CS FOR SENATE BILL NO. 125(FIN) An Act relating to the accounting and payment of contributions under the retirement plans of the Public Employees' Retirement System of Alaska and the Teachers' Retirement System, to calculations of contributions under those retirement plans, and to participation in, and termination of and amendments to participation in, the defined benefit plans of those systems; relating to employer contributions to the health reimbursement arrangement plan; making conforming amendments; and providing for an effective date. ANNETTE KREITZER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION, observed that Amendment #2 would speak to concerns by the Department of Law. Co-Chair Meyer MOVED to ADOPT Amendment #2. Vice-Chair Stoltze OBJECTED. Michael Barnhill, Assistant Attorney General, Department of Law, explained that the HCS CSSB 125 (FIN) provides new sections for additional state contributions to the PERS/TRS systems. Review of these sections with outside counsel uncovered concern to which a statute in AS 09.17.070 might be used to characterize payments as offsets to any eventual recovery, if there should be a recovery against the state's actuarial: Mercer. The purpose of Amendment #2 is to clarify that AS 09.17.070 will not apply to offset against any recovery against Mercer based on additional state contributions under the bill. In response to a question by Representative Gara, Mr. Barnhill explained that the department intends to pursue litigation and funding for the litigation. No funding has been provided to date. 9:15:04 AM Vice-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment was adopted. Co-Chair Meyer MOVED to adopt New Amendment #3. Vice-Chair Stoltze OBJECTED. Ms. Kreitzer explained the amendment. She noted the backup included with the amendment. VIRGINIA RAGLE, ASSISTANT ATTORNEY GENERAL, LABOR AND STATE AFFAIRS, DEPARTMENT OF LAW, explained that the technical amendments were introduced to make sure that the two bills conform. 9:17:01 AM Ms. Ragle observed that HCS CSSB 125 (FIN) contains all the substantive provisions of SB 123 except the requirement for employers to separately compute medical retiree benefits. The benefits would be deposited into the new employee health trust established under AS 39.30.097(a). This provision is important to assure tax compliance. Commissioner Kreitzer provided members with backup to Amendment #3 (copy on file), which further explained the amendment would supersede SB 123 amendments. 9:18:57 AM Ms. Ragle and Commissioner Kreitzer reviewed amendments to the Revisor's Instructions. Ms. Ragle explained that the Revisor Instructions would resurrect repealed sections. There being NO OBJECTION, it was so ordered. 9:22:41 AM Representative Gara originally understood that the PERS rate of 22% and the TRS rate of 12% would continue into the future. He concluded that these numbers could increase according to investment performance. 9:24:06 AM KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION, clarified that the rates are set and fixed in Statute at 22% and 12.56%. He acknowledged that there is a remote chance the rates could increase if the normal costs exceed the rates in statute, since statutes state "the greater of". He did not think the normal costs would grow to the rate set in statute. The difference between the normal costs and 22% for PERS is intended to offset past service costs. It would take a dramatic shift of assumptions and would grow overtime. It would take action by the Legislature to change the rate. 9:25:52 AM Representative Foster MOVED to REPORT HCS CS SB 125 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 125 (FIN) was reported out of Committee with a "a "do pass" recommendation and with indeterminate note #1 by the Department of Administration and fiscal note #2 by the Department of Administration.