Legislature(2021 - 2022)SENATE FINANCE 532
02/05/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Prs/trs Update, Fy22 Payment | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
February 5, 2021
9:02 a.m.
9:02:06 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson (via teleconference)
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
PRESENT VIA TELECONFERENCE
Ajay Desai, Director, Division of Retirement and Benefits,
Department of Administration; Emily Ricci, Chief Health
Policy Administrator, Division of Retirement and Benefits,
Department of Administration; Kevin Worley, Chief Financial
Officer, Division of Retirement and Benefits, Department of
Administration.
SUMMARY
PRESENTATION: PRS/TRS UPDATE, FY22 PAYMENT
Co-Chair Stedman discussed the agenda.
^PRESENTATION: PRS/TRS UPDATE, FY22 PAYMENT
9:03:10 AM
AJAY DESAI, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS,
DEPARTMENT OF ADMINISTRATION (via teleconference),
discussed his background. He had been director of the
Division of Retirement and Benefits for the previous four
years. He had about 32 years of experience in the area of
pension and health benefit administration. He introduced
his staff.
9:04:14 AM
Mr. Desai discussed the presentation "PERS/TRS 2020
Update," (copy on file).
Mr. Desai looked at slide 2, "Organization PERS / TRS,"
which showed a flow chart that included the Department of
Revenue, the Alaska Retirement Management (ARM) Board, and
the Department of Administration (DOA). He commented that
effective October 1, 2005 the ARM board was a trustee for
the pension and retiree health trust, the state
supplemental annuity plan, and deferred compensation plans.
The board's primary duties were to manage and invest assets
in a manner that was sufficient to meet the liabilities and
pension obligations of the system. He listed a summary of
the board's duties: establish investment policies, review
actuarial earnings assumptions, establish asset allocation,
set contribution rates of employers, provide investment
options, and monitor performance.
Mr. Desai spoke to slide 3, "Membership (as of June 30,
2020)," which showed a data table with membership numbers
under both PERS and TRS from defined benefit and defined
contribution plans. He pointed out that the numbers were
broken down by tier and active versus inactive employees.
He directed attention to the last column, which indicated
that there were about 34 percent active participants under
defined benefits plans in 2020. He noted that inactive
vested employees were at about 71 percent, and retired
employees were at 100 percent. Under defined contribution
plans, the active population was continuously growing and
was at about 66 percent. Inactive vested employees
comprised about 29 percent. There was a half percent of
retirees in defined contribution plans that was shown as
zero.
Mr. Desai referenced slide 4, "An Employer Group Waiver
Plan (EGWP) Subsidy":
? Projected amounts described above are rough
estimates due to the dynamic nature of claims.
? 2019 Actual subsidy is $49.5M compared to the
projected subsidy of $52.9M
? 2020 Actual subsidy is subject to minor adjustment
due to true-up
Mr. Desai shared that the 2020 actual subsidy from the
Employer Group Waiver Plan (EGWP) was projected to be about
$58.38 million. He projected about $62.25 million for 2021,
which was trending higher than expected and would help with
the unfunded liability.
9:08:12 AM
Senator von Imhof asked if the reference to "subsidy" was
an Unrestricted General Fund (UGF) additional payment of
$62 million. She asked if the amount was a subsidy made of
GF to make the account whole.
Mr. Desai explained that the funds were savings that
otherwise would have been spent on drugs through the
retiree plans. By implementing the EGWP, the state was able
to save and get a federal subsidy.
Senator von Imhof asked if the EGWP was an arrangement to
help do bulk purchasing with prescription drugs and if Mr.
Desai was saying that the federal government was going to
be paying the state $62 million for 2021 as a cost shift
from the state.
Mr. Desai answered in the affirmative.
9:09:50 AM
Senator Wilson asked about projected cost savings for
future years.
Mr. Desai asked his staff to address the question.
EMILY RICCI, CHIEF HEALTH POLICY ADMINISTRATOR, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION (via
teleconference), noted that the federal subsidies provided
through the EGWP were fairly dynamic. She mentioned the
catastrophic reinsurance and the coverage gap discount,
which reflected the pharmacy spending for the membership.
She pointed out that prescription drug costs for retiree
members had grown from 2019 to 2021. For the foreseeable
future, assuming there were no changes at the federal
level, the subsidies would increase with the increases in
prescription drug prices.
Mr. Desai turned to slide 5, "Additional State
Contributions Projected," which showed a data table which
listed projected additional state contributions from 2022
through 2043. He reminded that there had been a projection
that the state would be 100 percent funded by 2039. As the
state had created new layers for liabilities, the
contribution rate went a little higher on the TRS side. The
amount would be paid by additional state assistance.
Co-Chair Stedman asked for an estimate regarding
overfunding towards the end with lower participants in
2040.
Mr. Desai stated that the question of overfunding prompted
the extension of amortization past 2039, in the case that
there was a significant drop in investment income there
would not be a huge liability to pay off. The majority of
state contributions would be paid by 2039.
Co-Chair Stedman asked about the current unfunded liability
for PERS and TRS.
Mr. Desai estimated that current liability was
approximately $6.1 billion in present value. If the state
were to pay the total liability in a lump sum, it would add
up to about $4.8 billion for PERS and about $1.4 billion
for TRS.
9:14:47 AM
Mr. Desai considered slide 6, "Additional State
Contributions - History," which showed a data table
depicting additional state contributions from 2006 to 2021.
He highlighted that the total added up to $7.9 billion. He
thought the amount was significant. There had been $3
billion paid in 2015.
Co-Chair Stedman pointed out that when the state reduced
its contribution from 2016 to 2019, there was a greater
contribution to be paid in the future. He did not think the
practice was necessarily a good idea and made matters worse
in the future.
9:16:13 AM
Mr. Desai displayed slide 7, "Investment Experience":
The actuarial value of assets was reinitialized to
equal fair value as of June 30, 2014. Beginning in
FY15, the valuation method recognizes 20% of the
investment gain or loss each year, for a period of
five years ("Smoothing").
Mr. Desai noted that the first column on the table on slide
7 showed assumed actuarial earning rates set by the board,
which was 7.38 percent for PERS and TRS. In 2019, the
return based on fair value of assets for PERS was about 6
percent and for TRS was about 5.9 percent. For 2020 the
rates based on fair value of assets were about a 4.1
percent for both plans, but the numbers were not yet
finalized. The actuarial value for both plans was 5.5
percent for 2019 and 5.8 percent for 2020.
Co-Chair Stedman asked about the assumed actuarial rate and
the lower values for the fair value of assets and actuarial
rate.
Mr. Desai explained that there was a smoothing process over
a five-year period that recognized 20 percent of investment
gain or loss each year. He stated that by applying the
smoothing method, there was a lesser impact on the
actuarial assets of the plans.
Co-Chair Stedman asked if the division was hitting its
targeted rate of return, and if the committee should expect
a decrease in the rates.
Mr. Desai pointed out the difference between the 2020
expected rate of 7.38 percent and actuarial perspective of
5.8 percent. He acknowledged that the previous year was
tough worldwide and it was yet to be seen how returns would
change.
Co-Chair Stedman asked for clarification that the expected
rate of return was higher than actual returns. He asked
what to expect from Callan regarding future rates and
return and inflation. He referenced hearing from the Alaska
Permanent Fund Corporation (APFC) that rates were going
down in the future.
9:20:23 AM
KEVIN WORLEY, CHIEF FINANCIAL OFFICER, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION (via
teleconference), relayed that there was an experience study
done every four years and the consulting actuary would
consider the actuarial assumptions (including the rate of
return) compared to what was actually experienced. The
consultant would work with Callan and the Department of
Revenue (DOR) over the preceding year. The division would
consider the rate of return experience from the next study.
Co-Chair Stedman rephrased his question. He asked what the
division's target and return for the previous year.
Mr. Worley shared that the target had been 7.38 percent and
the return was 4.1 percent.
Co-Chair Stedman asked if the division fell short of its
target.
Mr. Worley answered in the affirmative.
Co-Chair Stedman asked the division to be clear so there
was more understanding. He acknowledged that targets and
returns could vary. He thought Mr. Worley had indicated
that there would be a review from the actuaries and
consultants that would come some time in the summer, and
the information would be available to the committee the
following January.
Mr. Worley stated that the experience study would start
during the summer and would take about a year to complete,
during which the information would be considered and
adopted by the ARM board. The study would be in the June
30, 2021 valuation report issued summer of 2022.
Co-Chair Stedman asked if the committee should be prepared
to expect a request for a higher contribution rate since
there were expectations of lower growth of capital markets
for the next decade (as relayed by APFC).
Mr. Worley stated that the matter would have to be worked
out during the course of the meetings with the actuarial
committee, the actuary consultants, Callan, and DOR. He
reminded that the division's investing time-perspective was
different than that of the APFC. He believed the
projections for the Permanent Fund were based on a much
shorter time frame than that of the retirement systems.
Co-Chair Stedman pointed out that the Permanent Fund was
invested in the equities and bond markets in the United
States. He recognized there were time-frame issues. He
understood other states in the country were cutting
contributions towards unfunded liabilities, which he did
not think was in the best interest of the state. He was
concerned if there was a risk of a higher capital call on
the treasury, there should be information sooner rather
than later. He asked for assistance with rough estimates of
what was coming.
9:25:18 AM
Co-Chair Stedman continued his remarks. He acknowledged
that it was not possible to have exact numbers but wanted
ballpark figures to factor into committee discussions. He
thought Callan would be presenting to the committee in the
future and addressing the Permanent Fund and possibly the
PERs and TERS issue. He expressed concern about changing
capital market expectations when the state was in a tough
financial spot.
Senator von Imhof appreciated slide 7. She noted that
beginning in 2015, the valuation method recognized 20
percent in investment gains. She referenced slide 11, which
referenced a longer history. She thought it was possible to
see a trend on slide 7, even if the period was shorter in
time. She wanted to see a difference between assumed
actuarial rates and the differences with the rate based on
fair market assets. She considered whether PERS and TRS had
an adequate funding ratio. She thought something similar to
the Department of Natural Resources' oil forecast, which
had high, medium, and low scenarios, could be helpful.
Co-Chair Stedman thought what Senator von Imhof described
was called a bugle graph and could be put in dollars or
percentages. He thought the graphs well illustrated the
risk level.
Senator von Imhof thought it would be helpful to reframe
slide 7 to include the years 2015 to 2020 with the
different rates.
Co-Chair Stedman asked Mr. Worley to reframe the slide with
the help of the Legislative Finance Division (LFD). He
asserted that there was a significant cash call on the
treasury and emphasized the importance of an accurate
understanding of expectations.
9:29:03 AM
Co-Chair Bishop referenced slide 5 and commented that if
the legislature had not made large deposits in the past
such as in 2015, there would be much more significant
deposits needed going forward. He thought it was important
to avoid the situation in the future.
Mr. Worley affirmed that he would respond to Senator von
Imhof's request to provide 2015 to 2020 information as
noted on slide 7. He would reach out to DOR, since the
agency did all the investing for the system.
Co-Chair Stedman stressed the importance of not
underfunding the state's obligation.
Mr. Desai highlighted slide 8, "Funded Status Valuation
Results ($000's)," which showed a data table. The table
showed total overall status of the actuarial funded ratio,
which was about 78.4 percent in 2019 for PERS. He noted
that the 79.3 percent for PERS for 2020 was a draft and not
yet approved by the board. He discussed the actuarial
funded ratio for TRS, which was 85.9 percent for 2019 and
projected to be 86.6 percent for 2020.
Mr. Desai looked at slide 9, "Funded Status Valuation
Results ($000's)," which showed a data table with funded
status for the defined benefit pension. He cited that the
ratio for PERS in 2019 was 63.7 percent and was projected
to be about 62.6 percent for 2020. Similarly, for TRS the
most recent valuation ratio was 75.3 percent, and a draft
ratio of 75.0 percent for 2020.
9:32:29 AM
Mr. Desai addressed slide 10, "Funded Status Valuation
Results ($000's)," which showed a data table showing funded
status for defined benefit health care for PERS and TRS.
The 2019 funded ratio for PERS was 109.2 percent, and 2020
was expected to be 113.5 percent. The 2019 TERS ratio was
about 117 percent for 2019, raising to an estimated 121.3
percent for 2020.
Co-Chair Stedman asked about understanding the mechanism of
overfunding in healthcare and the slight underfunding in
pension.
Mr. Worley stated that for funding for the health plans,
the state currently deposited what was called the "normal
cost," which was the annual cost of the healthcare plan.
Because it was over funded, the state would have a negative
past service cost, which could reduce the contributions
going into the healthcare trust. Because of statutes in
place, the state was not allowed to take a negative past
service cost or reduction to the contribution percentage
rate for healthcare. The statute was a result of a funding
situation from 20 years previously. The division would
continue requesting employers to make a contribution into
the healthcare plan even though it was overfunded.
Co-Chair Stedman asked about the point at which the funding
level was higher than necessary. He questioned when the
statute should be revisited, so the overfunding could be
directed toward the pension side.
Mr. Worley stated that the matter had been discussed
internally. The division had discussed better ways to fund
the pension plan. He thought the division could work on the
matter with the ARM Board, DOR, and the legislature.
Co-Chair Stedman agreed with Mr. Worley's suggestion to
address the matter.
9:36:17 AM
Senator von Imhof observed that there were 20,000 Tier 1
retirees. She asked if the state was overfunded because the
retirees were healthy and not making claims. She wondered
how quickly the numbers could change.
Mr. Desai deferred to Ms. Ricci for more detail on the
numbers.
Ms. Ricci stated that funding levels for the healthcare
plan had been positively impacted by the implementation of
the EGWP. She explained that healthcare costs could change
fairly dramatically. While there had been initial relief
from the EGWP, there had also been dramatic cost increases,
especially related to specialty drugs and new gene
therapies. She emphasized the healthcare costs for the
group could increase quickly. She cited that another
contributor of the positive funding status was due to
increasing age of participants, at which point Medicare
became a primary payer. The division had seen about a 7
percent increase in membership moving to the group of 65
and over individuals. There had been a reduction in
pharmacy costs as well as greater numbers of retirees
becoming Medicare-eligible. She affirmed that that the
division tried to anticipate changes in the healthcare
system, which it would try and manage as efficiently as
possible.
Senator von Imhof assumed that the division tracked
demographics of the 22,000 members. She asked about the age
breakdown of the members, and if Ms. Ricci could share the
information with the committee.
Ms. Ricci agreed to share the information with the
committee.
9:40:27 AM
Mr. Desai advanced to slide 11, "Historical Rate of Return
and Funded Ratio," which showed a large data table. The
data went back to 1996. He pointed out that the numbers
shown in red, such as in 2001 and 2002, indicated the lower
returns and the ratio dropped. Negative returns affected
the actuarially funded ratio.
Co-Chair Stedman thought it was nice to see the funded
ratio advancing on the slide. He reminded that viewers
should take the numbers for 1996 through 2001 with a grain
of salt, as he suspected the numbers were not accurate. He
referenced past defensive maneuvers to keep the pension
plan solvent.
Senator Hoffman looked at the "Assumed Actuarial Earnings
Rate" in the second column. He asked if the rate was for
both the PERS and TRS systems.
Mr. Desai answered in the affirmative. He stated that
historically the rate had been set the same for the two
systems.
Senator Hoffman asked if the rate was the same for PERS and
TRS, the plans must be invested differently since there
were different actual rates of return. He observed that
there were differences in the rates of return for the two
systems over time.
Mr. Desai invited Mr. Worley to address Senator Hoffman's
question.
Mr. Worley thought the question would best be addressed by
DOR. He thought the difference in rates of return had to do
with incoming revenue coming at different times. He noted
that PERS employers reporting to the division ranged from
bi-weekly, semi-weekly, to monthly timing of funds. He
offered to reach out to DOR for a more detailed response.
Co-Chair Stedman asked for Mr. Worley to reach out to DOR
and addition asked to clarify if there was co-mingling of
PERS and TRS.
Mr. Worley agreed to provide the information.
Mr. Desai looked at slide 12, "Funded Ratio History
(Based on Actuarial Valuation Reports)," which showed a bar
graph showing the funded ratio history for PERS and TRS
from 2001 to the most recent valuation in 2019.
Co-Chair Stedman observed that the last time there were any
real gains to the ratio was when the state had made a cash
infusion to the systems.
Mr. Desai agreed.
9:45:03 AM
Mr. Desai showed slide 13, "Unfunded Liability PERS / TRS
($000's)," which showed a bar graph with data from 2006 to
the last valuation date in 2019. He pointed out that the
last column showed that the PERS unfunded liability present
value was about $4.8 billion and was nearly $1.4 billion
for TRS. He summarized that there was about $6.2 billion in
present value for unfunded liability.
Co-Chair Stedman observed that during the period from 2008
to 2019, PERS was about the same for unfunded liability,
while TRS had improved significantly by over $1 billion. He
asked for Mr. Desai to address the contribution issue.
Mr. Desai drew attention to a significant increase in
unfunded liability 2012 and 2013. He considered that there
had been significant movement in the PERS unfunded
liability as it rose and fell between 2008 and 2019.
Co-Chair Stedman asked Mr. Desai to provide a written
answer as to why there were gains for TRS and did not gain
anything in PERS from 2008 to 2019.
Mr. Desai referenced slide 14, "Employers and Additional
State Contributions Projection," which showed a graphical
flow chart:
Allocation of Projected Employer and Additional State
Contributions with Liabilities "Rolled Forward" Two
Years, Assets "Rolled Forward" One Year and Smoothed
Mr. Desai summarized that the slide showed a kind of
timeline of what it took to determine annual rates for
employer and state contributions. The last complete
valuation, the actual rate of return, and the projected
rate was considered.
Co-Chair Stedman thought the state frequently struggled
with the delayed impact of change.
9:49:07 AM
Mr. Desai turned to slide 15, "FY2022 Contribution Rates
DB Plans," which showed a data table of contribution rates
for defined benefit plans. He noted that the rates were
determined using the process illustrated on the previous
slide. He discussed contribution rates and noted that
employer contribution rates were capped at 22 percent and
12.56 percent for PERS and TRS respectively. He pointed out
that the row showing "Additional state contribution"
signified the amount the state paid toward the unfunded
liability.
Senator von Imhof did not know when it was appropriate to
ask about SB 55, which pertained to PERS payments and was
sponsored at the request of the governor.
Co-Chair Stedman thought the matter should be addressed
when the bill was before the committee for consideration.
He thought the committee could go into more detail
regarding contributions when the bill was discussed.
Senator von Imhof thought it was important to know that the
bill was coming forward and would address contribution
rates and funding sources.
Co-Chair Stedman thought the bill would be before the
committee in the next month or so.
Senator Wielechowski thought there was a federal bill with
funding that could possibly apply to the state's defined
benefit plans. He wondered if the division was monitoring
the issue.
Co-Chair Stedman asked if the department had heard if there
was any relief for unfunded pension liability for states
included in the most recent federal COVID-19 relief bill.
Mr. Desai stated that the federal legislation was in the
draft stage and the division did not have any detail as to
the potential impacts. The department would be working to
understand the impacts but did not have any detailed
information yet.
Senator Wielechowski understood that the bill contained
significant relief for states. He was interested in getting
an update from the administration, as he thought the
funding could have as significant impact on the budget.
Co-Chair Stedman stated that LFD would be working on
understanding the federal legislation. He thought the
administration would be doing the same and would work with
the legislature to the greatest advantage of the state.
9:53:41 AM
Mr. Desai considered slide 16, "FY2022 Contribution Rates
DC Plans," which showed a data table of contribution rates
for defined contribution plans. He cited that the slide
showed that employees in defined contribution plans under
PERS and TRS contributed about 8 percent. The employer paid
5 percent for PERS and 7 percent for TRS. The healthcare
percentage for PERS was 1.07 percent, and .83 percent for
TRS. Occupational death and disability for all employees
was at a rate of about .31 percent, and for peace officers
and firefighters was .68 percent. For TERS the healthcare
percent was .08 percent. The health reimbursement account
was a flat dollar amount based on 3 percent of all PERS and
TRS average annual compensation. Any overflow of the
contributions helped towards the defined benefit plan
unfunded liability.
Senator Wilson wondered how Alaska compared to other states
with regard to unfunded liability.
Co-Chair Stedman thought the question was broad.
Mr. Desai agreed to provide the information at a later
time. He noted that the division participated in a national
organization that would have information.
Co-Chair Stedman asked for Mr. Desai to include healthcare
information as well.
9:56:22 AM
Mr. Desai displayed slide 17, "Contribution Rates
History," which showed two line graphs; one for PERS and
one for TRS. He pointed out that in 2014, the required
contribution was flat at 22 percent, but the actuarial rate
was 31.9 percent. The gap between the two rates was paid as
the additional state contribution. He continued that for
TRS, it was possible to see the gap in rates that signified
the state's additional contribution.
Senator Wielechowski asked if Alaska was still the only
state in the country that did not have a defined benefit
plan or social security for state employees.
Mr. Desai believed there were other states that had stopped
providing defined benefits. He did not have details on
individual states. He offered to provide the information at
a later time.
Co-Chair Stedman noted that the TRS system could opt into
social security, and the choice was not controlled by the
legislature.
Senator Wielechowski asked if there had been discussion
regarding the PERS or TRS systems opting back into Social
Security.
Mr. Desai had not heard of any discussion on the matter. He
thought there had been questions about how TRS could get
back under social security. He echoed Co-Chair Stedman's
remarks that there was an option to opt into social
security. He did not have any additional information.
Senator von Imhof affirmed that there was always the option
of opting back into Social Security. She thought the change
would require a vote and the matter was not under the
purview of the legislature.
Mr. Desai highlighted slide 18, "Projected Pension Benefit
Recipients," which showed a line graph. The graph showed
the count of retirees receiving benefits from the system.
He drew attention to the top line of the chart, which
showed there were about 51,639 retirees receiving benefits
from PERS and TRS. According to the latest valuation, in
2029 the state would have its highest population receiving
benefits from the plans at close to 58,000 retirees.
Co-Chair Stedman reminded that the state was in no jeopardy
of not meeting its pension obligations. He acknowledged
that the unfunded liability was a cash flow issue and in no
way were the retirees subject to an adverse cash position
within the retirement plans. He thought meetings were
sometimes misinterpreted regarding the unfunded liability
and the state's ability to pay its obligations.
Mr. Desai agreed with Co-Chair Stedman.
10:01:00 AM
Mr. Desai looked at slide 19, "Projected Pension Benefits
Payment ($000's)," which showed a line graph. He cited that
the state would be paying about $1.5 million for 2021
compared with a projected peak at $2 billion in 2036. The
chart slowed down after 2037 after retirees aged out of the
system. The state would make the benefits payment until the
end of the century.
Co-Chair Stedman asked why the chart went to 2100, which he
thought was indicative of a long life expectancy.
Mr. Desai explained that there were many employees that had
not retired under the PERS and TRS systems yet and were
still active. The projection of the expected payments
considered demographic information and the fact that
beneficiaries could collect benefits after death.
Co-Chair Stedman contemplated that a beneficiary would have
to be 20 years of age currently to receive benefits that
far in the future.
Mr. Desai stated that beneficiaries could be spouses or
children. He had seen a projection until the year 2112.
Co-Chair Stedman referenced Senator von Imhof's question
about age distribution and thought it would be helpful for
the committee to see how many qualified individuals were
under the defined benefit plan that were in different age
groups.
Senator Wilson asked if there had been any trends related
to retirement age and life expectancy changes.
Co-Chair Stedman asked to be reminded about life expectancy
tables and how often the information was reset.
Mr. Worley agreed to send the committee the life expectancy
tables. He explained that the tables were considered during
the experience study, when the actual experience and
assumptions were compared using data from a four-year
period. He thought there could be an update after the next
study was completed after 2021.
Co-Chair Stedman thought the tables had been continuously
extended.
Senator Wilson thought there had been recent debate
regarding whether COVID-19 had changed the data and studies
being done.
Co-Chair Stedman noted that the last widow of a Confederate
soldier from the Civil War had passed away the previous
year.
10:06:02 AM
Mr. Desai addressed slide 20, "Health Care Cost Trend
Rates," which showed a data table with data from the last
actuarial evaluation in 2019. He pointed out the 7 percent
rate in the "Medical Pre-65" column. He noted that after
2050 the rate was projected to continue at 4.5 percent for
all the groups.
Senator Hoffman referenced the Supplemental Benefits System
and deferred compensation. Several years previously the
state had submitted a plan to the federal government that
changed how the retirement systems worked. He had expressed
concerns that deferred compensation should be an individual
decision by state employees. He thought the problem with
the plan the state had submitted was that individuals could
only access the deferred compensation funds upon
retirement. He asked for a list of number of participants
for the previous ten years, and the yearly total of
deferred compensation deductions. He was concerned that by
including deferred compensation into the state's retirement
program, it had taken a management tool from individual
employees. He questioned what benefit there was to
employees that deferred income but could not access the
funds. He thought the state had made a mistake by including
deferred compensation program in the retirement system and
not allowing individual employees to have control over
their own funds.
Co-Chair Stedman asked Mr. Desai to get the information
back to the committee. He thought it would be nice to have
a historical view of deferred compensation participation
over the last several decades.
Mr. Desai agreed to provide the information requested by
Senator Hoffman. He thought the division had done some
research on the matter. He stated he would try to find out
whether there were federal regulations with options that
allowed making changes to the plan to allow participants to
withdraw benefits.
10:10:39 AM
Senator Hoffman asked if any other states were treating the
deferred compensation program in the same way as Alaska.
Co-Chair Stedman asked Mr. Desai to add Senator Hoffman's
additional question to the inquiry about deferred
compensation.
Co-Chair Stedman commented that the retirement system was a
serious issue to the entire state. He discussed the agenda
for the following week.
ADJOURNMENT
10:12:18 AM
The meeting was adjourned at 10:12 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020521 DOA_PERS_TRS_Overview_2021.pdf |
SFIN 2/5/2021 9:00:00 AM |
PRS/TRS |
| 020521 DOA Response Attachment A.pdf |
SFIN 2/5/2021 9:00:00 AM |
PRS/TRS |
| 020521 Senate Finance Committee - PERS TRS Meeting Questions 02052021.pdf |
SFIN 2/5/2021 9:00:00 AM |
PERS/TRS |
| 020521 DOA Response Attachment B.pdf |
SFIN 2/5/2021 9:00:00 AM |
PERS/TRS |