HOUSE BILL NO. 17 "An Act relating to retirement benefits and military service." 2:39:36 PM REPRESENTATIVE GEORGE RAUSCHER, SPONSOR, explained that the bill was a reintroduction of the previous year's HB 232. He recounted that HB 232 had successfully advanced through the House Military and Veterans Affairs Committee, and the House Finance Committee before reaching the House Rules Committee on May 8, 2024, too late for passage. He thanked the committee for its unanimous support in the prior year. He noted that there had been nine "do pass" designations on the bill. Representative Rauscher relayed that HB 17 ensured that veterans that were totally and permanently disabled could access accrued Public Employees' Retirement System (PERS) benefits a few years earlier without penalty. The bill also clarified that the military service purchased under PERS rules counted as credited service requirements for normal retirement. He noted the veterans with total and permanent disabilities often encountered significant barriers to employment, financial stability due to their service- connected conditions. He contended that by passing HB 17, the legislature could ensure the veterans received the benefits they had already earned at a time when they needed them the most. The bill did not expand benefits but simply removed unnecessary hurdles for disabled veterans that had already served the country and the public. He contended that with the support of the committee and the legislature, the state could take a meaningful step towards providing stability and certainty for those that sacrificed and gave so much of their lives and bodies for our nation. 2:42:04 PM CRAIG VALDEZ, STAFF, REPRESENTATIVE GEORGE RAUSCHER, went through the sectional analysis (copy on file). Section 1: AS 39.35.370(a) This section amends AS 39.35.370(a) to add additional language related to eligibility requirements when a terminated employee is eligible for a normal retirement benefit. Specifically adding new subsections, A and B to section 1, lines 7 through 10. Section 2: Repeals three statutes. Representative Stapp commented that he supported the bill. He asked about the discount rate given and understood that the veterans would be able to use military service to buy into retirement. He asked what the discount rate would be. 2:43:50 PM BRANDON ROOMSBURG, RETIREMENT AND BENEFITS MANAGER, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION (via teleconference), assumed that Representative Stapp was asking about being able to retire sooner than being vested or meeting normal early-eligible requirements. Representative Stapp answered in the affirmative. He thought typically people could buy into it with money to make sure the actuarial realized value was the same. Mr. Roomsburg answered affirmatively. He asked if Representative Stapp was speaking to the ability to accept an actuarial reduction to the benefit and not having to pay for the claim itself. Representative Stapp asked if the bill proposed to make the veterans buy the time, or if the veterans were just receiving the time. Mr. Roomsburg would follow up at a later time. Co-Chair Josephson thought the sponsor had indicated that the bill did not propose to expand benefits. He pondered a person with 5 years in credited service, for defined benefit (DB) or defined contribution (DC) plans. He assumed that if a person could get into retirement sooner, there benefits were expanded in terms of timeline if not in quantity or quality of the benefit. Mr. Valdez responded that it was only for DB plans and only covered Tier 1 employees. He understood Co-Chair Josephson's reasoning. 2:46:37 PM Representative Hannan asked if the number of people potentially affected was known. She recalled that two people were affected. She thought the people both needed to already have 5 years credited service in the DB system and be permanently and totally disabled service-connected. She thought the scope was narrow. Mr. Valdez relayed that the state did not have precise numbers but had narrowed it down to potentially two Tier 2 individuals. The fiscal note mentioned there were potentially up to 48 people that could meet the qualifications. He suggested addressing the question to the authors of the fiscal note. Representative Hannan wanted to hear from DRB as to whether it had come up with a broader number. Mr. Roomsburg did not hear the question. Representative Hannan asked how many people would be captured under the law if the bill was implemented. Mr. Roomsburg replied that it would be approximately 48 members. Representative Hannan asked about the 48 people who potentially could qualify because of having five years of service. She asked if it was not known if they were all living and currently receiving disability. Mr. Roomsburg responded that it could be a combination of active, inactive, or retired members. He offered to split up the demographics for her review. 2:49:10 PM Representative Bynum thought that under the bill the individuals would still have to meet the five years of service requirement. He asked about the term "terminated" being used twice. He asked about the current definition for "permanently and totally disabled for service-connected conditions." Mr. Roomsburg responded that when he read the language, he did not see the portion about five years of service as part of the bill. He would have the same question for the bill sponsor. Co-Chair Josephson asked Mr. Roomsburg to repeat his answer. Mr. Roomsburg replied that he would have the same question as Representative Bynum had regarding the "at least 5 years" of service. Mr. Valdez relayed that he would look into the language. Mr. Roomsburg responded that Section 1 stated "with at least five years of credited service." Co-Chair Foster suggested that the sponsor do some research on the credit service. Representative Rauscher responded that the phrase "at age 60" was removed. He was not sure he was following the question, but he would return to the committee with more information. 2:52:53 PM Representative Bynum acknowledged that the bill stated "at least five years," but wanted to ensure that it was a requirement with the way the bill was written. He thought it would be a question for the Division of Legal and Research Services. He asked about the specific terminology relating to a terminated employee. He discussed terminology regarding veterans that were permanently disabled, and whether it was specifically defined in the federal code. He discussed classifications of disability. Mr. Valdez responded that he would follow up with legislative legal services to determine why certain terminology was used. He relayed that the bill used the Veteran's Administration (VA) definition of permanent disability. Co-Chair Josephson asked when Tier 2 had ended. Mr. Roomsburg responded that Tier 2 closed on June 30, 1996. 2:54:58 PM MARK WHISENHUNT, SELF, PALMER (via teleconference), advocated on behalf of disabled veterans and supported the bill. He wanted to address some of the questions members had asked. He explained that disabled veterans often faced challenges like limited employment opportunities, difficulty accessing quality healthcare, and higher rates of mental health issues such as Post-Traumatic Stress Disorder (PTSD). He discussed the transition to civilian life, which could be challenging. He thought veterans often downplayed the impact of service. He discussed the category of veterans with permanent disabilities, who could face even greater challenges with employment and often struggled with income stability. He had personally experienced the challenges and had seen the same in others. Mr. Whisenhunt contended that the bill could serve a unique role in supporting disabled veterans. He suggested that support of the bill would show commitment to veterans. The bill allowed totally permanently disabled veterans to access retirement benefits they had earned. He thought the legislation was a lifeline and cited that the VA had deemed less than 4 percent of veterans were totally permanently disabled. He cited a study that indicated that the small group of veterans had diminished life expectancy when compared to the civilian population. Disabled veterans were dying on average 15 years earlier than their civilian counterparts. He estimated that there were approximately 48 totally permanently disabled veterans that had a PERS account. He believed that allowing approximately 48 totally disabled veterans with a significantly lowered life expectancy to access their hard-earned retirement funds would in now way cause an undue hardship to the PERS system. Mr. Whisenhunt addressed earlier questions relating to how one would buy military time back. He noted that the circumstance applied to Tiers 1, 2, and 3. In order to get any type of benefits, a person would have to be vested by at least 5 years of service. To purchase military time, it could only be up to 5 years, and it was done at a rate of 8.5 percent of your annual wage on a vesting year. At year 5, if a person made $50,000 per year, they would have to pay 8.5 percent of the annual wage, which for the maximum service credit of five years the person would pay about $21,000. He noted that the phrases "temporary" and "permanent" were defined in federal law. The only way to obtain the specific rating was to be 100 percent disabled and the VA had to determine the condition would not improve. 3:01:18 PM Representative Allard asked about Mr. Whisenhunt's sources and if he was an expert. She relayed that she had heard from some veterans that had indicated that the bill would have a negative impact. Mr. Whisenhunt replied that he was not an expert but had done a lot of research. He noted that the data he referenced was directly from the VA. Representative Allard was in disagreement with some of what Mr. Whisenhunt had stated. Co-Chair Josephson was also confused. He asked if a person were born in 1988 and at age 18, they could have just become a Tier 3 employee when the program ended and had state or municipal service. He discussed the hypothetical situation of the individual having five years state service before entering the miliary and becoming totally and permanently disabled. He pondered that the individual would currently be 37 years old and would be able to qualify for retirement decades before others. He pondered that maybe it was a perfectly good policy call because it was affordable (because of the low number of people) and the person defended our country. He asked if under the bill such a person could get retirement. Mr. Whisenhunt responded that the person would not regard a full retirement but would be eligible for the years that they worked. If the person worked for five years, they would be eligible for ten percent of their retirement, which would be a few hundred dollars a month but could be a significant difference in a person's life. 3:04:49 PM Co-Chair Josephson asked about Mr. Whisenhunt's comment about being eligible for ten percent of retirement. He thought the person would be eligible for all of the retirement, but it would be fairly small after only working five years. Mr. Whisenhunt responded that Tier 2 and 3 retirement was based off years worked, and ultimately the percentage of income. If the person made $50,000 per year they would be eligible for 10 percent of that per month. Co-Chair Josephson asked why there was no cost to the state or the Department of Administration [ref: FN 1 from DOA, OMB Component 64]. Mr. Whisenhunt understood that the fiscal note was indeterminate because the division did not collect data on veterans' status. 3:06:43 PM Representative Hannan thought that Mr. Whisenhunt had raised a couple of issues that were not in the bill. She thought he had stated that a person could only bring in five years of service. She thought line 7 said the person had to be 60 years of age before drawing the benefit. She asked if she was reading the bill differently. Mr. Whisenhunt responded that the five years was defined within AS 35, which stipulated it was the maximum amount of time a person could purchases from military service. If a person had served three years, they could purchase a maximum of three years of service. He noted that there was an "or" between a and b; meaning that one had to reach age 60 or be deemed permanently and totally disabled. Vesting was required for both circumstances. If a person was permanently and totally disabled at age 44, a person could retire at that time with the service they had in the system. Mr. Valdez reiterated that there were two circumstances in (a) and (b) to qualify. Representative Allard asked if anyone had reached out to the sponsor to indicate it was negatively impacting them. Representative Rauscher responded in the negative. Representative Allard shared that she had people reach out who indicated the bill would negatively impact them. She referenced Mr. Whisenhunt's testimony about veterans' shorter life span and challenges with employment. As a veteran she took offense with many of Mr. Whisenhunt's statements. She stressed that veterans were not inept but were capable. She thought it was demoralizing to say that veterans would need handouts. She thought there needed to be more information, and questioned the quality of Mr. Whisenhunt's testimony. She relayed that she would proceed with caution and gather more information on how the bill could affect veterans that had retired and had paid into the system. Co-Chair Foster asked if Mr. Whisenhunt had an affiliation. Mr. Whisenhunt responded that he was representing himself. He noted he had put many hours of research into the topic. He appreciated Representative Allard's position. He clarified that as a disabled veteran he would never say that veterans were not good or needed a handout. He commented that veterans are resilient. He relayed that his goal was to point to VA statistics on the struggles of some veterans. He thought the bill would only help veterans and in no way hurt veterans, whether retired or not. 3:11:47 PM Representative Rauscher referenced Representative Allard's comments and did not think there were any handouts or pity. He pondered that if a person was 100 percent disabled, their body would deteriorate faster than others. He explained that the bill related to awards for the service and a thank you in understanding what disabled veterans gave up for our country. Representative Johnson referenced the first paragraph in the language section of the fiscal note, which indicated the bill would create an additional unfunded liability to the PERS plan. The final paragraph referenced roughly 48 members and referenced repeal of statutes. She read from the fiscal note: Additionally, the repeal of the 3 statutes listed in the bill open up the PERS to additional members who can use prior military service. This information is not tracked currently, and the Division is unable to determine how many members this could impact nor the impact on pension benefit costs to the PERS. As such, the Division provides an indeterminate fiscal note based on this analysis and conclusion. Representative Johnson pondered that the fiscal note did not go into the cost in-depth. She thought the bill could create an unfunded liability to PERS. 3:14:15 PM Co-Chair Foster OPENED public testimony. 3:14:30 PM AUSTIN FLAVIN, SELF, PALMER (via teleconference), testified in support of the bill. He was a member of a veteran's association. He had followed the previous version of the bill. He grew up in Dillingham and had enlisted in the navy for six years. He recounted that around 2001, he had some PERS service prior to enlisting and kept his Tier 3 status. He discussed four deployments, including a 7-month deployment to Iraq where he dealt with burn pit activity. He described the cutting and welding of improper metals and up-armoring of military vehicles, which involved ingesting toxins. He had a rating with the VA and he had bought his time back. He addressed comments related to the bill being a kind of hand-out. He cited that he had paid over $30,000 to buy his military time back. He interpreted the bill as a benefit he had already paid for. He addressed Section 3, line 13, which he thought would affect himself or others with at least 30 years of credited service. He discussed a similar provision for police and fire personnel. Mr. Flavin shared that he supported the bill because he had a rating with the VA, which he could not disclose. He relayed that he had Chronic Obstructive Pulmonary Disease (COPD) directly associated with burn pits in Iraq. He shared that he was 43 years old and endeavored to be healthy. He would gladly take the opportunity to retire sooner and live a better quality of life. He knew there were individuals that had worse experiences that would also be eligible. He saw the bill only as helping people that had served their country, with a high likelihood of serving in Iraq, Kosovo, and other areas. He mentioned the lower life expectancy of veterans. 3:22:07 PM Representative Tomaszewski thanked Mr. Flavin for his service. Co-Chair Josephson thanked Mr. Flavin for his service. He knew that the previous Congress had fought hard for benefits for people that were exposed to burn pits and hoped he got what he was entitled to. 3:23:06 PM Co-Chair Foster CLOSED public testimony. Representative Hannan asked if the bill would impact anyone who was already a retiree. Mr. Roomsburg relayed that he would need to follow up. Representative Hannan was confused. She understood that the numbers could not be predicted and that the fiscal note referenced potential unfunded liability but thought that the bill would not affect the people who were already retired or their benefits. Mr. Roomsburg agreed. Representative Bynum asked about questions for Legislative Legal Services. DAN WAYNE, ATTORNEY, LEGISLATIVE LEGAL SERVICES, JUNEAU (via teleconference), was available for questions. Representative Bynum asked about persons being aged 60 or any age if the terminated employee was a veteran. He thought the VA's definition would apply. He wondered if there was a legal reason for saying "terminated" twice. Mr. Wayne thought the language was for drafting purposes, and instead of saying "person" the bill said "terminated employee." 3:27:08 PM Representative Bynum asked that the reference to terminated employee in the language of the statute described a person that was no longer working with the state or under the retirement program. Mr. Wayne responded in the affirmative. Representative Bynum thought the language of the bill stated that a 100 percent disabled veteran (under the VA definition) would be able to qualify for early retirement. If a person had worked under Tier 2 or Tier 3 for five years then met the classification, the person would be able to file for retirement. He asked if there had been consideration of putting the new category under the section where there would be an actuarial adjustment. Mr. Valdez responded that he was not involved in the drafting, but he could follow up. Representative Bynum was just curious if it was taken into consideration. He thought the fiscal note indicated there was a small scope of individuals affected. He supported the bill. Co-Chair Foster asked to review the fiscal note. Mr. Roomsburg reviewed a zero-cost fiscal note from DOA with OMB component 64 and control code IUnPL. There were no requested operating expenditures, fund sources, or additional positions requested for the bill. The department already had sections for processing the work. The department anticipated regulations to be developed at a later time if the bill was passed. Co-Chair Foster set an amendment deadline of March 27 at 5 o'clock p.m. Representative Rauscher expressed his appreciation for the committee hearing the bill. He noted that the bill only affected a small number of veterans with total disability. Co-Chair Foster reviewed the agenda for the following meeting. HB 48 was HEARD and HELD in committee for further consideration.