Legislature(2005 - 2006)SENATE FINANCE 532
05/07/2005 07:00 PM House 2D FREE CONFERENCE COMMITTEE ON SB 141
| Audio | Topic |
|---|---|
| Start | |
| SB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| SB 141 |
ALASKA STATE LEGISLATURE
CONFERENCE COMMITTEE ON SB 141
May 7, 2005
7:32 p.m.
MEMBERS PRESENT
Senator Lyda Green, Chair
Senator Ralph Seekins
Senator Donny Olson
Representative Bruce Weyhrauch
Representative Paul Seaton
Representative Harry Crawford
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 141(FIN)
"An Act relating to the teachers' and public employees'
retirement systems and creating defined contribution and
health reimbursement plans for members of the teachers'
retirement system and the public employees' retirement
system who are first hired after July 1, 2005; relating to
university retirement programs; establishing the Alaska
Retirement Management Board to replace the Alaska State
Pension Investment Board, the Alaska Teachers' Retirement
Board, and the Public Employees' Retirement Board; adding
appeals of the decisions of the administrator of the
teachers' and public employees' retirement systems to the
jurisdiction of the office of administrative hearings;
providing for nonvested members of the teachers' retirement
system defined benefit plans to transfer into the teachers'
retirement system defined contribution plan and for
nonvested members of the public employees' retirement
system defined benefit plans to transfer into the public
employees' retirement system defined contribution plan;
providing for political subdivisions and public
organizations to request to participate in the public
employees' defined contribution retirement plan; and
providing for an effective date."
HEARD AND HELD
HOUSE CS FOR CS FOR SENATE BILL NO. 141(FIN) am H
"An Act relating to the teachers' and public employees'
retirement systems and creating defined contribution and
health reimbursement plans for members of the teachers'
retirement system and the public employees' retirement
system who are first hired after July 1, 2005; relating to
university retirement programs; establishing the Alaska
Retirement Management Board to replace the Alaska State
Pension Investment Board, the Alaska Teachers' Retirement
Board, and the Public Employees' Retirement Board; adding
appeals of the decisions of the administrator of the
teachers' and public employees' retirement systems to the
jurisdiction of the office of administrative hearings;
providing for nonvested members of the teachers' retirement
system defined benefit plans to transfer into the teachers'
retirement system defined contribution plan and for
nonvested members of the public employees' retirement
system defined benefit plans to transfer into the public
employees' retirement system defined contribution plan;
providing for political subdivisions and public
organizations to request to participate in the public
employees' defined contribution retirement plan; and
providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 141
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
SPONSOR(s): FINANCE
03/14/05 (S) READ THE FIRST TIME - REFERRALS
03/14/05 (S) FIN
03/16/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/16/05 (S) Heard & Held
03/16/05 (S) MINUTE(FIN)
03/17/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/17/05 (S) Heard & Held
03/17/05 (S) MINUTE(FIN)
03/21/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/05 (S) Heard & Held
03/21/05 (S) MINUTE(FIN)
03/22/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/22/05 (S) Heard & Held
03/22/05 (S) MINUTE(FIN)
03/23/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/23/05 (S) Heard & Held
03/23/05 (S) MINUTE(FIN)
03/29/05 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/29/05 (S) Heard & Held
03/29/05 (S) MINUTE(FIN)
03/30/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/30/05 (S) Heard & Held
03/30/05 (S) MINUTE(FIN)
03/31/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/31/05 (S) Heard & Held
03/31/05 (S) MINUTE(FIN)
04/01/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/01/05 (S) Heard & Held
04/01/05 (S) MINUTE(FIN)
04/02/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/02/05 (S) Heard & Held
04/02/05 (S) MINUTE(FIN)
04/03/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/03/05 (S) Heard & Held
04/03/05 (S) MINUTE(FIN)
04/04/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/04/05 (S) Scheduled But Not Heard
04/05/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/05/05 (S) Heard & Held
04/05/05 (S) MINUTE(FIN)
04/06/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/06/05 (S) Moved CSSB 141(FIN) Out of
Committee
04/06/05 (S) MINUTE(FIN)
04/08/05 (S) FIN RPT CS 5DP 1DNP 1AM
NEW TITLE
04/08/05 (S) DP: GREEN, WILKEN, BUNDE, DYSON,
STEDMAN
04/08/05 (S) DNP: HOFFMAN
04/08/05 (S) AM: OLSON
04/12/05 (S) ENGROSSED
04/14/05 (S) TRANSMITTED TO (H)
04/14/05 (S) VERSION: CSSB 141(FIN)
04/14/05 (H) READ THE FIRST TIME - REFERRALS
04/14/05 (H) STA, FIN
04/14/05 (H) STA AT 8:00 AM CAPITOL 106
04/14/05 (H) <Pending Referral>
04/16/05 (H) STA AT 9:30 AM CAPITOL 106
04/16/05 (H) <Bill Hearing Canceled>
04/19/05 (H) STA AT 8:00 AM CAPITOL 106
04/19/05 (H) Heard & Held
04/19/05 (H) MINUTE(STA)
04/20/05 (H) STA AT 8:00 AM CAPITOL 106
04/20/05 (H) Moved HCS CSSB 141(STA) Out of
Committee
04/20/05 (H) MINUTE(STA)
04/21/05 (H) STA AT 8:00 AM CAPITOL 106
04/21/05 (H) <Bill Hearing Canceled>
04/22/05 (H) STA RPT HCS(STA) 1DP 5NR
04/22/05 (H) DP: SEATON;
04/22/05 (H) NR: LYNN, GATTO, GRUENBERG,
ELKINS, RAMRAS
04/23/05 (H) FIN AT 10:00 AM HOUSE FINANCE 519
04/23/05 (H) Heard & Held
04/23/05 (H) MINUTE(FIN)
04/28/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/28/05 (H) Heard & Held
04/28/05 (H) MINUTE(FIN)
04/30/05 (H) FIN AT 2:00 PM HOUSE FINANCE 519
04/30/05 (H) Heard & Held
04/30/05 (H) MINUTE(FIN)
05/01/05 (H) FIN AT 1:00 PM HOUSE FINANCE 519
05/01/05 (H) Moved HCS CSSB 141(FIN) Out of
Committee
05/01/05 (H) MINUTE(FIN)
05/02/05 (H) FIN RPT HCS(FIN) 2DP 5NR 2AM
(FORTHCOMING HCS)
05/02/05 (H) DP: KELLY, FOSTER;
05/02/05 (H) NR: JOULE, STOLTZE, MOSES, MEYER,
CHENAULT;
05/02/05 (H) AM: HAWKER, WEYHRAUCH
05/02/05 (H) OBJECTION TO REFERRAL TO RULES
05/02/05 (H) OBJECTION TO REFERRAL TO RULES
WITHDRAWN
05/02/05 (H) RETURNED TO FIN COMMITTEE
05/02/05 (H) FIN RPT HCS(FIN) 3DP 4NR 1AM
(FORTHCOMING HCS)
05/02/05 (H) DP: FOSTER, KELLY, CHENAULT;
05/02/05 (H) NR: HOLM, STOLTZE, MOSES, MEYER;
05/02/05 (H) AM: HAWKER
05/02/05 (H) OBJECTION TO FISCAL ANALYSIS WITH
FINANCE RPT
05/02/05 (H) REPLACE FISCAL ANALYSIS FAILED Y15
N25
05/02/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
05/02/05 (H) Moved HCS CSSB 141(FIN) Out of
Committee
05/02/05 (H) MINUTE(FIN)
05/03/05 (H) HCS(FIN) NT RECEIVED
05/03/05 (H) MOVED TO BOTTOM OF CALENDAR
05/03/05 (H) BEFORE THE HOUSE
05/03/05 (H) MOTION TO DIVIDE AM NO 3 NOT IN
ORDER
05/03/05 (H) ADJOURNED TO 5/4
05/05/05 (H) BEFORE THE HOUSE
05/06/05 (H) ENGROSSED
05/07/05 (H) VERSION: HCS CSSB 141(FIN) AM H
05/07/05 (S) CONCURRENCE MESSAGE READ
05/07/05 (S) CONFERENCE COMMITTEE APPOINTED
05/07/05 (S) GREEN (CHAIR), SEEKINS, OLSON
05/07/05 (H) RECEDE MESSAGE
05/07/05 (H) CONFERENCE COMMITTEE APPOINTED
05/07/05 (H) SEATON, WEYHRAUCH, CRAWFORD
WITNESS REGISTER
No witnesses
ACTION NARRATIVE
SB 141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
CHAIR LYDA GREEN called the Conference Committee on SB 141
meeting to order at 7:32:12 PM. All members were present.
CHAIR GREEN said she hoped to get through the points of
agreement and disagreement and report back to the House and
Senate.
SENATOR SEEKINS moved that the Senate request the House
recede from its amendments to CSSB 141(FIN).
An unidentified member objected.
A roll call vote was taken. Representatives Seaton,
Crawford, and Weyhrauch and Senator Olson were opposed and
Senators Green and Seekins were in favor, therefore the
motion failed.
REPRESENTATIVE WEYHRAUCH moved that the Senate concur with
the changes contained in HCS CSSB 141(FIN)am H.
CHAIR GREEN objected.
A roll call vote was taken. Senator Olson and
Representatives Weyhrauch, Crawford and Seaton were in
favor and Senators Seekins and Green were opposed.
CHAIR GREEN announced the motion failed, requiring two
affirmative votes from each house. She then informed
members that several bill comparisons had been distributed;
the comparison done by her staff is the most recent and
contains the provisions of the bill with no substantial
differences. Senate members are willing to accept the House
language on those provisions at this time.
7:34:17 PM
REPRESENTATIVE SEATON clarified that in the rush to get
things done, in the House comparison the Senate and House
provisions are reversed so that the provisions under the
Senate column are the House provisions and vice versa.
REPRESENTATIVE WEYHRAUCH noted Senate Finance Committee
staff prepared the document referred to by Chair Green;
Representative Seaton provided a comparison; and the third
double-sided document explains all elements of the bill.
CHAIR GREEN affirmed that members would work from the
Senate Finance Committee document, which has numbered
columns.
7:37:31 PM
CHAIR GREEN began reviewing the comparison and directed
members to line 7, employee contribution rates, and said
the Senate is agreeable to the House plan.
REPRESENTATIVE WEYHRAUCH asked if column d contains the
provisions in the House bill while column b contains the
provisions in the Senate bill as received by the House.
CHAIR GREEN clarified that column b contains the provisions
in the bill passed by the Senate while column d contains
the provisions of the bill passed by the House. She
repeated that in column d, line 7, the employee
contribution will remain unchanged.
7:41:26 PM
SENATOR SEEKINS asked if the Senate plan was a floating
plan while the House plan was a fixed plan.
REPRESENTATIVE SEATON explained the Senate plan contains an
escalator for the employee, which increases the
contribution by .5 percent per year until the amount equals
the employer contribution. He noted that questions of the
legality of that method were raised.
CHAIR GREEN referred to line 9, column d, and said the 5
percent to the DC account as listed in the House plan is
acceptable to the Senate.
CHAIR GREEN directed members to page 2, line 24, and said
the House gave the board the additional duty of assisting
the retirement system administrator in prescribing policies
for the operation of the retirement system. The Senate is
agreeable to that directive.
CHAIR GREEN moved to the language on line 25, which speaks
to the $400 honorarium plus per diem, and said the Senate
finds that to be acceptable.
SENATOR SEEKINS commented that the intent of that provision
is to mirror the per diem paid to the Alaska Permanent Fund
Corporation board of trustees.
REPRESENTATIVE SEATON said that is correct, as well as the
directors of the board of the Alaska Housing Finance
Corporation.
7:41:52 PM
CHAIR GREEN said the Senate is agreeable to the provision
on page 3, line 27, to change the fund ratio to 105
percent.
CHAIR GREEN referred to the provision on page 3, line 29,
which closes a loophole, and said the Senate is agreeable.
SENATOR SEEKINS asked if it applies to minor dependents
only.
REPRESENTATIVE SEATON explained that it applies to
dependents with no relationship to the retiree before he or
she died.
SENATOR SEEKINS asked if any age limits apply to dependents
or if the benefit is dependent on IRS status.
REPRESENTATIVE SEATON believed the definition of
"dependent" is from the existing retirement system so no
changes would occur.
CHAIR GREEN stated, "They're already dependent adults that
might be covered, as well as certainly your children that
you would have custody of."
REPRESENTATIVE SEATON said his understanding is that if the
retiree dies and the spouse later adopts or has a
dependent, the new dependent would not be covered.
7:44:09 PM
CHAIR GREEN moved to line 32 and said the House removed
language regarding forfeiting all rights under this
chapter, which the Senate is agreeable to. She noted that
language is in existing law so nothing will change.
CHAIR GREEN explained that the language on page 4, line 36,
pertains to conditional retroactivity, which the Senate
finds acceptable.
7:44:48 PM
REPRESENTATIVE WEYHRAUCH asked about line 3 above line 36.
CHAIR GREEN said the number 3 was erroneously implanted on
every page and asked members to ignore it.
7:46:13 PM
CHAIR GREEN announced a 10-minute break.
8:03:47 PM
REPRESENTATIVE SEATON informed members the House would
accept the Senate schedule on page 1, line 13, but in
several places in the Senate version, such as on page 93,
lines 4 and 5, the bill refers to age 65 instead of
Medicare eligible. House members are agreeable as long as
the understanding is that the correct term is "Medicare
eligible" and that term is used.
CHAIR GREEN stated that "Medicare eligible" would be used
throughout the bill.
SENATOR SEEKINS pointed out the conference committee cannot
amend the bill.
8:04:33 PM
CHAIR GREEN announced an at-ease.
8:05:44 PM
CHAIR GREEN informed members [the conference committee can
request] that a technical correction be made to the bill by
the legal drafter to make that language consistent.
REPRESENTATIVE SEATON referred to the language on line 28
and said the problem is the retroactivity to 1987. He said
the House has no problem making that change prospectively
but it cannot agree to diminish accrued benefits.
CHAIR GREEN said that provision would be left open for
further discussion at a later date.
8:07:26 PM
CHAIR GREEN informed members that by accepting the language
on page 1, line 9, the reference on line 5 would also be
accepted.
REPRESENTATIVE SEATON said that is correct.
CHAIR GREEN explained that one is 5 percent; the other is 8
percent so the total would be 13 percent. She then said the
Senate would also agree to accept line 5.
8:09:03 PM
SENATOR SEEKINS commented that in looking at the totals in
section 13, line 9, the numbers on line 5 include the 5
percent number to equal the 13 percent. He said his
understanding of line 9 is that the 4.5 and 2.0 differ from
the House version, which establishes a 2.5-fixed rate. He
asked if the 1.75 in the Senate version is a calculated
number rather than a fixed number.
REPRESENTATIVE SEATON pointed out the $250 on the House
side is also a calculated number.
SENATOR SEEKINS asked if that number stays the same forever
in the House version or whether it is actuarially
calculated for a date certain.
REPRESENTATIVE SEATON replied $250 is the current actuarial
calculation but the House version requires that medical
benefits be enough to satisfy the medical cost. Therefore,
the $250 would be actuarially calculated each year to
prevent building up an unfunded liability.
SENATOR SEEKINS asked if the number is fixed in statute.
REPRESENTATIVE SEATON referred members to line 29 on page
86 of HCS CSSB 141(FIN)am H, subsection (d).
8:11:56 PM
CHAIR GREEN said her understanding is that in the Senate
version, the 1.75 percent is from the Mercer calculation.
She assumed it to be a calculable rate each year.
SENATOR SEEKINS thought it was a fixed rate and said he
couldn't see where it becomes calculable in the future. He
affirmed he was speaking to the 2.5 percent amount for the
medical [rate].
REPRESENTATIVE WEYHRAUCH said it is 2 percent by
legislative fiat.
SENATOR SEEKINS agreed the number will remain the same
until changed by the legislature.
REPRESENTATIVE WEYHRAUCH thought that was the purpose of
requiring advice and consent and reports to the legislature
in other portions of the bill.
CHAIR GREEN recalled a conversation about reaching a
balance between the contribution rates for employees and
retirement health benefits. She pointed out the 1.75 is in
statute as well.
8:14:22 PM
SENATOR SEEKINS asked if the language beginning on page 51,
lines 7-14, of the House bill add a requirement for AMRB to
annually evaluate the employer rate for medical insurance
sufficient to cover projected costs.
REPRESENTATIVE SEATON said that was the intent.
SENATOR SEEKINS said he would object to just setting a
number in statute.
REPRESENTATIVE SEATON said House members would too.
CHAIR GREEN suggested leaving that question for the next
conference committee to address.
REPRESENTATIVE SEATON added there are a couple of errors in
both accounts. Although those errors were discussed on the
House floor, they were not changed because a death and
disability part was added on the House side, which adds up
to 3/10 of a percent and the actuarial calculation was
supposed to be there. He said Mercer calculated the 1.75
rate based on requiring people to retire directly from the
system as it was on the House side and made a mistake
because not retiring from the system increases the cost
quite a bit.
SENATOR SEEKINS agreed that 175 basis points increase the
cost quite a bit and he is not willing to fix that [number]
in statute.
CHAIR GREEN said she would leave that open for the free
conference committee.
8:16:46 PM
REPRESENTATIVE WEYHRAUCH said the health reimbursement
provision should also be left open because the differences
need to be determined.
CHAIR GREEN said someone had asked if a person resigned
rather than retired, that person would have access to the
health reimbursement account.
8:20:42 PM
CHAIR GREEN announced an at-ease.
8:23:02 PM
CHAIR GREEN announced she would leave the last question
open for the next conference committee to address.
SENATOR SEEKINS proposed highlighting the specific points
the committee does not agree on by page number and
paragraph using the matrix.
CHAIR GREEN expressed skepticism about making it through
100 pages.
SENATOR SEEKINS said he wanted to look at each referenced
page.
REPRESENTATIVE SEATON referred to line 8 on the matrix.
SENATOR SEEKINS clarified that would be pages 73-74,
sections 7-8 of the House version and pages 71-72, sections
95 and 96 in the Senate version.
REPRESENTATIVE SEATON explained line 8 sets a floor for
PERS and TRS contributions to prevent another shortfall
from occurring, like the one that occurred after the PERS
contribution was lowered to 6.75 percent. It will smooth
out the long-range contributions to the system so the state
does not generate past service costs. TRS did keep a floor
at 11 percent so the contribution never went down but PERS
brought its normal cost rates down to 6.75 a couple of
years ago. He thought that earlier, the committee accepted
the elimination of the employee contribution the 50
percent match with the .5 percent escalator on line 7,
which corresponds to line 8 in the Senate bill. He said the
Senate version says 50 percent of the normal cost rate.
Line 7 said the employee rate would increase .5 percent
each year until the two matched. Since the Senate agreed to
eliminate that language, it also eliminated the employer 50
percent match. He questioned whether the Senate would
accept the floor on employer contributions in the House
version.
8:26:53 PM
CHAIR GREEN said she thought the [Senate] was trying to
craft the language to assure there would be participation
at the normal service rate. She suggested leaving that
provision open for future discussion.
REPRESENTATIVE SEATON said that is fine. He said when
looked at carefully, one can see that lines 7 and 8 are
tied together. He explained that because the Senate agreed
to remove the escalator from the employee rate up to 50
percent, the reference to the employer paying up to 50
percent does not make sense.
CHAIR GREEN repeated she would leave that open.
SENATOR SEEKINS asked if the House and Senate are not in
agreement on line 5.
CHAIR GREEN said they are.
SENATOR SEEKINS said the House and Senate agree on line 7
but they are not in agreement on lines 8 and 9. He asked,
regarding line 11, why the House views its version to be
more advantageous.
REPRESENTATIVE SEATON explained the requirement for medical
benefits is 10 years of service. If employees are not
required to retire directly from the system with 30 years
of service at any age or at age 60 with at least 10 years,
a person could work from age 22 to 32, leave the state, and
have medical benefits provided by the state at age 60. When
Mercer calculated the Senate's number, it assumed the
employee would retire directly from the system.
8:30:44 PM
CHAIR GREEN asked if a person who worked 30 years and
resigned would be required to come back and work to retire.
REPRESENTATIVE SEATON said absolutely not. He said retiring
directly from the system is defined as 30 years of service
or more than 10 years and reaching age 60.
CHAIR GREEN said she would leave that provision open.
SENATOR SEEKINS asked for an explanation of the items on
line 12.
REPRESENTATIVE SEATON explained the House version has a
pre-Medicare eligible medical coverage provision built in
so if a person is within 5 years of being pre-Medicare
eligible, s/he can get a subsidy on medical premiums so
that s/he could retire at age 60. The premium subsidy would
be based on the number of years served beginning at 30
percent for 10 years of service with an increase of 3
percent per year up to 30 years, at which point the subsidy
would be 90 percent. The subsidy of the premium has some
cost containment built in. The start year - this year is
$7,900; the maximum escalation is 5 percent per year.
Therefore, if health care costs increase 12 percent per
year, 7 percent would be excluded from the calculation.
This benefit was built in because employees said medical
benefits are highly prized.
8:34:32 PM
CHAIR GREEN asked about the increased cost to the employer.
REPRESENTATIVE SEATON said it would increase costs by 1
percent for each pre-Medicare eligible employee.
CHAIR GREEN said she would leave that provision open for
later discussion.
SENATOR SEEKINS said the House and Senate are not in
agreement on line 13. He then asked, regarding line 14,
what the normal retirement age is.
REPRESENTATIVE SEATON said normal retirement age is 60
months pre-Medicare, meaning 60 years old.
SENATOR SEEKINS asked if, in the House version, retirement
begins 5 years earlier than the Senate version.
REPRESENTATIVE SEATON said that is correct. He explained
that a person with 30 years of service who is not 60 would
have to pay the full premium.
CHAIR GREEN asked if that provision merely provides access.
REPRESENTATIVE SEATON said that is correct.
REPRESENTATIVE SEATON said that is the same as the Senate
version. The difference between the two is the House
version has a 60 months pre-Medicare eligible component
whereas the Senate version has no medical benefits before
Medicare eligible age or 65.
CHAIR GREEN asked for an explanation of the age range in
the House version.
REPRESENTATIVE SEATON said the service range in the two
versions is identical 30 years or 10 years and reaching
the age of 60. He then said, "...It's actually 10 years and
60 months pre-Medicare eligible. The reason that pre-
Medicare eligible is so important is because the federal
government might come around in a few years and change
Medicare eligible to 67 and we at the state don't want to
be stuck with paying 100 percent of medical costs between
65 and 67 if they raise the age limit by two years."
SENATOR SEEKINS asked if this would establish a floating
rate that duplicates exactly what the Senate version would
do in terms of age and eligibility now.
REPRESENTATIVE SEATON said the House version provides for a
60 months pre-Medicare eligible subsidy for insurance
premiums while the Senate version does not provide anything
pre-Medicare eligible.
CHAIR GREEN noted the House version provides an extra five
years of assistance.
REPRESENTATIVE SEATON said that is correct.
CHAIR GREEN said she would leave that provision open, as
well as lines 15 and 16 as she is waiting for more figures
on that provision.
SENATOR SEEKINS said the difference between the House and
Senate versions in the health reimbursement arrangement
[line 17] is the 50 basis points in the House version. The
House wants to give retirees more money than the Senate
does.
REPRESENTATIVE SEATON said that is correct.
CHAIR GREEN said some concern was expressed that the House
provision was "too rich" so she would leave that open.
REPRESENTATIVE WEYHRAUCH asked if line 17 relates to line 9
on page 1.
CHAIR GREEN said it does and that a deeper discussion on
the balance between all of those contributions needs to
occur because one causes one to go down and another to go
up. The right balance needs to be found so that the
employer is not over contributing and she believes there is
room for change. She repeated she would leave that open for
the free conference committee.
CHAIR GREEN then said she and Senator Seekins are very
concerned with line 19.
SENATOR SEEKINS said his concern is that someone could
leave voluntarily and come back and get full benefits plus
interest.
CHAIR GREEN said that literally means someone could be kept
on the books for infinity and she believes the benefit is
designed to prepare employees, not to keep them on the
books for 60 years. She said she would leave that open for
future discussion.
REPRESENTATIVE SEATON said the whole design of this plan is
a defined contribution. He continued, "And we have two
components of defined contribution here. One is to the
retirement plan where we're doing a percentage into there
and the other defined contribution portion is the HRA where
we take a certain amount of money and put it in your
individual account that you have and you have to own and it
becomes portable, it becomes usable. So this is a defined
contribution section of the medical plan."
CHAIR GREEN said the HRA is not portable, as she
understands it.
REPRESENTATIVE SEATON said it is portable in the sense that
it is the employee's specific account that the employee is
free to use for any medical expenses. It is a defined
contribution, not a defined benefit. If it were a defined
benefit, it would say the employer would pay so much of the
medical costs. This says the state will contribute 2.5
percent of the average wage of every PERS/TRS employee for
individual use. He pointed out the employee would not own
it until s/he met the 10 year vesting requirement.
8:43:30 PM
SENATOR SEEKINS asked if he is sure ownership is attached
or whether the account is there for the employee's benefit
if he continues to be an employee and retires normally.
8:44:27 PM
REPRESENTATIVE SEATON replied, "You can look at it however
you want but if the idea of a DC plan is to make a
contribution into an account that is accounted for you,
individually - not for the group but you individually have
this benefit that's what the DC plan is and that's what
this is. Now it takes 10 years to vest in it just like you
have 5 years to vest in the other account."
SENATOR SEEKINS said he can see no reason why, if someone
voluntarily separates, the state should maintain that
contribution and let it accrue interest in case that person
decides to come back 20 years later. He questioned why the
state should do that if "it doesn't exist in the real
world?"
REPRESENTATIVE WEYHRAUCH said it does exist in the real
world because, "When your employer contributes something to
you for your benefit, it becomes a property interest."
SENATOR OLSON asked if the employee contributes to a DC
plan.
CHAIR GREEN clarified the employee does not contribute to
the HRA portion.
REPRESENTATIVE SEATON agreed but said the employer
contributes to an account for each specific employee. The
employee must submit medical invoices for reimbursement
from that account. He said the purpose of a DC plan is to
attract employees.
SENATOR SEEKINS asked to leave this provision open for
further negotiation because he believes the only way this
money will become the employee's money is if the employee
returns to state employment.
REPRESENTATIVE SEATON said that is incorrect because it
belongs to the employee if s/he vests in 10 years.
SENATOR SEEKINS read, "can return to participating employer
without time limitation and have account balance restored
with interest."
REPRESENTATIVE SEATON said that is correct and explained
that if Senator Seekins worked for 10 years, vested, left
state service for 5 years and returned, his account would
still be there. It is an incentive to employees to return.
SENATOR SEEKINS said in the real world, if you leave, you
leave it behind therefore he disagrees with that provision.
CHAIR GREEN said that is one of the characteristics of the
current plan that has caused the state to be in the
position it is in.
CHAIR GREEN moved to the next issue: board members.
8:47:17 PM
SENATOR SEEKINS asked why only one person on the board is
not a PERS/TRS member.
REPRESENTATIVE SEATON said the board is comprised of four
employer representatives and four employee representatives.
The commissioners of revenue and administration, and
finance officers of a municipality and a school district
would represent employers, while two members of the PERS
employee system and two members of the TRS employee system
would represent employees.
SENATOR SEEKINS asked if the commissioners and finance
officers are PERS members.
CHAIR GREEN said they are.
SENATOR SEEKINS noted the PERS and TRS members also
participate in the program so only one board member does
not. He felt that balance is out of line.
8:48:56 PM
REPRESENTATIVE CRAWFORD said he is a member of the
ironworkers' pension plan. That board consists of 3 members
from the employers' group and 3 members of the employees'
group. Although they have disparate goals at times, all are
covered by the same plan. He thought the House composition
is much fairer than the Senate composition.
SENATOR SEEKINS said he sees the two commissioners and two
finance officers as employees of the state. He asked if
something goes wrong with the ironworkers' [retirement
plan], the general public would be asked to make up the
deficit as would happen with PERS and TRS. He said the
person who is not a beneficiary of PERS and TRS should be
part of the balance of this committee.
REPRESENTATIVE WEYHRAUCH asked if the ratio under the
Senate version was 6 PERS/TRS members to 3 non-PERS/TRS
members versus the 8 PERS/TRS members to 1 non-PERS/TRS
member in the House version.
SENATOR SEEKINS said that is correct. He likened the House
composition to allowing the fox to watch over the hen
house. Someone who is qualified and not a beneficiary of
the PERS/TRS system should be on the board.
CHAIR GREEN told members the Senate used the Permanent Fund
board as a model. It was looking for highly trained
investors. She added the Senate sees this board as a very
hard working board and supports the honorarium for that
reason. She said she prefers to have 3 unconnected people
on the board.
SENATOR SEEKINS said he is not accusing anyone of being
less than honorable; he just feels the board should be more
balanced.
REPRESENTATIVE SEATON replied the commissioners would not
be representing their individual membership in PERS and
TRS, but rather the State of Alaska. He clarified that in a
House Finance version, the PERS/TRS members were to be
elected, which put them outside of the required criteria
for other board members. In the final House version, all
members must meet the same criteria.
8:54:49 PM
SENATOR OLSON said in his businesses, when negotiating with
employees, he and his managers are in the same retirement
program as his employees but his managers represent his
side. He said he tends to favor the House composition and
questioned how many Permanent Fund board members are not
permanent fund dividend recipients.
SENATOR SEEKINS said every resident receives an equal
permanent fund dividend but not every resident gets
retirement benefits from the state. He noted he is in the
process of creating a bright line in the ethics law that
says if a public officer has an investment worth $10,000 or
more and that officer's action could benefit that
investment, the officer must put that investment in an
account that s/he has no management control over. He said
because the State of Alaska has an interest in the success
of this program, it should have more than one member who is
not a beneficiary of the system.
CHAIR GREEN announced that issue would remain open.
Regarding line 22, board terms, SENATOR SEEKINS said his
understanding is that the structure of the board in the
Senate version is modeled after the Permanent Fund board.
As a former chair of that board, the only thing he found he
did not like was that every board member was a political
appointee who sat at the will of the governor. The
legislature changed that last year so that now members are
appointed to staggered terms and they can only be removed
for cause. He said three-year terms provide a chance to
evaluate members' service. He sees no reason to change.
REPRESENTATIVE SEATON said the House went with a 6-year
term because 3-year terms with a 9 member board means that
a single term governor would replace the entire board. The
6-year term would allow for some staggering so that doesn't
happen.
CHAIR GREEN said the differences between the House and
Senate board terms leave a lot of room for modifications so
she would leave that open.
CHAIR GREEN referred to line 23, board duties, and said she
would leave that open.
SENATOR SEEKINS asked for the rationale of line 23.
REPRESENTATIVE SEATON said one big problem of past service
costs was not recognizing the changes to medical costs. The
House thought the medical component should be analyzed each
year to make sure the state doesn't get behind on projected
medical benefits.
REPRESENTATIVE WEYHRAUCH indicated the medical benefits
have always been projected to be the largest component of
the financial impact and most subject to change.
CHAIR GREEN thought that was included as an assumption but
she would check.
REPRESENTATIVE SEATON said the other assumptions are made
every four years.
CHAIR GREEN thought another review kicks in on alternate
years as well.
REPRESENTATIVE WEYHRAUCH indicated that everyone was in
agreement about line 27.
CHAIR GREEN said the committee agreed to leave line 28 open
and it agreed upon line 29.
9:00:55 PM
CHAIR GREEN said regarding line 30, the University of
Alaska (UA) requested this language. The UA prefers the
Senate language because it was part of a complete package
it brought to the Senate. The current language provides a
one-time option for current employees who choose to
participate in PERS/TRS to transfer into the existing
optional retirement program. She said she was not sure she
wanted to revise the UA's optional retirement program.
REPRESENTATIVE SEATON explained the House did that for two
reasons. First, a lot of people move into the University
system and then into school districts or boroughs. This
would give UA blue-collar workers a different plan from
professors that would not be transferable. He cautioned if
the UA has a separate system that is done by the Board of
Regents, it would no longer conform with PERS so blue
collar workers could not transfer from a municipality to
the UA. For that reason, the House left the optional
program intact but all other employees would be in the
defined contribution PERS program established here.
CHAIR GREEN asked if new employees could choose a defined
benefits program or defined contribution program.
REPRESENTATIVE SEATON explained the employee would either
have the SB 141 defined contribution plan or the UA's
optional plan, which is a defined contribution plan as
well. That would allow blue-collar workers to go from one
PERS job to another.
CHAIR GREEN asked if UA talked about forecasting
difficulties arising from the difference.
REPRESENTATIVE WEYHRAUCH said he did not recall any such
testimony in the House Finance Committee. He said UA does
that now with its professorial and administrative staff
because it can offer the defined contribution plan.
9:04:39 PM
SENATOR OLSON said it was his understanding that UA wanted
a hybrid plan and asked whether Representative Seaton is
saying that will be denied.
REPRESENTATIVE SEATON replied the UA testified that it
wanted to go to a defined contribution plan for everyone,
although there would be different levels of it. The House
version says the defined contribution plan that applies to
most everyone will be the same as the state's defined
contribution plan and UA will have the ability to offer an
optional plan. He affirmed there was no hybrid plan.
CHAIR GREEN noted both bodies have agreed on line 32.
9:05:56 PM
SENATOR SEEKINS asked for an explanation of line 33.
REPRESENTATIVE SEATON stated, "What that is, it's not only
AVTechs, it's also Department of Labor has welding
instructors out - I think it's in Bethel and you know
wherever they have instructors that they hire that are
teachers that are in TRS system, this means they would
continue in the TRS system instead of stopping the TRS
system and having to be in PERS because then if they had
qualified in one they would be basically having two state
retirement programs. So this means that if they are a
member of TRS when they go in as an instructor in the
Department of Labor, they will stay in the TRS system
because there are slight differences. But if they're not,
they're in the PERS system."
SENATOR SEEKINS asked if Representative Seaton's
understanding is that people in the AVTech programs would
stay there forever or that they don't want to go back to
being a blue-collar worker.
9:07:02 PM
REPRESENTATIVE WEYHRAUCH said he heard testimony about how
a welder who works for the city in a village might be asked
to be a welding instructor. This would allow the welder to
do that without getting into a separate retirement system.
It is designed to pick up on the skilled labor in those
areas.
REPRESENTATIVE SEATON said that is not quite what this
does. He explained that blue-collar workers who come to the
Department of Labor to teach welding would be in PERS. This
would apply to people like high school teachers who are
already in TRS who are brought to the Department of Labor
to teach they would then change to PERS. Those people
would remain in TRS but anyone who is not already in TRS
would be in PERS.
CHAIR GREEN asked how many people this would apply to.
REPRESENTATIVE SEATON said maybe 10 to 12 people in Seward
and some in Kotzebue. He provided the history of the
problem.
CHAIR GREEN asked if those employees preferred to be in TRS
because the benefits are better.
REPRESENTATIVE SEATON said the workers who were in TRS
before would have to cancel out and change over to PERS. If
they were vested in TRS, they would have that retirement
system and would be forced to pick up the new PERS.
CHAIR GREEN said she would leave line 33 open.
CHAIR GREEN said she does not believe the contents of line
34 should be placed in statute. She said the board has
instructions and goals already and that the cost savings
measures are an administrative function. She said line 34
would be left open.
REPRESENTATIVE SEATON mentioned the House State Affairs
Committee included it as intent language but Legislative
Legal Services and the House Finance Committee [preferred
that it be put in the bill instead].
REPRESENTATIVE SEATON explained that line 35 grew out of
the retirement and benefits board's attempt to up generic
drug use. That use has increased from 37 to 42 percent,
saving an estimated $1 million for each 1 percent change.
Generic drugs are not required now so line 35 requires the
cost savings measures be implemented and mandatory. That
change is estimated to save $6.5 million per year.
CHAIR GREEN announced the House and Senate agree upon line
36 and that she would leave lines 37 and 38 open.
CHAIR GREEN then asked members to sign the report so that
it can be taken to members' respective bodies tomorrow, at
which time free conference committee members will be
appointed.
9:13:47 PM
SENATOR SEEKINS moved to return a letter to the Senate
President and House Speaker that states that the conference
committee on SB 141 met on May 7, 2005 and that Senate
members failed to concur with the changes to HCS CSSB
141(FIN)am H, that the House members failed to recede from
their changes to CSSB 141(FIN) and that the conference
committee considered the attached sections and did not come
to agreement. The conference committee respectfully
requests limited powers of free conference.
CHAIR GREEN announced that with no objections, the motion
carried.
REPRESENTATIVE SEATON asked if the conference committee
should specify the areas for limited free conference.
CHAIR GREEN said the committee will sign the report when it
meets at 1:45 p.m. tomorrow. She then adjourned the meeting
at 9:18:50 PM.
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