Legislature(2005 - 2006)HOUSE FINANCE 519
04/30/2005 02:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | SB 141 | ||
HOUSE FINANCE COMMITTEE
April 30, 2005
2:29 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting
to order at 2:29:55 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
None
ALSO PRESENT
Representative Paul Seaton; Representative Beth Kerttula;
Senator Bert Steadman; Representative Lesil McGuire;
Speaker John Harris; Virginia Ragle, Assistant Attorney
General, Department of Law; Suzanne Cunningham, Staff, Co-
Chair Meyer
PRESENT VIA TELECONFERENCE
Representative Jim Holm
SUMMARY
CSSB 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."
HCSSB 141 (FIN) was heard and HELD in Committee
for further consideration.
2:31:07 PM
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."
Representative Joule WITHDREW his objection from April 28,
2005, to Representative Hawker's motion to adopt the work
draft for SB 141, Version C.
Representative Hawker WITHDREW his motion from April 28,
2005, to adopt a work draft for SB 141, labeled 24-
LS0637\C, Craver, 4/26/05.
2:31:56 PM
Co-Chair Meyer noted that the House State Affairs version
would be before the Committee [24-LS0637\X].
2:32:17 PM
REPRESENTATIVE PAUL SEATON, STATE AFFAIRS COMMITTEE CHAIR,
reviewed HCS CSSB 141 (HSTA). He provided members with a
handout: "Walkthrough House State Affairs CS to SB 141"
(copy on file.) He explained the changes to the existing
retirement system and to the current and proposed boards.
He described the medical program elements of the HSTA
version of SB 141. The HSTA Committee added an Ad-hoc Post
Retirement Pension Adjustment, which would occur when the
Fund is solvent and the "system can support it". This was
left at 110 percent: assets to liability.
Changes to the Board structure were adopted, which merged
the PERS, TRS and ASPIB (Alaska State Pension Investment
Board) boards into the new Alaska Retirement Management
Board (ARM). The makeup of the board was changed to make it
more representative. The HSTA version increased the PERS
and TRS members to two each. Representation outside of the
retirement system was reduced to one. Four members would
represent the employer: commissioners of the departments of
Administration and Revenue, a finance officer from a
political subdivision and a finance officer of a school
district. He observed that he would support an amendment to
have the PERS and TRS members picked by the Governor from a
list nominated by the bargaining units.
Terms would be staggered and were changed from three to six
years, to prevent a single term governor from replacing the
entire Board. The intent is to make it less political.
Representative Seaton asserted that the primary duty (90
percent) of the current TRS and PERS boards is to hold
hearings on disabilities. These duties would be transferred
to the Department of Administration hearing officer.
Representative Seaton discussed medical program elements.
He observed that there was no pre-retirement plan. Surveys
of employees and employers identified medical benefits as
most critical. The HSTA version provides a plan with 3.75
percent of employee compensation for TRS and 3.5 percent of
employee compensation for PERS. This would be 60 months
pre-Medicare eligible and after Medicare eligible. The
subsidy base would only increase by 5 percent a year, to
prevent an unfunded liability.
Eligibility was changed and would be based on the "Medicare
eligible age" instead of 65 yrs, in anticipation that the
federal government would change the age sometime in the
future. Service would be 30 years. A member's spouse and
dependents would be eligible if they were dependents during
the member's active service. This would allow the
department to determine the liability at the time the
person leaves employment.
Representative Seaton referred to the Health Reimbursement
Arrangement (HRA) and the required employee and employer
contributions, which was increased to 2 percent.
Each person would pay a set premium for major medical.
Retirees would have to meet the required amount of service.
Pre and post Medicare eligible retires would pay different
premium amounts.
Representative Seaton discussed the formula for post
Medicare eligibility. The subsidy base continued on through
post-Medicare eligibility. He observed that an amendment
might be offered to change this.
2:39:44 PM
Representative Seaton noted that there was also a change to
the employer dollar amount for the HRA. Individual accounts
are maintained upon termination of employment. Under the
previous version, benefits would have been lost after five
years. He noted that the intent would be to retain the
benefits, which the were paid into, upon return to
employment. This would be in line with a defined
contribution account, which would follow with the person
and be accessible upon retirement age and ten years of
vesting. The required employer contribution would be 4.5
percent; the total contribution would be 12 percent. The
employee would pay 8 percent. Optional contributions would
be allowed, but would not be matched. Rollovers would be
the same. There would not be any vesting in the employer's
portion of the contribution in the first year, but it would
increase by 25 percent a year. After three years an
employee would take his contribution and 50 percent of the
employer's contribution. After five years the employee
would get the full amount of the employer's contribution in
addition to his own.
2:42:04 PM
Representative Seaton referred to investment accounts and
observed that that there would be a range of investment
options. Participants would direct the investment into fund
accounts, but would not be able to invest in individual
stocks, similar to SBS. Employees would be able to elect
distribution of accounts upon termination of employment,
after 60 days, subject to federal regulations. The Board
would set the "normal cost rate".
Representative Seaton noted that conditional service,
retirement benefit, and credit service was changed to 120
days for legislative employees.
Representative Seaton referred to the fiscal note. The PERS
and TRS liability would be paid for two years through the
plan.
Representative Seaton discussed the option to convert from
the defined benefit (DB) to the defined contribution plan
(DC). An unvested TRS and PERS member would be able to
convert their DB plan into a DC plan.
A mechanism was included for political subdivisions, which
do not currently have a PERS system, to join the DC plan.
2:45:22 PM
Representative Joule inquired about the boards and asked if
discussion occurred regarding approval by the legislature
of the membership. Representative Seaton noted that the
HSTA Committee did not go into confirmation by the
legislature.
2:46:55 PM
Co-Chair Meyer observed that a work group was set up to
find areas of common grounds between the various versions
of SB 141. He asked Representative Kelly, the chairman of
the group, for a report.
2:47:52 PM
Representative Kelly reported that the working group worked
out the differences between the HSTA version and the
proposed House Finance Committee substitute, version C. He
referred to a handout, "SB 141 Bill Version Comparison"
(copy on file.)
2:50:42 PM
Representative Kelly referred to item #17, board members.
He noted that the working group generally agreed that the
PERS and TRS system would be represented by two members per
system, which would be selected by the governor, from a
list nominated by the bargaining.
Representative Kelly spoke of item #18. The working group
agreed to keep the requirement for permanent fund dividend
eligibility. The intent is to assure that the board member
be an Alaskan. There was no change to item #19 from the
HSTA version. The working group approved language proposed
in version C, for items 20 and 22. He noted that there was
no time to create a new committee substitute.
2:54:10 PM
Representative Kelly commented that after discussions with
Representatives Meyer and Seaton, the decision was made to
bring forth the amendments that found consensus.
2:55:21 PM
Representative Croft, working group member, referred to
item 18. He noted that there was some discussion on whether
a member would have to be active or vested in the system.
2:56:24 PM
Representative Seaton, who also participated in the work
group, related that a problem with the permanent fund
dividend qualification requirement could occur if there
were three public members that had not been involved in the
system. He did think it would pose a problem as the
presented.
Representative Croft referred to page 47, HCS CSSB 141
(STA). He concluded that employees are likely to be
PERS/TRS members. The commissioners would also be
participants. He concluded that it would not be a problem.
2:58:41 PM
Representative Kelly stated that the theme of the
amendments would be eliminating increases for existing
employer contributions, addressing death and disability,
early retirement opportunities, and health care provisions.
2:59:55 PM
Representative Kelly MOVED to adopt Amendment 1:
Page 47, line 11
Delete "three"
Insert "seven"
Page 47, lines 24-31
Page 48, lines 1-5
Delete all material
Insert
(3) two trustees shall be a member of the public
employees' retirement system who shall be selected
form a list of nominees submitted by public employees'
retirement system bargaining units;
(4) two trustees shall be a member of the
teachers' retirement system who shall be selected from
a list of nominees submitted by teachers' retirement
system bargaining units.
Co-Chair Meyer OBJECTED for discussion purposes.
3:00:40 PM
Representative Seaton observed that the amendment reduces
the public membership to one and increases the PERS and TRS
membership to two eaach.
Representative Croft noted a technical change to amend
Amendment 1:
Add "four" after "of" in lines 10 and 13.
Representative Kelly OBJECTED for the purpose of
discussion.
Representative Seaton explained due to the staggered terms,
both of the members would not be replaced at the same time.
Representative Croft agreed MOVED to AMEND his amendment to
Amendment 1: change "four" to "three". There being NO
OBJECTION, it was so ordered.
3:03:04 PM
Representative Weyhrauch observed that it is the
responsibility of the bargaining unit to make sure members
as qualified as possible.
Representative Kelly WITHDREW his objection to the
amendment to Amendment 1. There being no further objection,
the amendment (a) to Amendment 1 was adopted.
3:03:53 PM
Representative Croft restated the amendment change. He
MOVED amendment (b) to Amendment 1:
Add the words "All trustees shall be subject to the
legislature."
Representative Croft observed that the legislature is the
ultimate appropriating body. The financial responsibility
lies with the state. He acknowledged that most nominees are
confirmed, but felt that there should be a legislative
check.
Representative Kelly clarified that the permanent fund
board is not confirmed by the legislature. He maintained
his OBJECTION to amendment (b) to Amendment 1. He opined
there might be enough protection.
Representative Kelly noted that the intent is to be
consistent with the Permanent Fund Board.
3:07:12 PM
Representative Weyhrauch observed that some of the members
of the Permanent Fund Board are confirmed by the
legislature. The attorney general and commissions of
revenue are confirmed by the legislature.
Representative Kelly felt that there was sufficient
oversight.
3:08:31 PM
Vice-Chair Stoltze asked how the Bradner Decision affects
legislative confirmation.
3:09:27 PM
VIRGINIA RAGLE, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, observed that the board would not be the head of an
agency or a quasi-judicial board, which would require
confirmation.
Representative Croft asked if the TRS/PERS boards are
confirmed. Ms. Regal clarified that the TRS/PERS boards are
not confirmed. She understood that the legislature cannot
require confirmation of just anyone. There are certain
prescribed, descriptive terms that the Constitution uses to
determine when confirmation is appropriate.
Representative Croft withdrew amendment (b) to Amendment 1.
3:11:41 PM
Representative Hawker asked if there is a technical
correction to Amendment 1. He MOVED amendment (c) to
Amendment 1:
Replace (3) and (4) with (d) and (e).
There being NO OBJECTION, amendment (c) to Amendment 1 was
adopted.
3:14:02 PM
Co-Chair Meyer WITHDREW his objection to adopt Amendment 1.
There being no further objection, Amendment 1 was adopted,
as amended.
3:14:11 PM
Representative Kelly MOVED to adopt Amendment 2:
Page 59, line 15
Delete "two"
Insert "2.5"
Co-Chair Meyer OBJECTED for discussion purposes.
Representative Kelly explained that the 2.5 percent
contribution represents the middle ground between the HSTA
and the Senate versions. {The amendment would substitute
2.5 for 3.75 as the employers contribution to the employees
major medical insurance.]
3:15:22 PM
Representative Seaton observed that the total health care
cost was decreased due to cost constraints.
In response to a question by Representative Croft, Seaton
clarified that the amendment refers to the public
employee's health reimbursement plan.
3:17:50 PM
Representative Croft observed that the next three
amendments offer different percentages. He stressed that
any percentage adopted would be an estimate and emphasized
that if the guess were wrong future employees would suffer.
Under the current system the Board reevaluates yearly.
Co-Chair Meyer acknowledged Representative Croft's
concerns, but pointed out that the legislature can increase
the amount in the future.
3:20:24 PM
Representative Kelly stressed that the amount is a policy
call.
3:21:29 PM
Representative Hawker expressed similar concerns to those
expressed by Representative Croft. He questioned what
evidence there is that 2.5 would meet the medical needs of
retirees.
3:22:20 PM
Representative Seaton responded that there are numerous
tables to show the effect of different funding levels. He
acknowledged that the House State Affairs Committee did not
feel that two percent was sufficient, without pre-Medicare
eligible health care. Their analysis demonstrated that
there would not be sufficient funding to provide for health
care during the pre-Medicare eligible period. He noted that
it would take 3 percent to cover the need without pre-
Medicare eligibility. He recounted testimony that 2.5
percent would be "medically very rich" and would adequately
fund the premium base for early retirement. He felt that
the result would be a good medical plan.
3:25:34 PM
Representative Hawker summarized that 2.5 percent is
adequate to provide the necessary benefits. Representative
Seaton responded that 2.5 HRA with pre-Medicare eligibility
would provide excellent medical coverage for retirees.
3:26:40 PM
Representative Croft asked what would happen if they were
wrong. He observed that if they were wrong the employee
would be considerably under saved. The employee faces the
consequences.
Representative Kelly noted that the percentage could always
be increased, but emphasized the need to be conservative
since the amount cannot be reduced.
3:30:22 PM
Representative Hawker pointed out that the reason the issue
is before the state of Alaska is that the experts recently
erred in judging medical costs. Representative Seaton
responded that the pre-60 medical plan has a subsidy base
and cost containment with an escalation of five percent a
year. He acknowledged that if inflation is seven percent
that there would be some cost sharing.
Representative Croft asked how a number could be chosen for
medical costs. Representative Seaton acknowledged that the
design is a defined medical contribution plan, which
constrains the subsidy base. The subsidy base would go up
to $47,000 a year in 30 years. The cost to the system is
built in. He acknowledged that projections can be wrong.
Representative Croft summarized that if medical costs
increase beyond 5 percent that employees would have a
shortfall. Representative Seaton agreed and added that it
is important to have a large nest egg.
3:33:57 PM
Representative Croft MOVED to amend Amendment 2: replace
"3" with "2.5".
Co-Chair Meyer OBJECTED.
In response to a question by Representative Weyhrauch,
Representative Seaton clarified that the total employer
contribution would be 10 percent.
3:36:37 PM
At ease.
3:38:08 PM
Representative Weyhrauch restated the amendment to
Amendment 2.
3:39:58 PM
At ease.
3:40:44 PM
A roll call vote was taken on the motion to ADOPT the
amendment to Amendment 2.
IN FAVOR: Croft, Hawker, Joule, Moses, Weyhrauch
OPPOSED: Foster, Holm, Kelly, Stoltz, Chenault, Meyer
The MOTION FAILED (5-6).
Co-Chair Meyer WITHDREW his objection to the motion to
adopt Amendment 2. There being NO OBJECTION, Amendment 2
was adopted.
3:42:55 PM
Representative Kelly MOVED to adopt Amendment 3:
Page 16, line 10
Delete "4.5"
Insert "5"
Page 83, line 20
Delete "4.5"
Insert "5"
Co-Chair Meyer OBJECTED. Representative Kelly explained
that the additional half percent reflects the medium
approach to assure sufficient funds.
3:43:57 PM
Representative Croft questioned if there is evidence
indicating that the funding level is appropriate.
3:44:38 PM
Representative Kelly referred to tables provided by
Representative Seaton and maintained that the amendment
represents a generous contribution level. He noted that,
per the Constitution, the rate cannot be reduced.
3:46:36 PM
Representative Croft summarized that current employees can
not have their level dropped; it would require a new tier.
Representative Kelly observed that current employees would
not be affected.
Representative Seaton added that 10.9 to 11.1 is the 24-
year average employer contribution.
3:49:12 PM
There being NO OBJECTION, Amendment 3 was adopted.
An at-ease was taken.
4:02:33 PM
Representative Kelly MOVED to ADOPT Amendment 4 (New):
Page 16, line 12:
Delete "3.75"
Insert "2.5"
Page 27, line 27:
Delete "(j) and (k)"
Insert "(j), (k), and (n)"
Page 28, lines 7 - 8:
Delete "will use the subsidy base for Medicare-
eligible premiums"
Insert "are eligible for benefits as provided in (n)
of this section"
Page 28, line 8:
Delete "will"
Insert "shall"
Page 28, line 10, following "(m)", through line 11:
Delete all material.
Page 28, line 12:
Delete "the subsidy"
Insert "The subsidy"
Delete "will be"
Insert "shall be"
Page 28, line 14:
Delete "Each"
Insert "The"
Delete "will"
Insert "shall"
Page 28, following line 15:
Insert a new subsection to read:
"(n) The cost of premiums for a participant who
is eligible for Medicare is the following percentage
of the premium amount:
(1) 30 percent if the member has 10 or
more, but less than 15 years of service;
(2) 25 percent if the member has 15 or
more, but less than 20 years of service;
(3) 20 percent if the member has 20 or
more, but less than 25 years of service;
(4) 10 percent if the member has 30 or more
years of service."
Reletter the following subsections accordingly.
Co-Chair Meyer OBJECTED.
SUZANNE CUNNINGHAM, STAFF, CO-CHAIR MEYER, discussed the
amendment. Legislative Legal Services drafted New Amendment
4 in keeping with the intent of Amendment 4, which pertains
to the cost of premiums for participants who are eligible
for Medicare. She reviewed the percentage based on service
(see above).
4:04:26 PM.
Co-Chair Chenault observed that the amendment did not
address 20 to 25 years of service.
Co-Chair Chenault MOVED to AMEND Amendment 4 by changing 25
years to 30 on page 2, line 17: (3) 20 percent if the
member has 20 or more, but less than 30 years of service.
4:05:51 PM
Representative Croft asked if the percentage schedule was
the same as the Senate version. Representative Weyhrauch
questioned the status of medial benefits for those that are
pre-Medicare eligibility.
4:06:33 PM
In response to questions, Representative Seaton explained
that the House State Affairs version added 60 months pre-
Medicare eligibility and retained the same post Medicare
system. The House State Affairs pre-Medicare version was
combined with the post Medicare Senate version. The pre-
Medicare program is subsidy based, which pays 30 90
percent of the premium depending on years of service. The
system changes with Medicare eligibility.
Representative Croft summarized that the amendment is a
hybrid of the two approaches. Representative Seaton agreed.
The HSTA version adds pre-Medicare eligibility and cost
containment. There is also a Medicare subsidy from the
federal government. The cost difference of the 2.5 percent
is 1 percent for pre-Medicare and 1.5 for post Medicare.
The post Medicare premiums are smaller because of the
federal subsidy, but the system pays a higher percentage.
4:10:17 PM
Representative Croft stressed that there will be no
governmental obligation if the medical costs estimates are
wrong. He did not think the percentage should be lowered.
Representative Seaton clarified that the payment would be a
guaranteed benefit that the state of Alaska would provide
to the employee.
4:11:56 PM
In response to a question by Representative Weyhrauch,
Representative Seaton clarified that the original Senate
version contained 3.75 percent, with cost containments.
4:13:22 PM
Representative Weyhrauch MOVED to AMEND Amendment 4 to
delete on page one, lines 1 3. There being NO OBJECTION,
it was so ordered. [The amendment to the amendment would
result in the retention of 3.75 percent.]
There being NO OBJECTION, it was so ordered.
Representative Kelly MOVED to RESCIND the Committee's
action in adopting the amendment to the amendment.
Representative Croft OBJECTED.
A roll call vote was taken on the motion to rescind.
IN FAVOR: Holm, Kelly, Stoltze, Foster, Hainault, Meyer
OPPOSED: Hawker, Joule, Moses, Weyhrauch, Croft
The MOTION PASSED (6-5).
A roll call vote was taken on the motion to amend by
deleting lines 1 3 on page 1.
IN FAVOR: Hawker, Joule, Moses, Weyhrauch, Croft
OPPOSED: Holm, Kelly, Stoltze, Foster, Chenault, Meyer
The MOTION FAILED (5-6).
4:20:01 PM
Representative Croft spoke against the reduction to 2.5
percent. He emphasized the inability to accurate predict
medical costs over the next 30 40 years.
Representative Kelly stressed that there is some sharing of
the risk, but the legislature is doing the best it can to
assure that future plans can be maintained.
4:23:04 PM
A roll call vote was taken on the MOTION to ADOPT Amendment
4, as amended.
IN FAVOR: Kelly, Stoltze, Weyhrauch, Foster, Hawker, Holm,
Chenault, Meyer
OPPOSED: Joule, Moses, Croft
The MOTION PASSED (8-3).
4:23:34 PM
Representative Kelly MOVED to ADOPT (New) Amendment 5:
Page 83, line 22:
Delete "3.5"
Insert "2.5"
Page 93, line 19, following "the member has":
Delete all material and insert "at least 25 years of
service as a peace officer or fire fighter or at least
30 years of service for all other employees; or"
Page 94, lines 4, following "a member with at least":
Delete "30 years of service"
Insert "25 years of service as a peace officer or fire
fighter or at least 30 years of service for all other
employees"
Page 95, line 6:
Delete "(j) and (k)"
Insert "(j), (k), and (n)"
Page 95, lines 17 - 18:
Delete "will use the subsidy base for Medicare-
eligible premiums"
Insert "are eligible for benefits as provided in (n)
of this section"
Page 95, line 18:
Delete "will"
Insert "shall"
Page 95, line 20 following "(m)" through line 21:
Delete all material.
Page 95, line 22:
Delete "the subsidy"
Insert "The subsidy"
Delete "will be"
Insert "shall be"
Page 95, line 24:
Delete "Each"
Insert "The"
Delete "will"
Insert "shall"
Page 95, following line 25:
Insert a new subsection to read:
"(n) The cost of premiums for a participant who
is eligible for Medicare is the following percentage
of the premium amount:
(1) 30 percent if the member has 10 or
more, but less than 15 years of service;
(1) 25 percent if the member has 15 or
more, but less than 20 years of service;
(1) 20 percent if the member has 20 or more,
but less than 25 years of service;
(1) 10 percent if the member has 30 or more
years of service.
Reletter the following subsections accordingly
Co-Chair Meyer OBJECTED.
Representative Seaton explained that the amendment
reinstates the 25-year of service for police officers.
Representative Weyhrauch MOVED to ADOPT an amendment to
Amendment 5: Change 25 to 30 on page 2, line 26
There being NO OBJECTION, it was so ordered.
Representative Weyhrauch MOVED to ADOPT an amendment to
Amendment 5:
Delete lines 1 3 on page 1.
Representative Kelly OBJECTED.
A roll call vote was taken.
IN FAVOR: Weyhrauch, Croft, Hawker, Joule,
OPPOSED: Kelly, Moses, Stoltze, Foster, Holm, Meyer,
Chenault
The MOTION FAILED (4-7).
4:27:15 PM
Representative Kelly MOVED to ADOPT Amendment 6:
Page 50, line 6
Insert new paragraph
(8) review annually the status of the retiree health
insurance fund established for members of the defined
contribution plans under AS 14.25.310-14.25.590 and AS
39.35.700-39.35.990 to ensure the medical cost rate
established for employers under AS 14.25.350(b) and AS
39.35.750(b) is sufficient to fully fund the
employers' required share of the premiums established
for the retiree major medical insurance plan; the
board shall notify the legislature immediately if the
board determines the rates established by statute are
insufficient;
Renumber the remaining paragraphs accordingly
Co-Chair Meyer OBJECTED. Representative Seaton explained
that the amendment would require annual review of the 2.5
percent [employer contribution] to assure that sufficient
funds are collected to provide medical benefits.
Representative Croft questioned if the amendment should
state that the amount is "sufficient to provide medical
benefits". He did not feel that the amendment was specific
enough. Representative Seaton clarified that the amendment
would clarify that the legislature would make sure that the
employer contribution of 2.5 is enough to provide for the
guaranteed benefit for the plan.
In response to comments by Representative Seaton,
Representative Croft clarified that, while he would like to
change the entire program to a defined benefit, he was not
attempting to do so in Amendment 6. The question is: within
the context of a defined contribution plan, should the
legislature periodically "get a reality check on whether
what we are providing as benefit, in a defined contribution
system, is sufficient for people to retire on."
Representative Kelly stressed that the discussion concerns
two different studies. One would look to see if the funding
level is adequate for premiums. Representative Croft's
concerns would require the whole situation to be studied.
Representative Croft MOVED to ADOPT a conceptual amendment
to Amendment 6: to broaden the study to ask if the
contribution rate is enough to pay the cap subsidies that
have a box of 5 percent, and whether the benefit is
sufficient for retirement. He pointed out that the
legislature would not have to act on the findings.
4:31:32 PM
Representative Kelly OBJECTED. He noted the amendment is
beyond the scope of the amendment.
Representative Weyhrauch questioned if the amendment to the
amendment should be a separate amendment. He spoke in
support of providing more information to the legislature,
but felt that it should be its own amendment.
Representative Croft spoke in support of retaining the
amendment to Amendment 6. He maintained that the current
plan is a cost shifting not a risk sharing.
4:35:07 PM
Representative Kelly stressed that there is still a problem
at 5 percent. He disagreed with the assessment that there
is no risk [to the state of Alaska.]
4:36:33 PM
Representative Croft restated his amendment to broaden the
study to include whether the benefits paid are sufficient
for the employees to fund an adequate retirement and meet
their medical expenses. A roll call vote was taken on the
motion to adopt a conceptual amendment to Amendment 6.
IN FAVOR: Moses, Stoltze, Weyhrauch, Croft, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Chenault, Meyers
The MOTION FAILED (5-6).
Representative Weyhrauch MOVED to AMEND Amendment 6: add on
line 9 "and make recommendations on rates that are
sufficient". There being NO OBJECTION, it was so ordered.
There being NO OBJECTION, Amendment 6 as amended was
adopted.
4:38:43 PM
Representative Kelly MOVED to ADOPT Amendment 7:
Page 51, line 20
Delete "$150"
Insert "$400"
Representative Kelly observed that the [board] stipend
amount would be the same as that of the Permanent Fund
board members.
There being NO OBJECTION, it was so ordered.
4:39:37 PM
Representative Weyhrauch WITHDREW Amendment 8.
Representative Kelly MOVED to ADOPT Amendment 9, which
provides for an employer making contributions towards a
retiree major medical insurance. Representative Seaton
explained that the amendment would provide extra
contributions for police/fire death benefits. He did not
have actuarial numbers on the amendment, as the House State
Affairs Committee did not consider the amendment.
4:41:06 PM
Representative Weyhrauch suggested the amendment be
considered at a different time.
Representative Kelly WITHDREW Amendment 9. There being NO
OBJECTION, it was so ordered.
4:42:04 PM
Representative Weyhrauch WITHDREW (New) Amendment 10. There
being NO OBJECTION, it was so ordered.
4:42:36 PM
Representative Kelly MOVED to ADOPT Amendment 11:
Page 59, lines 24-27
Delete all material
Insert
"If a person who has not met the eligibility
requirements of AS 14.25.470 or AS 39.35.870 returns
to employment with a participating employer within 10
years after the date of termination, the person's
account balance shall be restored in the amount
recorded on the date of termination from the trust,
with interest.
Co-Chair Meyer OBJECTED for the purpose of discussion.
Representative Seaton explained that Amendment 10 would
make the HRA available for persons that returned to service
within 10-years. The Senate version had a five-year window.
Representative Kelly WITHDREW Amendment 11. There being NO
OBJECTION, it was so ordered.
4:45:08 PM
Representative Kelly MOVED to ADOPT Amendment 12:
Page 27, lines 8-11
Delete all material
Co-Chair Meyer OBJECTED for the purpose of discussion.
Representative Seaton explained that Amendment 12 would
eliminate some of the unfunded liability. The question is:
Should the system be responsible for new dependents of an
employee? He observed that it is a policy call.
4:47:49 PM
Representative Croft spoke in support of the amendment. He
suggested that people have the right to have second
families and for those families to be eligible for
benefits. He did not think that individuals would have
families just to reap benefits.
Co-Chair Meyer acknowledged the attempt to minimize
liability, but agreed with Representative Croft.
Vice-Chair Meyer WITHDREW his objection to the motion to
adopt Amendment 12. There being NO further OBJECTION, it
was so ordered.
4:49:28 PM
Representative Kelly MOVED to ADOPT Amendment 13:
Page 112, following line 7:
Insert a new bill section to read:
"* Sec. 143. The uncodified law of the State of Alaska
is amended by adding a new section to read:
CONDITIONAL RETROACTIVITY. If secs. 1 - 9, 12, 15 -
18, 20 - 86, 93 - 104, 106 - 111, and 113 - 130 of
this Act take effect after July 1, 2005, secs. 1 - 9,
12, 15 - 18, 20 - 86, 93 - 104, 106 - 111, and 113 -
130 of this Act are retroactive to July 1, 2005."
Renumber the following bill sections accordingly.
Page 112, line 10:
Delete "Section 142 of this Act takes"
Insert "Sections 142 and 143 of this Act take"
Page 112, line 11:
Delete "secs. 143 and 144"
Insert "secs. 144 and 145"
Co-Chair Meyer OBJECTED for the purpose of discussion.
Representative Weyhrauch explained that the amendment would
provide a technical correction suggested by the drafters.
There being NO further OBJECTION, it was so ordered.
Representative Weyhrauch MOVED to ADOPT Conceptual
Amendment 14:
For any employee hired after the effective date of
this act, who is killed or disabled in the course of
their employment, the provisions of AS 14.25.157,
160,162, or 39.35.410, 415,420,430, and 440 as they
existed before the effective date of this act, shall
apply.
Co-Chair Meyer OBJECTED for the purpose of discussion.
4:50:58 PM
Representative Weyhrauch explained that individuals killed
in the line of duty, principally fire and police officers
are negatively affected by the legislation. The intent of
the amendment would be to retain Tier III disability
benefits for the heirs and descendents of employees hired
after the effective date and killed while affecting their
employment.
Vice-Chair Stoltze spoke in support of the amendment.
Co-Chair Meyer WITHDREW his OBJECTION. Representative Kelly
OBJECTED for the purpose of further discussion. He
requested additional information.
4:54:12 PM
Representative Seaton noted that the federal Public Safety
Officers Benefit program provides $267,494 for any
emergency or public safety officer killed in the line of
duty, or officers that are terminally and totally disabled.
In response to a question by Representative Kelly, Ms.
Millhorn clarified that individuals killed on the job would
have death benefits under the existing PERS statute. A lump
sump payment would be paid to their beneficiary if there is
no spouse; if they have a spouse the benefits would be
available under existing statute.
4:57:50 PM
Co-Chair Meyer spoke in support of the amendment.
In response to a question by Representative Kelly, Ms.
Millhorn did not know the relative cost [of the amendment].
Ms. Millhorn observed that there are currently 31,000 in
the PERS system. She added that 2,705 are police or
firefighters. Over the last five years, there have been
approximately six death benefits paid by the state of
Alaska due to occupational death. There have been 13 in
PERS for all other deaths.
5:01:04 PM
Representative Croft spoke in support of the amendment,
which would pay 40 percent of base salary out over the life
of the remaining spouse. It is preferable to a lump sum,
which could be too much or too little. The amount would be
measured by the need of the beneficiary.
5:02:26 PM
Representative Kelly questioned if the amendment would risk
changing the nature of the plan.
Ms. Millhorn responded that a different kind of benefit
would be created, which would reach back and create a
defined benefit contribution. She referred to plans by
other states where disability benefits were the account
balance.
5:04:20 PM
Co-Chair Meyer reiterated his question as to whether it
would create a problem.
Representative Kelly asked that the amendment be held for
further consideration.
Representative Croft questioned the funding source. Ms.
Millhorn noted that the money would come out of the medical
contribution. Under the defined benefit plan all the
provisions are in the evaluation and paid for by the
employer and the employee. Representative Croft agreed and
asked what would happen under the new plan. Ms. Millhorn
noted that the new plan would most likely fall under the
medical component. Representative Croft did not see how it
would fall under the employees or the unfunded liability.
5:08:40 PM
Representative Kelly noted that a previous amendment would
pay for the plan.
Representative Weyhrauch WITHDREW Amendment 14. There being
NO OBJECTION, it was so ordered.
Representative Weyhrauch WITHDREW Amendment 15. There being
NO OBJECTION, it was so ordered.
5:10:05 PM
Representative Weyhrauch MOVED to ADOPT Amendment 16:
Page 11, line 4:
Delete "110"
Insert "105"
Page 11, line 14:
Delete "110"
Insert "105"
Page 78, line 1:
Delete "110"
Insert "105"
Co-Chair Meyer OBJECTED for the purpose of discussion.
Representative Weyhrauch explained that the amendment would
provide for a cost of living adjustment from 105 percent.
He felt that the amendment would allow more latitude.
Representative Seaton did not object to the amendment.
Co-Chair Meyer WITHDREW his OBJECTION to adopt Amendment
16. There being NO further OBJECTION, it was so ordered.
5:12:26 PM
Representative Weyhrauch MOVED to adopt Amendment 17:
Page 18, line 20, following "accounts.", through page
19, line 13:
Delete all material.
Insert "The board shall invest the assets of the
individual accounts under AS 37.10.210."
Page 49, lines 15 - 16:
Delete all material.
Reletter the following subparagraphs accordingly.
Page 49, line 18, following "Plan);":
Insert "and"
Page 49, lines 19 - 20:
Delete all material.
Reletter the following subparagraph accordingly.
Page 85, line 30, following "accounts.", through page
86, line 23:
Delete all material.
Insert "The board shall invest the assets of the
individual accounts under AS 37.10.210."
Vice-Chair Stoltze OBJECTED for discussion purposes.
Representative Weyhrauch explained that the amendment
speaks to who is doing the investment in the plans and why.
He referred to a study in "Governing Magazine", March 2004.
The state of Nebraska introduced a defined contribution
plan where state and county employees controlled their
investments. He observed that, during the period from 1983
to 1999, state and county workers averaged 6 percent return
on their investments versus an 11 percent return by the
state's traditional investors handling the traditional
pension funds.
Representative Kelly spoke against Amendment 17 and
suggested that it goes too far.
5:14:32 PM
Co-Chair Meyer asked if the attempt is to make options
similar to the SBS system. Representative Seaton affirmed
and explained that the House State Affairs Committee looked
at allowing the new board to manage the funds with the same
accounts that the defined benefits use. They found that it
would be illegal for a single defined contribution account
to have a single investment option, under the IRS code.
Individuals could elect to have their accounts managed by
the new ARM Board.
5:15:50 PM
A roll call vote was taken on the motion to Adopt Amendment
17 was taken.
IN FAVOR: Weyhrauch, Hawker, Joule, Moses
OPPOSED: Croft, Foster, Holm, Kelly, Stoltze, Chenault,
Meyer
The MOTION FAILED (4-7).
5:17:28 PM
At ease.
5:22:18 PM
ADJOURNMENT
The meeting was adjourned at 5:23 P.M.
| Document Name | Date/Time | Subjects |
|---|