Legislature(2025 - 2026)GRUENBERG 120
01/28/2025 03:15 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Division of Retirement and Benefits | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
January 28, 2025
3:16 p.m.
MEMBERS PRESENT
Representative Ashley Carrick, Chair
Representative Andi Story, Vice Chair
Representative Rebecca Himschoot
Representative Ky Holland
Representative Sarah Vance
Representative Kevin McCabe
Representative Elexie Moore
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW: DIVISION OF RETIREMENT AND BENEFITS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
Kathy Lea, Director
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Gave an overview describing the Alaska
Division of Retirement and Benefits.
AMY GALLAWAY, Retired Teacher
Invited testifier
Fairbanks, Alaska
POSITION STATEMENT: Gave invited testimony regarding retirement
processing delays and her experience.
ACTION NARRATIVE
3:16:07 PM
CHAIR ASHLEY CARRICK called the House State Affairs Standing
Committee meeting to order at 3:16 p.m. Representatives Story,
Himschoot, Holland, Vance, McCabe, Moore and Carrick were
present at the call to order.
^Overview: Division of Retirement and Benefits
Overview: Division of Retirement and Benefits
3:16:52 PM
CHAIR CARRICK announced that the first order of business would
be an overview of the Division of Retirement and Benefits.
3:17:48 PM
Kathy Lea, Director, Division of Retirement and Benefits,
Department of Administration, gave an overview via PowerPoint
describing the Alaska Division of Retirement and Benefits [hard
copy included in committee file]. She remarked that the
presentation was a general overview and specific elaboration on
the Processing. Beginning on Slide 2, she described the
operating role of the division and its governance. On Slides 3
and 4, she discussed both the pension programs and health
benefits programs. She noted that the Division of Retirement
and Benefits (DRB) administers nine different pension programs.
She remarked that each of these pension programs has specific
rules and eligibility guidelines. Moving to Slides 5 and 6, she
described the internal organization within the division. She
noted that this includes a director and three officers. She
proceeded to describe each officer and their governing units.
3:21:18 PM
REPRESENTATIVE HIMSCHOOT asked how much state healthcare
benefits have increased in cost.
MS. LEA was unable to provide those numbers but could get them
later.
3:22:16 PM
MS. LEA continued with the overview and described Slide 7, which
illustrates the organizational hierarchy of the Chief Pension
Officer. She noted that when fully staffed, 45 employees work
in the Member Benefits Unit.
3:23:00 PM
MS. LEA responded to a series of questions from committee
members. She noted that currently the vacancy rates were doing
well and noted that the last position within the processing unit
was in the process of being filled. She explained that in June,
the Member Benefits Unit had a 47 percent vacancy rate; however,
the rest of the division was not as high. Regarding tenure, she
said that DRB has the blessing of a seasoned staff that has
worked within the division for a long time. She also remarked
that no positions have been cut from the division, and positions
have been added in the last five years. She confirmed that
$4,000 hiring incentives were used, and these helped with the
hiring process. These incentives involved a $2000 initial
payment and a $2000 payment following 2 years of service. The
retention bonuses follow the same pay-out model. She said that
DRB saw few applications for their positions, and the incentives
were helping address the thin application pools. She explained
that in the last few years, DRB was not conducting exit surveys,
as managerial prioritization was placed on refilling positions;
however, the Division of Personnel conducts them and can be a
source of this information.
3:32:36 PM
MS. LEA continued with the division overview and presented Slide
11, which illustrates retirement benefit processing time. She
clarified that retirement benefits are due at the end of the
month, and this can create some confusion for applicants. She
noted that about 20 percent of retirement processing goes over
six weeks and is typically due to missing applicant paperwork.
3:34:55 PM
MS. LEA responded to questions from committee members. She
noted that the timing to initiate retirement processing begins
at the first of the month and explained that it can take time to
process because of applicant paperwork requirements and ensuring
the issuance of the correct benefits package. She remarked that
approximately 75-80 percent of plans are paid on time. She
clarified that employment termination and retirement eligibility
are different. She stated that the division encourages early
submission of applications and applicants with delays are
entitled to retroactive payments.
3:41:09 PM
MS. LEA continued with the overview and discussed Slides 12-14,
which highlight the 2022 division reorganization. She
elaborated on what units were moved and provided the rationale.
She explained that the July retirement load can be four to five
times the standard application load due to teacher retirements.
She explained that staffing issues and the additional workload
created problems within the division. She mentioned that DRB
reputation was damaged from the high workload placed on
employees and this created additional hiring complications. On
Slide 15, she provided an illustration of both the staffing
requirements and vacancies during 2023/2024. She explained that
the retirement processing unit was about 47 percent staffed and
approximately 14 weeks were required to process retirement
applications. On Slide 16, she discussed the division's
decision to reverse the 2022 reorganization. She mentioned that
overtime was offered to all staff to assist with retirement
processing, and that retirement applications were caught up by
the end of August 2024.
3:46:25 PM
MS. LEA responded to a series of questions from committee
members. She clarified Slide 15 and remarked that it describes
the types of benefits, not how many units handle an application.
She also mentioned that in anticipation of the July workload,
the division has a planning meeting in May. She explained that
during the busy period, extended periods of leave are not
expected from employees. She also mentioned that in the absence
of a chief pension officer, typically the operations manager is
responsible for staffing oversight and help requests are issued
to the director. She also mentioned that to prepare for exiting
division employees, a mentoring program was implemented, and
cross-training employees is a requirement for every chief and
manager. She noted that this program has been successful for
the division. She could not explain the rationale for the
actions taken by the prior director and their decision to move
staff. Lastly, she noted that most DRB employees are in
Juneau's State Office Building, but some are in Anchorage and
periodically requested for help.
3:54:57 PM
MS. LEA discussed Slide 17 and mentioned the cultivation of the
idea within DRB that it is a united division, regardless of
sections and units. She noted that when one sections falls
behind, others are expected to support it. On Slide 18, she
explained that cross-training was practiced to better prepare
staff to help in other divisional areas. In conclusion on Slide
19, she iterated that paying benefits is a number one priority
and a division point of focus.
3:57:30 PM
MS. LEA responded to a series of questions from committee
members. She confirmed that delinquent employers are an issue
for the division and have been since the '90s. She remarked
that most of delinquents were from smaller villages and that a
statute allows the division to intercept state funds being
issued to that entity; but if funds get intercepted, then
critical infrastructure funds can be compromised. She explained
that after consultation, it was deemed that there is no money to
intercept. She noted that the employees of those delinquent
employers do not get all the benefits. She mentioned that about
every 2-3 years new solutions are explored. She added that
current employers that are delinquent are in suspension and
cannot add any additional employees and provide coverage. She
also explained that each fund is adequately funded and in good
health. She clarified that DRB is neutral regarding legislative
planning as this was the responsibility of the legislature.
However, she emphasized that understanding plan structure is
important and how plans have changed historically. She noted
that some benefits haven't been processed, but everything that
has a completed application is on a 4 to 6-week schedule. She
could not provide the number of applications still being
processed but would work on making that information available
later. She remarked that bonuses are budgeted until June 30 and
a later evaluation would be conducted to determine whether
bonuses would be needed. She was unable to provide the amount
of money spent on bonuses but would work on getting this
information.
4:12:43 PM
AMY GALLAWAY, Retired Teacher, invited testifier, gave invited
testimony regarding retirement processing and her experience.
She remarked that she retired in July after 25 years of teaching
and her difficulties dealing with retirement were shared by
others in the same retirement period. She thanked DRB for
changing course and policies to address delays. Initially, she
was told in June that her retirement would not arrive until
November or December, and this was a point of concern. She
mentioned that preparations for her retirement began in 2023,
and she provided information in advance. Following submission,
she was told of a backlog of 12-14 weeks from the effective
start date. She began hearing about problems with other
teachers and DRB confirmed that there was a delay. She noted
that these delays caused her to cancel doctor appointments to
address a recent diagnosis. She opined that it seemed as if
public servants were not a priority and compared it to permanent
fund dividend (PFD) prioritization. She expressed that the
delays eroded her belief that teachers felt valued, and this
sentiment was shared by some still working. She noted that the
more she investigated the issue, the more she learned of others
being adversely affected by the delays. She provided a few
stories of her colleagues with the same issue. She said that
within 3 weeks, some relief was provided, and this reduced
delays. She raised concern since the problem had been known
since March. She noted that Article 12, Section 7 of the Alaska
Constitution states that membership in employee retirement
systems of the state shall constitute a contractual relationship
and should not be impaired. She argued that more than 6 weeks
constituted impairment. She said that it should have never been
acceptable to wait this long and expressed sympathy and
understanding to DRB staffing shortages.
4:25:08 PM
CHAIR CARRICK noted that Ms. Lea was not employed during the
timeframe regarding which Ms. Gallaway was testifying.
4:25:30 PM
REPRESENTATIVE MCCABE asked MS. Gallaway whom she worked for,
the State of Alaska or the Borough School District.
MS. GALLAWAY responded that she worked for the Borough and
thought that all teachers were state employees.
4:25:50 PM
MS. LEA responded to questions from committee members. She
clarified backlogs and noted that a server intrusion caused a
delay in plan payments. She said that the data was not
compromised. She noted that following the intrusion the
employer reporting tool, E-Reporting, was a function that didn't
migrate to the state cloud platform and required re-programming.
She noted that 1,600 employer payrolls are currently awaiting
processing, and employees will be compensated for any lost
earnings; however, this can't be done until all payrolls are
processed. She noted that compensation for delays follow
Internal Revenue Service (IRS) rules. She noted that DRB
communicates with employers regarding updates and social media
updates are utilized as well. She clarified that the
verification of the payroll occurs with the E-Reporting tool,
which helps detect payroll errors, makes processing accurate,
and has been a tool used since around 2007. She noted that a
problem with processing is having to process payrolls in order.
She also explained that bonuses helped with recruitment but are
just one of many adjustments made by the division to assist with
recruiting.
4:40:34 PM
REPRESENTATIVE HOLLAND asked Ms. Gallaway what she thought about
defined benefits being offered to future teachers and employees.
He asked about what she has learned about bringing back these
benefits.
MS. GALLAWAY said that she was on the governor's Teacher's
Recruitment and Retention Working Group and one of the operating
objectives was to determine recruitment and retention methods
that have efficacy. She noted that every Tier I and Tier II
worker she knew was motivated to keep working because of the
health benefit. She said that the pension did not help with
recruitment, but it was an effective retention tool. She noted
that bonuses were an effective recruiting tool. She said some
Tier 3 teachers have left the state to pursue pension programs
in other states. She noted that pension programs will help
retain quality educators. Additionally, she emphasized that
pairing mentorships programs and pensions is important for
retaining talent.
4:46:12 PM
REPRESENTATIVE STORY asked Ms. Lea what the average age of
retirement was and how DRB plans to deal with any potential
influxes of retirement applications. She also inquired to how
minimum qualifications for positions have been adjusted, whether
any work was contracted, and whether the work was done by
Alaskans.
MS. LEA responded that statistics pertaining to upcoming
retirement ages can be delivered and that when fully staffed,
the division can handle even larger loads of applications. She
mentioned that currently DRB have around 300 and felt that it
could process up to 1,000. She mentioned that an issue is
career change and employee retention, especially amongst younger
employees. Regarding qualification adjustments, she noted that
there has been a shift to skill-based recruiting. She noted
that many higher-end positions can be difficult to fill. She
explained that this work is done completely through Alaska Hire;
and only record keeping on the pension side is contracted out.
She elaborated on contracted employees.
4:55:28 PM
MS. GALLAWAY responded to questions from committee members. She
remarked that she decided to continue teaching despite her
diagnosis because she had a passion for her work, and that after
20 years she could get extra points for retirement and
additional benefits for each year she continued. She noted that
managing stress was a major factor that helped her condition and
allowed her to continue working.
4:58:51 PM
REPRESENTATIVE STORY noted that another employee of DRB was
present.
MS. LEA introduced Chris Novell, the new DRB Chief Financial
Officer to the Committee and expressed optimism for the future
of the division.
5:00:37 PM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 5:00
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2025.01.28.HSTA.Presentation.DRB Overview.pdf |
HSTA 1/28/2025 3:15:00 PM |