's  fiscal note                                                               
was quite  high because all  Alaska Public  Employees' Retirement                                                               
(PERS)  and  Teachers'  Retirement System  (TRS)  employees  were                                                               
covered. He detailed that the  bill's final version was submitted                                                               
as  an amendment  to  SB  91, but  the  amendment was  ultimately                                                               
pulled.  He revealed  that  the governor's  office  heard from  a                                                               
number of legislators that supported  the bill being addressed in                                                               
the special session.                                                                                                            
                                                                                                                                
8:36:26 AM                                                                                                                    
CHAIR STOLTZE  asked if  the sponsor that  asked the  governor to                                                               
put it on the special session agenda was from the House.                                                                        
                                                                                                                                
COMMISSIONER FISHER  replied that  a number of  legislators asked                                                               
the governor to put the bill on the special session's agenda.                                                                   
                                                                                                                                
CHAIR STOLTZE  asserted that the  committee was trying to  get to                                                               
the bill's  broader policy  ramifications. He  asked Commissioner                                                               
Fisher  to  provide  guidance  on  the  cautions  and  unintended                                                               
consequences that  were discussed with the  entire administration                                                               
when the legislation was developed  to provide certainty of long-                                                               
term benefits.                                                                                                                  
                                                                                                                                
COMMISSIONER FISHER specified that  the benefit has been provided                                                               
by funding  out of the  Department of Public Safety's  budget. He                                                               
said  there was  no assurance  the  benefit could  continue on  a                                                               
long-term basis  and there  was a  desire to  put the  benefit in                                                               
statute.                                                                                                                        
                                                                                                                                
He disclosed  that questions have  been asked whether  the bill's                                                               
scope should be expanded or  reduced. He noted that expanding the                                                               
bill  could be  problematic, particularly  because the  bill does                                                               
not  cover  Village  Public  Safety  Officers  (VPSO)  and  other                                                               
contracted officers.  He added that the  Internal Revenue Service                                                               
(IRS)  prohibits non-PERS  participants  from receiving  benefits                                                               
from the  PERS trust  fund. He revealed  that expanding  the PERS                                                               
fund could  endanger the entire  fund where the state  would risk                                                               
losing  its tax-free  status.  He added  that  the Department  of                                                               
Administration has looked  at whether the bill  covered all peace                                                               
officers  and   firefighters  as  well  as   state  or  municipal                                                               
employees.                                                                                                                      
                                                                                                                                
He  disclosed  that one  of  the  Department of  Administration's                                                               
inputs addressed other jurisdictions that created special carve-                                                                
outs and narrowly  defining benefit groups. He  revealed that the                                                               
California  Public  Employees'  Retirement System  (CalPERS)  has                                                               
almost become  unmanageable because of the  breadth of carve-outs                                                               
that exist  in each jurisdiction  within the state. He  said even                                                               
though SB  4002 may not be  perfect, the bill was  a balance that                                                               
appropriately focused  on peace officers and  firefighters with a                                                               
cost that was reasonable.                                                                                                       
                                                                                                                                
8:39:55 AM                                                                                                                    
SENATOR MCGUIRE joined the committee meeting.                                                                                   
                                                                                                                                
CHAIR STOLTZE added  that the committee was going to  ask for the                                                               
Department of Law's  input as well. He  asked Commissioner Fisher                                                               
to address  his cautions  and sideboards  regarding the  bill. He                                                               
noted  that Commissioner  Fisher had  talked about  expansion and                                                               
constriction. He  asked what  would happen  if a  public employee                                                               
union asked that  grader operators responding to  floods or first                                                               
responders to emergencies be covered by the benefit as well.                                                                    
                                                                                                                                
8:42:13 AM                                                                                                                    
COMMISSIONER  FISHER  replied   that  determining  precisely  who                                                               
should   be  covered   was  difficult.   He  agreed   that  other                                                               
occupations have  dangers associated  with them  as well.  He set                                                               
forth that  there was  a history of  treating peace  officers and                                                               
firefighters  differently. He  pointed out  that the  majority of                                                               
states offer  similar benefit versions  to SB 4002.  He disclosed                                                               
that the feeling  was the bill was the appropriate  right step in                                                               
light of  both the history  and limitations that  were available.                                                               
He opined  that society sees  a difference  between a job  like a                                                               
police  officer  and  firefighter where  confronting  danger  was                                                               
inherent in the  job as opposed to other  occupations where there                                                               
was a  risk of  accident. He summarized  that he  thought society                                                               
generally recognizes a different  responsibility for the families                                                               
that are left behind.                                                                                                           
                                                                                                                                
CHAIR  STOLTZE pointed  out that  correctional  officers were  as                                                               
much a part of the administration of justice as police officers.                                                                
                                                                                                                                
8:45:03 AM                                                                                                                    
COMMISSIONER FISHER  explained that  the statutory  definition of                                                               
"peace officer" did include correctional officers.                                                                              
                                                                                                                                
CHAIR STOLTZE  asked that Commissioner  Fisher provide a  list of                                                               
who was covered.                                                                                                                
                                                                                                                                
COMMISSIONER  FISHER detailed  that the  statutory definition  of                                                               
peace officer and firefighter including the following:                                                                          
                                                                                                                                
   · Police,                                                                                                                    
   · Chief of police,                                                                                                           
   · Regional public safety officer,                                                                                            
   · Correctional officers,                                                                                                     
   · Correctional superintendents,                                                                                              
   · Firefighters,                                                                                                              
   · Fire chief.                                                                                                                
                                                                                                                                
8:46:13 AM                                                                                                                    
SENATOR  MCGUIRE  asked  that   actuarial  evidence  be  provided                                                               
regarding death rates to support the benefit's narrow category.                                                                 
                                                                                                                                
COMMISSIONER FISHER  replied that  he would  get back  to Senator                                                               
McGuire with the actuarial information.                                                                                         
                                                                                                                                
SENATOR HUGGINS  noted that Commissioner Fisher  mentioned that a                                                               
majority of states  had a similar provision to SB  4002. He asked                                                               
Commissioner Fisher  to provide information on  the other states'                                                               
techniques   in   approaching   the  challenge.   He   asked   if                                                               
consideration was  given for  a group program  where a  dollar or                                                               
two  a month  was contributed  towards a  death-benefit pool.  He                                                               
pointed out that the state's  unfunded liability was $7.5 billion                                                               
and the Legislature has to be careful in taking on more debt.                                                                   
                                                                                                                                
He  called  attention  to Buck  Consultants'  letter  that  said,                                                               
"Small  variations and  these  approximations  and estimates  may                                                               
lead  to significant  changes in  actual measurements."  He asked                                                               
what Buck's letter meant and asked  if Buck's statement was a way                                                               
of saying, "We don't know what's going on."                                                                                     
                                                                                                                                
8:49:56 AM                                                                                                                    
COMMISSIONER  FISHER replied  that the  sentence Senator  Huggins                                                               
referred to was standard language  that Buck's analysis was based                                                               
on the  best knowledge  they have today.  He explained  that Buck                                                               
Consultants looks  backwards in order  to forecast what  is going                                                               
to  happen in  the  future,  but analysis  may  be overstated  or                                                               
understated depending  on future changes; for  example, mortality                                                               
rates or medical  costs may be higher. He opined  that no one can                                                               
precisely predict the future.                                                                                                   
                                                                                                                                
SENATOR HUGGINS remarked that the  state's unfunded liability was                                                               
due to organizations  like Buck Consultants getting  it wrong. He                                                               
asked Commissioner Fisher to review Buck Consultants' analysis.                                                                 
                                                                                                                                
COMMISSIONER FISHER  surmised that  the unfunded  liability arose                                                               
from  both  actuarial errors  and  the  dramatic decline  in  the                                                               
market that  reduced the asset's  value. He said  Senator Huggins                                                               
was  correct where  a set  of assumptions  at a  given time  were                                                               
thought to be reasonable that turned  out to be incorrect and the                                                               
state was left with a substantial unfunded liability.                                                                           
                                                                                                                                
8:52:40 AM                                                                                                                    
CHAIR STOLTZE  asked Commissioner  Fisher to clarify  that heath-                                                               
care  costs   were  calculated  in  the   $7.5  billion  unfunded                                                               
liability.                                                                                                                      
                                                                                                                                
COMMISSIONER FISHER answered yes.                                                                                               
                                                                                                                                
SENATOR  WIELECHOWSKI asked  Commissioner  Fisher  if the  fiscal                                                               
note  from Buck  Consultants' report  predicts how  many officers                                                               
and firefighters will die in the line  of duty as well as the age                                                               
of  spouses, the  number of  dependents, and  how long  insurance                                                               
will be collected.                                                                                                              
                                                                                                                                
COMMISSIONER FISHER answered yes.  He said the actuarial analysis                                                               
takes the factors Senator Wielechowski  noted as well as the cost                                                               
of delivering the benefit.                                                                                                      
                                                                                                                                
SENATOR  WIELECHOWSKI remarked  that  variables  could include  a                                                               
dramatic increase in: insurance  costs, additional children being                                                               
born, marriages, or people dying in the line of duty.                                                                           
                                                                                                                                
COMMISSIONER  FISHER answered  yes. He  added that  the variables                                                               
Senator Wielechowski pointed out could decrease as well.                                                                        
                                                                                                                                
8:54:46 AM                                                                                                                    
JOHN   BOUCHER,  Deputy   Commissioner,   Alaska  Department   of                                                               
Administration, Juneau,  Alaska, pointed out that  given the size                                                               
of the pool, a large tragic event would be another variable.                                                                    
                                                                                                                                
CHAIR STOLTZE commented  that the committee was  making sure that                                                               
all of the  bill's ramifications were known prior  to passing any                                                               
retirement change.  He remarked that  the state  was in a  lot of                                                               
trouble  due   to  retirement  issues.   He  opined   that  other                                                               
bargaining  units   might  make  an  effort   to  get  comparable                                                               
benefits. He said  the question remained whether or  not the bill                                                               
could stand when only being applied to a small group.                                                                           
                                                                                                                                
8:56:44 AM                                                                                                                    
COMMISSIONER FISHER reiterated that he  believed that there was a                                                               
public  sense  that police  and  firefighters  are different.  He                                                               
pointed  out that  many states  treated  police and  firefighters                                                               
differently.                                                                                                                    
                                                                                                                                
He stated that there were two  ways an employee group may request                                                               
additional  coverage:  negotiation  where  similar  benefits  are                                                               
demanded or a  legal claim that the benefit group  is too narrow.                                                               
COMMISSIONER  FISHER disclosed  that he  had a  conversation with                                                               
the Department  of Law regarding a  legal claim. He said  he felt                                                               
comfortable that  the legislation would successfully  withstand a                                                               
legal claim.                                                                                                                    
                                                                                                                                
8:58:47 AM                                                                                                                    
CHAIR STOLTZE asked Commissioner Fisher  if he had a higher level                                                               
of  confidence  through  the  bargaining  process  or  the  court                                                               
process.                                                                                                                        
                                                                                                                                
COMMISSIONER  FISHER  answered that  he  felt  confident in  both                                                               
processes.                                                                                                                      
                                                                                                                                
CHAIR  STOLTZE   commented  that  he  questioned   confidence  in                                                               
predicting the court process.                                                                                                   
                                                                                                                                
COMMISSIONER FISHER  replied that he  was relying on  the state's                                                               
experts.                                                                                                                        
                                                                                                                                
SENATOR COGHILL stated  that he would be interested  to hear from                                                               
the Department of Law regarding  a possible legal claim. He asked                                                               
if the cost of a legal claim would be borne by the trust fund.                                                                  
                                                                                                                                
COMMISSIONER FISHER answered that the  cost would be borne by the                                                               
employers, but  pointed out that  the previously noted  cap would                                                               
require additional state assistance.                                                                                            
                                                                                                                                
SENATOR COGHILL  commented that the  thought a  PERS-system trust                                                               
paying out  a narrow benefit  would result in a  higher potential                                                               
for  litigation. He  asked Commissioner  Fisher  to confirm  that                                                               
payment would come out of the general fund.                                                                                     
                                                                                                                                
9:01:05 AM                                                                                                                    
COMMISSIONER   FISHER   explained    that   the   Department   of                                                               
Administration works each  year with the actuaries  in the Alaska                                                               
Retirement  Management  (ARM) Board  to  define  a cost  for  the                                                               
benefits  that are  delivered and  those costs  are allocated  to                                                               
each employer. He pointed out  that because employers are already                                                               
capped  in their  contribution rate,  increase  in essence  would                                                               
fall to  the state. He  added that the  rate noted in  the fiscal                                                               
note was the actuarial estimate  of the additional cost necessary                                                               
to fund the trust fund to pay for the benefits.                                                                                 
                                                                                                                                
CHAIR STOLTZE  remarked that  asking if  the payments  would come                                                               
out of  the general fund was  too limiting. He asserted  that the                                                               
current  discussion  addressed  the  broader-pension  obligations                                                               
which involve the general fund,  permanent fund earnings reserve,                                                               
constitutional  budget  reserve,  and  the dividend  which  is  a                                                               
derivative of the permanent fund earnings reserve.                                                                              
                                                                                                                                
SENATOR COGHILL  specified that he was  addressing the litigation                                                               
part if the  trust fund was going to bear  the responsibility. He                                                               
opined that  all of the other  people who contribute to  the fund                                                               
would feel that the proposed legislation was too narrow.                                                                        
                                                                                                                                
9:03:37 AM                                                                                                                    
MR. BOUCHER remarked  that the state may be  subjecting itself to                                                               
additional litigation,  however; there was a  long history within                                                               
the PERS  trust funds of  peace officers and  firefighters having                                                               
slightly different benefits than all other employees.                                                                           
                                                                                                                                
SENATOR COGHILL stated that he  appreciated Mr. Boucher's remarks                                                               
for getting at  the heart of his question  regarding specific law                                                               
previously made for retirement benefits.  He said his concern was                                                               
that the legislation does not become "flypaper for litigation."                                                                 
                                                                                                                                
CHAIR STOLTZE said the larger  issue pertained to the Legislature                                                               
going  through a  lot  of pain  trying  to get  a  handle on  the                                                               
retirement  system.  He  stated  that  in  spite  of  everybody's                                                               
empathy  for  trying  to  take  care  of  the  problem  that  the                                                               
legislation addresses,  there was a caution  anytime a retirement                                                               
issue  was  opened up.  He  specified  that  the issue  was  much                                                               
broader than the two people or the two families.                                                                                
                                                                                                                                
9:05:39 AM                                                                                                                    
SENATOR  COGHILL asked  Commissioner  Fisher to  confirm that  SB
4002 would be retroactive to  2013. He inquired how many families                                                               
would be picked up by the bill.                                                                                                 
                                                                                                                                
COMMISSIONER FISHER stated that  three families would be captured                                                               
from 2013 to present.                                                                                                           
                                                                                                                                
SENATOR  COGHILL asked  Commissioner Fisher  to confirm  that the                                                               
bill would say being retired was  not a requirement and the death                                                               
benefit would  go to  health care upon  the unfortunate  death of                                                               
the police officer or the firefighter.                                                                                          
                                                                                                                                
COMMISSIONER FISHER  explained that  the benefit would  depend on                                                               
the person's  Defined Contribution  Plan (DCR) tier.  He detailed                                                               
that upon  the death of  the peace officer or  firefighter killed                                                               
in the line  of duty, all surviving spouses  and dependents would                                                               
be eligible  for premium-free  health benefits;  however, spouses                                                               
and dependents for  a DCR Plan Tier IV would  receive 100 percent                                                               
premium  subsidy until  an individual  becomes Medicare  eligible                                                               
and would  then pay the  portion of the  premium as if  there had                                                               
been no death event.                                                                                                            
                                                                                                                                
9:08:54 AM                                                                                                                    
SENATOR  COGHILL asked  Commissioner Fisher  to clarify  benefits                                                               
for the Tier-IV recipients.                                                                                                     
                                                                                                                                
COMMISSIONER  FISHER  reiterated  that   once  a  person  becomes                                                               
Medicare  eligible, the  person would  pay their  portion of  the                                                               
cost as if there had been no death.                                                                                             
                                                                                                                                
SENATOR COGHILL  asked if the state  would pay the premium  for a                                                               
Tier IV recipient until Medicare eligibility.                                                                                   
                                                                                                                                
COMMISSIONER FISHER answered yes.                                                                                               
                                                                                                                                
SENATOR COGHILL  asked if  the state would  cover 100  percent of                                                               
the benefit.                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER  answered yes.  He added  that under  the DCR                                                               
Plan, members are  required to retire directly from  the plan and                                                               
SB  4002 removes  that requirement.  He said  SB 4002  would also                                                               
extend  the benefit  to  dependents  in the  event  there was  no                                                               
surviving spouse.                                                                                                               
                                                                                                                                
SENATOR  COGHILL  asked Commissioner  Fisher  what  he meant  by,                                                               
"Members are required to retire directly from the plan."                                                                        
                                                                                                                                
COMMISSIONER FISHER explained  that an example would  be a person                                                               
with five years  of service and Tier IV status  was killed in the                                                               
line of  duty. He  pointed out  that there  is no  opportunity to                                                               
retire  directly from  the  plan because  statutorily  a Tier  IV                                                               
person must  have 25 years of  service and have worked  the prior                                                               
12  months. He  pointed out  that in  the case  of an  individual                                                               
dying prior to reaching the  statutorial parameters, retiring was                                                               
technically  impossible.  He  specified   that  SB  4002  made  a                                                               
technical change that allows the benefit to be provided.                                                                        
                                                                                                                                
9:11:43 AM                                                                                                                    
CHAIR  STOLTZE  pointed  out that  Commissioner  Fisher  remarked                                                               
about Alaska coming into conformance  with other states. He asked                                                               
that Commissioner Fisher provide further details.                                                                               
                                                                                                                                
COMMISSIONER FISHER  clarified that he  did not mean to  say that                                                               
every  state does  exactly what  SB 4002  proposes. He  specified                                                               
that other  states provide some  form of benefit that  varies. He                                                               
reiterated that there was a  broad recognition in the public that                                                               
peace  officers  and firefighters  merit  a  heightened level  of                                                               
benefit  in the  event of  occupational death.  He said  he would                                                               
provide the  committee with details  regarding what  other states                                                               
have done.                                                                                                                      
                                                                                                                                
CHAIR STOLTZE  specified that his  question was meant  to clarify                                                               
for the public.                                                                                                                 
                                                                                                                                
SENATOR  COGHILL asked  what would  occur if  a surviving  spouse                                                               
remarried.                                                                                                                      
                                                                                                                                
MR.  BOUCHER answered  that the  status of  the benefit  does not                                                               
change until the surviving spouse becomes Medicare-age eligible.                                                                
                                                                                                                                
9:14:45 AM                                                                                                                    
SENATOR MCGUIRE  stated that she generally  supported the concept                                                               
for  SB 4002  and felt  that peace  officers were  different when                                                               
asked to do the  things we do not want to do.  She said she would                                                               
like  the  Legislature to  explore  the  notion of  zero  percent                                                               
contribution and noted three different suggestions:                                                                             
                                                                                                                                
   · Beneficiary pays a percentage by adding "skin in the game,"                                                                
   · Graduated benefit over a specific time period,                                                                             
   · Ability to pay.                                                                                                            
                                                                                                                                
She summarized  that she gets  the principal and  understands the                                                               
idea  of recognizing  the service  of  individuals. She  asserted                                                               
that the questions  were not meant to be  disrespectful. She said                                                               
considering where Alaskans can partner  was important because the                                                               
state was not in  the position to give all and  do all anymore or                                                               
in the foreseeable future.                                                                                                      
                                                                                                                                
9:19:16 AM                                                                                                                    
SENATOR  HUGGINS asked  what the  responsibility would  be for  a                                                               
municipality  if one  of its  police officers  was killed  in the                                                               
line of duty.                                                                                                                   
                                                                                                                                
COMMISSIONER   FISHER   replied   that  the   bill   as   defined                                                               
contemplates  that there  would be  an increase  in the  employer                                                               
contributions. He  said theoretically the employer  would pick up                                                               
the cost,  but the employer  contribution is capped so  the state                                                               
would pay for the additional contribution.                                                                                      
                                                                                                                                
MR. BOUCHER  suggested that the  peace officers  and firefighters                                                               
be thought of as a group in a  kind of "benefit pool" for all the                                                               
employers that are involved so  a specific municipality would not                                                               
bear the  sole burden, the  benefit contribution would  be shared                                                               
across all of the participating employers.                                                                                      
                                                                                                                                
9:21:30 AM                                                                                                                    
SENATOR HUGGINS  said he would  be interested to see  what Alaska                                                               
does versus other  states. He asserted that the  bill addresses a                                                               
tragic  situation,   but  noted  his  disappointment   that  more                                                               
spending was requested  when the state has a  $4 billion deficit.                                                               
He  noted   that  the  governor   expanded  Medicaid   and  asked                                                               
Commissioner Fisher if  the governor had the authority  to do the                                                               
same for the proposed benefit.                                                                                                  
                                                                                                                                
9:25:34 AM                                                                                                                    
COMMISSIONER FISHER responded that he did not know.                                                                             
                                                                                                                                
SENATOR  HUGGINS  stated that  his  question  deserves an  answer                                                               
regarding whether the governor has the authority.                                                                               
                                                                                                                                
SENATOR   WIELECHOWSKI  asserted   that   he   had  a   different                                                               
perspective than some  others in the committee.  He admitted that                                                               
the fiscal note  was not insignificant at $174,000  for FY17 with                                                               
an  increase a  few  years  later to  over  a  couple of  hundred                                                               
thousand  dollars; however,  when reviewing  the capital  budget,                                                               
the  Legislature was  spending money  on new  legislative offices                                                               
and $1.5 million on new security  for the capitol. He stated that                                                               
the  priority order  of things  in his  mind was  that there  was                                                               
nothing more  important than providing  health care  for deceased                                                               
spouses and  dependent kids of firefighters  and police officers.                                                               
He  affirmed that  firefighters and  police officers  were giving                                                               
enough "skin  in the game" by  giving their lives to  protect the                                                               
state. He stated that he supported SB 4002.                                                                                     
                                                                                                                                
CHAIR   STOLTZE   replied  that   he   did   not  think   Senator                                                               
Wielechowski's  stated   philosophy  was  different   from  other                                                               
committee members. He asserted that  the committee was looking at                                                               
the unforeseen ramification.                                                                                                    
                                                                                                                                
SENATOR  HUGGINS  stated  that  he hoped  that  he  prefaced  his                                                               
comments  about the  committee's  concern about  the victims.  He                                                               
pointed out  that he  was one  of the guys  that went  around the                                                               
world and put his life on the line.                                                                                             
                                                                                                                                
9:27:53 AM                                                                                                                    
SENATOR   MCGUIRE   said   she   did   not   appreciate   Senator                                                               
Wielechowski's remark.  She expressed that  it would be  easy for                                                               
the  committee  to say,  "Just  fund  it."  She voiced  that  all                                                               
committee members  felt tremendous  empathy for the  survivors of                                                               
those who  have been killed  in any circumstances,  but certainly                                                               
in  the line  of duty.  She set  forth that  the state  was in  a                                                               
situation  where everything  was reevaluated  as how  to mitigate                                                               
costs  and  move  forward  in   the  future.  She  remarked  that                                                               
reevaluating was  not inappropriate  and reevaluating a  new cost                                                               
would  be a  violation  of  the committee  members'  oath to  the                                                               
constitution. She  specified that  reevaluating was the  point of                                                               
"skin in  the game" and  her remark was  not meant to  imply that                                                               
the  ultimate  sacrifice  was  not given.  She  admitted  that  a                                                               
circumstance  like insurance  for  dependents  when presented  to                                                               
committee members has tremendous  emotion behind it. She asserted                                                               
that being in the majority  and leading was always more difficult                                                               
than just making remarks in the minority.                                                                                       
                                                                                                                                
9:30:03 AM                                                                                                                    
MR. BOUCHER announced that Larry  Langer and Melissa Bissett from                                                               
Buck Consultants were  online to address the  committee. He asked                                                               
Mr. Langer and Ms. Bissett  to address the Buck Consulting letter                                                               
submitted to  the committee as  well as  speaking to some  of the                                                               
comments the committee posed relating to risks of assumption.                                                                   
                                                                                                                                
9:32:40 AM                                                                                                                    
LARRY  LANGER, Principal  Consulting  Actuary, Buck  Consultants,                                                               
Chicago,  Illinois, announced  that he  was available  to address                                                               
the risk element associated with SB 4002.                                                                                       
                                                                                                                                
9:33:23 AM                                                                                                                    
MELISSA  BISSETT, Senior  Consultant, Health  Care Actuary,  Buck                                                               
Consultants, Denver,  Colorado, announced that she  would provide                                                               
an overview  of the letter  she wrote, the work  Buck Consultants                                                               
did and the items considered in preparing the fiscal note.                                                                      
                                                                                                                                
She stated  that Buck Consultants' understanding  has always been                                                               
to investigate  the impact of potentially  providing free medical                                                               
care to survivors of peace  officer and firefighter employees who                                                               
die  in the  line of  duty. She  detailed that  Bucks Consultants                                                               
identified the  people and changed  the evaluation to  reflect no                                                               
contribution requirements that were dependent on eligibility.                                                                   
                                                                                                                                
She specified  that the bigger  impact was  on the Tier  IV group                                                               
that had  to pay  100 percent  of the  premium for  a potentially                                                               
longer  period. She  added that  medical-care benefits  were also                                                               
extended to Tier II and Tier  III participants that may have been                                                               
required to pay premiums prior to  age 60. She detailed that Buck                                                               
Consultants changed  all of the  evaluation parameters  to remove                                                               
the premium  subsidy as well  as when Medicare  eligibility kicks                                                               
in for  a Tier IV  spouse. She  added that retroactivity  back to                                                               
January 2013  was also taken  into consideration.  She summarized                                                               
that results between the original-draft  valuation and the impact                                                               
from removing the premium requirements was also addressed.                                                                      
                                                                                                                                
MS.   BISSETT  addressed   the   committee's  previous   question                                                               
regarding what  would happen if  a survivor remarries  or becomes                                                               
employed with primary  coverage, the plan would  pay secondary in                                                               
those cases.  She detailed  that the  secondary-coverage scenario                                                               
was a minor adjustment to what  was initially projected as far as                                                               
increasing costs.                                                                                                               
                                                                                                                                
She  summarized  that  the  results  would  impact  the  unfunded                                                               
liability  by $557,000  and be  split  between PERS  and the  DCR                                                               
Plan.                                                                                                                           
                                                                                                                                
9:36:51 AM                                                                                                                    
MR. BOUCHER  asked Ms.  Bissett to  readdress the  scenario where                                                               
the plan becomes secondary.                                                                                                     
                                                                                                                                
MS.  BISSETT   reiterated  that  the  state   plan  would  become                                                               
secondary  only where  a surviving  spouse  remarries or  becomes                                                               
employed and  has another source  of primary coverage that  he or                                                               
she elects.                                                                                                                     
                                                                                                                                
MR. BOUCHER  expressed that Ms.  Bissett's statement  was counter                                                               
to what  he had  said earlier.  He asked  Ms. Bissett  to confirm                                                               
that the cost of the plan  would potentially increase if the plan                                                               
was primary in the instance that she described.                                                                                 
                                                                                                                                
MS. BISSETT answered correct.                                                                                                   
                                                                                                                                
COMMISSIONER  FISHER  clarified   that  Mr.  Boucher's  statement                                                               
regarding the plan's impact of  a surviving spouse remarrying was                                                               
not counter  to Ms.  Bissett's statement.  He specified  that the                                                               
plan  does  not change  the  legal  right  for an  individual  to                                                               
receive  the  benefit after  remarrying.  He  explained that  the                                                               
analysis  assumed a  percentage of  people either  take a  job or                                                               
change  their marital  status which  provides  access to  another                                                               
plan. He  said Buck  Consultants' assumption  was that  the state                                                               
plan  would  be  secondary  to the  other  plan  that  ultimately                                                               
reduces the forecasted cost.                                                                                                    
                                                                                                                                
MS.  BISSETT concurred  with Commissioner  Fisher and  noted that                                                               
the results were reflected in  Buck's report. She reiterated that                                                               
the impact on the unfunded  liability was an additional $557,000.                                                               
She summarized the assumptions considered as follows:                                                                           
                                                                                                                                
   · Health care cost trends,                                                                                                   
   · Chance of someone being killed in the line of duty,                                                                        
   · Effects of aging where people cost more, especially in the                                                                 
     few years prior to Medicare eligibility.                                                                                   
                                                                                                                                
9:39:55 AM                                                                                                                    
SENATOR COGHILL  remarked that because  the state was  small, the                                                               
retroactivity  in picking  up  two versus  three  families was  a                                                               
significant  actuarial change  on looking  forward. He  asked how                                                               
far Buck Consultants looked back.                                                                                               
                                                                                                                                
MS. BISSETT answered that the fiscal note went back two years.                                                                  
                                                                                                                                
COMMISSIONER FISHER asked  how far Buck Consultants  went back to                                                               
establish historical trend  analysis regarding medical, mortality                                                               
and  other   trends  for  forecasting.   He  assumed   that  Buck                                                               
Consultants went back further than  two years to calculate trends                                                               
to forecast into the future.                                                                                                    
                                                                                                                                
9:41:44 AM                                                                                                                    
MS. BISSETT answered correct. She  detailed that Buck looked back                                                               
at least four years to set health-care cost trends.                                                                             
                                                                                                                                
COMMISSIONER  FISHER  asked  Ms.  Bissett  to  address  mortality                                                               
trends.                                                                                                                         
                                                                                                                                
MS.  BISSETT  replied that  mortality  trends  were based  on  an                                                               
experience  study that  was completed  and adopted  in 2014.  She                                                               
noted that mortality rates were improving.                                                                                      
                                                                                                                                
SENATOR COGHILL  expressed that having police  officers deal with                                                               
circumstances due to  what the state was  facing was unfortunate.                                                               
He pointed  out that state  has paid death benefits  to survivors                                                               
outside  of health-care  benefits for  many years.  He asked  Ms.                                                               
Bissett if Buck  Consultants looked back and  established a trend                                                               
line based on the benefits that have been paid to survivors.                                                                    
                                                                                                                                
9:44:25 AM                                                                                                                    
MS.  BISSETT  asked  Senator  Coghill  to  clarify  that  he  was                                                               
wondering about the basis for the mortality assumption.                                                                         
                                                                                                                                
COMMISSIONER   FISHER   explained   that  Senator   Coghill   was                                                               
specifically  addressing the  historical "killed  in the  line of                                                               
duty"  category rather  than overall  mortality to  calculate the                                                               
assumption.                                                                                                                     
                                                                                                                                
SENATOR COGHILL stated that  Commissioner Fisher's assumption was                                                               
correct.                                                                                                                        
                                                                                                                                
MS. BISSETT  reiterated that Buck  Consultants did  an experience                                                               
study on  group-specific mortality in  2014. She noted  that Buck                                                               
Consultants  looked at  Alaska-specific  experiences dating  back                                                               
five  years or  more  in addition  to  industry information.  She                                                               
specified  that  there  was  a  difference  between  occupational                                                               
deaths and mortality rates.                                                                                                     
                                                                                                                                
CHAIR   STOLTZE  recalled   that  the   Legislature  passed   the                                                               
presumptive-cost bill that was limited  to firefighters and first                                                               
responders. He  asked if the  stand-alone provision  would impact                                                               
SB 4002.                                                                                                                        
                                                                                                                                
9:46:57 AM                                                                                                                    
MR. BOUCHER answered that he did not see a connection.                                                                          
                                                                                                                                
CHAIR STOLTZE  asserted that  the committee's  intent was  not to                                                               
inadvertently diminish  or make  unintended changes just  for the                                                               
purposes  of  being  careful.  He  stated  that  the  committee's                                                               
overall   concern  has   not   been  the   cost   of  the   three                                                               
beneficiaries, but  for the long  term ramifications. He  said he                                                               
understood  the real-people  connection  and empathy  as well  as                                                               
anybody, but the committee wants to vet SB 4002.                                                                                
                                                                                                                                
SENATOR  HUGGINS  noted  "Obamacare"  and  asked  if  subsidizing                                                               
beneficiaries would be feasible for health care insurance.                                                                      
                                                                                                                                
9:49:47 AM                                                                                                                    
COMMISSIONER FISHER  replied that  theoretically the  state could                                                               
contemplate  going onto  the "exchange"  to by  coverage for  the                                                               
families, but the  insurance cost was so high in  Alaska that the                                                               
cost to the state would  be substantially more. He specified that                                                               
the cost  of insuring  the "pool" in  which the  people currently                                                               
reside  in was  substantially  less  than the  cost  of buying  a                                                               
comparable insurance policy on the "exchange."                                                                                  
                                                                                                                                
SENATOR  HUGGINS  asked  Commissioner  Fisher to  verify  if  the                                                               
Obamacare approach would be more costly.                                                                                        
                                                                                                                                
COMMISSIONER FISHER replied that he believed so.                                                                                
                                                                                                                                
9:50:51 AM                                                                                                                    
SENATOR MCGUIRE disclosed that during  the wake of Obamacare, she                                                               
had an  idea as  part of  a permanent-fund  restructure to  add a                                                               
provision  that allowed  Alaskans to  "check off"  part of  their                                                               
dividend to become  part of a state pool for  either health care,                                                               
retirement or long-term care.  She encouraged Commissioner Fisher                                                               
to have Buck Consultants analyze  where a state pool's volumetric                                                               
numbers could leverage lower rates for Alaskans.                                                                                
                                                                                                                                
SENATOR MCGUIRE revealed  that the reason why she  brought up the                                                               
idea for  a state-pool  fund was due  to the  "stratification" of                                                               
those  that receive  good benefits  and  those that  do not.  She                                                               
opined  that very  few Alaskans  would have  complained about  SB
4002 if  the bill was  considered when oil prices  and production                                                               
were  higher.  She  said  the optics  for  everything  have  been                                                               
altered due to the state's economic changes.                                                                                    
                                                                                                                                
9:55:22 AM                                                                                                                    
COMMISSIONER FISHER explained that  the majority of the increased                                                               
cost of providing insurance on  the exchange was due to high-cost                                                               
claimants.                                                                                                                      
                                                                                                                                
SENATOR MCGUIRE  clarified that  her previous  statement referred                                                               
to a broader  point about Alaskan looking for  insurance but were                                                               
relegated to the  higher-cost exchange. She opined  that the only                                                               
people in the exchange where those with preexisting conditions.                                                                 
                                                                                                                                
COMMISSIONER FISHER  replied that he  agreed with the  trend that                                                               
Senator McGuire  pointed out  and stated  that the  Department of                                                               
Administration  shared the  same  concern. He  opined that  state                                                               
worker  versus private  sector benefits  was probably  beyond the                                                               
scope of the day's hearing to  dig into the "broad scope." He set                                                               
forth that  the administration and  Legislature has  attempted to                                                               
narrow the focus  on a group of individuals and  be reasonable in                                                               
light of all of the balancing issues that the committee raised.                                                                 
                                                                                                                                
9:58:16 AM                                                                                                                    
SENATOR MCGUIRE  reiterated that  she agreed  with the  bill, but                                                               
specified  that  her  broader point  addressed  average  Alaskans                                                               
having access to health care,  long-term care and retirement. She                                                               
challenged Commissioner Fisher  to not just deal  with the issues                                                               
before him,  but to give  broader consideration of what  types of                                                               
opportunities there  might be  to expand  the volume  of Alaskans                                                               
that get access to benefits.                                                                                                    
                                                                                                                                
9:59:40 AM                                                                                                                    
CHAIR STOLTZE held SB 4002 in committee.                                                                                        

Document Name Date/Time Subjects
SB 4002 - Sponsor Statement.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 - Sectional Analysis.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 - Presentation by Dept. of Administration 5.26.16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB4002 - Actuarial Letter 5.24.16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB4002 - Fiscal Note-DOA-OOC-05-23-16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB4002 - Fiscal Note -DOA-PERS-05-24-16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 Supporting Documents - DOA Responses.6.2.16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 Supporting Documents - Occupational Deaths, SOA+PoliSubs. 6.1.16.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 Supporting Documents - PERS, TRS Benefit information.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 - APDEA Support Letter.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 - ACOA Support Letter.pdf SSTA 5/26/2016 8:30:00 AM
SB4002
SB 4002 - APOA Support Letter.pdf SSTA 5/26/2016 8:30:00 AM
SB4002