Legislature(2005 - 2006)BELTZ 211
02/10/2005 03:30 PM Senate STATE AFFAIRS
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ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 10, 2005
3:34 p.m.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Charlie Huggins
Senator Bettye Davis
MEMBERS ABSENT
Senator Thomas Wagoner, Vice Chair
Senator Kim Elton
COMMITTEE CALENDAR
Department of Administration Overview - Impact of HB 242 (2001)
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
Melanie Millhorn
Division of Retirement & Benefits
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Gave overview on the impact of HB 242
Kevin Brooks, Deputy Commissioner
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Gave overview on the impact of HB 242
ACTION NARRATIVE
CHAIR GENE THERRIAULT called the Senate State Affairs Standing
Committee meeting to order at 3:34:33 PM. Present were Senators
Davis, Huggins and Chair Therriault.
^OVERVIEW:
DEPARTMENT OF ADMINISTRATION IMPACT OF House Bill 242 (2001)
CHAIR GENE THERRIAULT announced the committee would hear a
Department of Administration overview of the impacts of House
Bill 242 that passed in 2001, which established a program
allowing retirees to return to state employment.
3:35:08 PM
MELANIE MILLHORN, Department of Administration, explained that
former Senator Loren Leman introduced Senate Bill 149 to give
management the ability to offer incentives for normal retirement
teachers to return to work. Shortly thereafter Representative
Pete Kott introduced House Bill 242, which expanded the
opportunity to include normal retirement PERS employees. The
statutes were amended to allow retired TRS/PERS members to
return to work by waiving participation in the TRS/PERS
retirement program. Under the waiver, neither employees nor
employers made contributions to TRS or PERS.
The legislation is scheduled to sunset on July 1, 2005 and the
Department of Administration prepared a detailed report on the
program and its use to date.
3:37:06 PM
Approximately 56 percent of all TRS employers participated in
the program and 187 waivers were filed. As of November 30, 2004,
124 TRS members were employed under the program.
About 26 percent of all PERS employers participated and 297
waivers were filed. On November 30, 2004, 211 PERS members were
employed under the program.
3:38:10 PM
On 9/14/04 the Division of Retirement and Benefits received an
attorney general determination that once the PERS and TRS
statute sunsets, reemployed retirees could no longer receive
retirement benefits while employed by any PERS/TRS employer. In
addition, those who elect to continue working as a PERS/TRS
member, would be required to make contributions to PERS/TRS and
their retirement payments would stop. The employer would also
make PERS/TRS contributions.
CHAIR THERRIAULT said they would return to regular employee
status.
MS. MILLHORN said that's correct and the employee would begin to
earn service credit for a second retirement benefit.
So they're separate. If you worked for 20 years and
were enrolled under House Bill 242, you would come and
work another three years and then as of July 1, 2005 -
unless the Legislature extends this program or allows
those parties who are currently enrolled to continue
that benefit - it would cease as of that date. They
could work another three years of service and they
would get a second benefit that would be calculated
separately and added to their first retirement
benefit.
3:41:58 PM
SENATOR CHARLIE HUGGINS questioned whether PERS/TRS employers
could hire PERS/TRS retirees after the sunset date.
MS. MILLHORN replied there would be no new entrants and the
existing enrollees would no longer have a program to participate
in if the Legislature takes no action to continue the program
and/or to allow the existing parties to continue receiving the
benefit.
CHAIR THERRIAULT asked about the fiscal note for House Bill 242.
3:43:44 PM
MS. MILLHORN explained there were two parts to the fiscal note:
the retiree return provision allows retirees to enroll in the
program through the waiver; and enhanced medical benefits
reflect a .17 percent of payroll cost for the medical
enhancement
3:44:49 PM
CHAIR THERRIAULT said legislators are concerned that if the
program were continued or allowed to expand more and more of the
employee base wouldn't be contributing to a system that's
already in trouble.
What difference would it have made if those employees and their
employers had been making contributions into the system, he
questioned.
3:45:52 PM
MS. MILLHORN said they hadn't calculated that, but could do so.
CHAIR THERRIAULT asked her to make the calculation because the
Finance Committee would want the information.
3:46:24 PM
MS. MILLHORN said that after they received the AG opinion, they
noticed all PERS/TRS employers and members who were currently
enrolled so that they would be properly prepared to deal with
the issue.
The report information includes: how employers have used the
program; percentages by job classification for who has
participated - PERS parties who have come back including the
difficult to recruit and retain categories of biologists and
engineers, and that 87 teachers in 23 school districts that
returned under the program; and the successful mentoring
program.
3:48:23 PM
CHAIR THERRIAULT asked whether House Bill 242 had been abused.
MS. MILLHORN said she was unaware of any abuses. The TRS statute
says the school board must issue a resolution stating they have
retention issues before rehiring a teacher under the program.
PERS employers don't have that requirement.
3:49:38 PM
In September, a fiscal analysis tiered the participation level
at 100 members, 500 members and 1,000 members to determine what
happens to the system at the various participation levels.
For PERS they determined the costs to the system have been
negligible. TRS has a higher level of unfunded liability so when
124 members participate the fiscal impact has been about
$100,000.
MS. MILLHORN said, "If the Legislature enacts legislation going
forward to continue that program, our recommendation would
be.... to hold the system harmless by taking the payroll dollars
and incorporating those payroll dollars for purposes of reducing
past service costs."
3:50:45 PM
CHAIR THERRIAULT asked whether the bills were in the system.
MS. MILLHORN replied Senator Gary Stevens and Senator Kim Elton
both introduced legislation.
CHAIR THERRIAULT asked whether the suggested language was
included in either bill.
MS. MILLHORN said they discussed language to hold the systems
harmless with both Senators.
3:52:09 PM
SENATOR HUGGINS asked whether she was supporting this as a cost
saving mechanism with merit.
MS. MILLHORN replied it has been a good management tool and the
primary concern is to see that no additional costs are added to
the system.
3:53:20 PM
SENATOR HUGGINS asked if young people entering the work force
have difficulty finding a position because a retiree was rehired
for the position.
MS. MILLHORN replied you have to look at that on a case-by-case
basis, but it would be less an issue in the senior or journey
level positions.
CHAIR THERRIAULT questioned whether there might be a brain drain
at some point in the future when returning workers retire a
second time and don't return.
3:55:42 PM
MS. MILLHORN replied a healthy system has all levels of
employees and as a management tool its important to be able to
evaluate programmatic needs and have the ability to bring a
retired person back.
3:57:58 PM
SENATOR HUGGINS asked whether there are ever any constraints on
rehiring.
MS. MILLHORN said those decisions are made by individual
agencies.
4:01:53 PM
CHAIR THERRIAULT referenced page 4 and asked whether there's
been much thought about limiting the application base to address
specific levels of expertise.
KEVIN BROOKS, deputy commissioner, Department of Administration,
said there are no hard and fast rules.
4:06:31 PM
CHAIR THERRIAULT questioned whether there was any difference of
opinion on the AG conclusion of what would happen if the program
sunsets.
MR. BROOKS said they defer to the advice they receive from the
Department of Law.
CHAIR THERRIAULT asked how many retirees that have returned to
work might not meet recruitment criteria if parameters were
placed on the program and questioned how those people might be
impacted.
MR. BROOKS suggested recruitment criteria would impact new
rehires. They discussed the fact that rehires have already
qualified to retire and would do so again at some point. With
some exceptions, these people aren't likely to be long tenured,
he said.
CHAIR THERRIAULT asked whether he could supply some of that
demographic information.
MR. BROOKS replied they could supply group rather than
individual information.
CHAIR THERRIAULT said the information would be useful to
determine whether any particular age group took advantage of the
program.
MR. BROOKS said they would gather the information.
4:09:59 PM
CHAIR THERRIAULT remarked if the Legislature is seriously
interested in adding another tier, the faster the base moves
into the new tier the better. If existing employees can bridge
the gap between now and when a new tier is established, then new
employees will be in the new tier and that would be beneficial.
MR. BROOKS agreed and said the sunset provision provides that.
If the program were extended, it would provide opportunity to
clarify the issues.
CHAIR THERRIAULT questioned whether any bargaining units
disagreed with the AG opinion.
MR. BROOKS replied not with the opinion itself, but there is a
diverse set of opinions out there.
4:12:27 PM
SENATOR CHARLIE HUGGINS asked whether the average employee might
be characterized as bitter.
MS. MILLHORN explained the division interpreted the program
differently after the AG opinion and that has caused some to
become disgruntled.
CHAIR THERRIAULT asked whether communication with employees was
verbal or written.
MS. MILLHORN replied they provided the information in seminars,
verbally and via e-mail. The division admits that the
information it gave in 2002 is contrary to that it gives as of
September 2004.
CHAIR THERRIAULT questioned the potential liability.
MR. BROOKS said there's been no attempt to quantify liability.
CHAIR THERRIAULT remarked any litigation would probably be class
action.
4:16:03 PM
MR. BROOKS said Ms. Millhorn had written records.
MS. MILLHORN said they acknowledge they have changed their
interpretation.
MR. BROOKS added the total population is probably about 400.
4:17:01 PM
SENATOR HUGGINS suggested they had some flexibility and could
grandfather current participants.
4:18:40 PM
MR. BROOKS spoke of succession training and knowledge transfers.
SENATOR BETTYE DAVIS recapped the issue and asked when the
department decided to get an AG opinion
MS. MILLHORN said they asked the question in September 2004 and
that's when they received the opinion.
SENATOR DAVIS questioned what triggered the decision to ask for
an opinion.
MS. MILLHORN replied the director of the Division of Personnel
contacted the Department of Law and asked the question. "If she
hadn't asked that question, the division [Division of Retirement
and Benefits] would have continued on with its interpretation
and its understanding."
CHAIR THERRIAULT remarked that some members retired and might
not have cleaned out their desk before returning to work, which
causes you to wonder whether it's because they are difficult to
replace or because they are simply taking advantage of the
system.
4:25:11 PM
MR. BROOKS said they would provide the committee information on:
forgone contributions of rehires and the impact on the
retirement system; age demographics; and who was advised and in
what manner.
CHAIR THERRIAULT asked whether they could also be prepared to
suggest categories that need a heightened showing of need.
MR. BROOKS said they could provide a list of government job
classifications that have recruitment difficulties.
4:26:17 PM
MR. BROOKS stressed that the department would like to provide a
remedy rather than find out what the potential exposure might
be.
There were no further questions.
CHAIR THERRIAULT announced the committee would meet on Tuesday
and Thursday next week. There being no further business to come
before the committee, Chair Therriault adjourned the meeting at
4:29:01 PM.
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