HOUSE BILL NO. 236 An Act relating to credited service in the teachers' retirement system for part- time employment. PATTI SWENSON, STAFF, REPRESENTATIVE CON BUNDE, explained that the purpose of HB 236 was to correct an inequity in the Teachers Retirement System (TERS). Under the current system, teachers working more than 50% of the time, but less than full time, receive only one-half service credit for time worked. In other words, teachers in this group contribute more retirement dollars, but do not get a retirement benefit consistent with their contribution. Ms. Swenson stated that HB 236 would correct the inequity in the teacher retirement system by giving teachers, who work more than 50% of the time, but less than full time, retirement service based on time worked. Representative G. Davis inquired if the entire fund would increase the calculated contribution rate by approximately .06% and if all members of the group would pay that. Ms. Swenson replied that teachers are currently paying that rate. She requested that Guy Bell answer the question in more depth. GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, explained that there is a calculated cost of .06% of covered payroll. He noted that since the employee calculation rate is fixed, 8.65% would go to the employers. The employees are effectively paying in based on the time that they put in. The legislation would create a small additional liability to employers, because it is an adjustment to the benefit. However, this will not have an affect on the 12% contribution rate. The .06% rate will be absorbed by the system's current rate of 12% for employers. Representative Phillips commented that several years ago, the Legislature passed a similar bill for the non-certified employees. She asked if the nurses would be classified the same as the teachers. Mr. Bell advised that school nurses are generally classified as teachers. Representative Phillips asked if it was the intent of Representative Bunde that nurses be covered under this legislation. Ms. Swenson replied that it was. Mr. Bell pointed out that decision would be each district's discretion. Co-Chair Mulder pointed out that Section #2, the retroactive portion, was "troubling". That section would allow employees that have worked in excess of ½ time in the past, to come back and make application to the portion of the time that they worked. Mr. Bell explained that had been included in the calculation as well as the future costs to the State. Co-Chair Mulder suggested that would be an administrative nightmare. Mr. Bell requested the retirement specialist from his Division testify regarding that concern. DAVID STOUT, RETIREMENT AND BENEFITS SPECIALIST, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, noted that his job required administering the functions as prescribed in HB 230. He commented that with the computerization of the system, it would not be difficult to accomplish a change in the service from 50% to a prorated base. Representative J. Davies noted that this would not be totally retroactive, but rather, would address those coming up for retirement. Representative J. Davies added that this calculation would have to be determined regardless. Co-Chair Mulder asked the number of people eligible in this category. Mr. Stout replied that there is a small amount of teachers that teacher part time. He guessed that only 15% - 20% of all active teachers has some part-time service in their careers. Co-Chair Mulder interjected that was a significant number. Co-Chair Therriault inquired if the total cost would be absorbed. Mr. Bell replied that he had been advised that the costs could be absorbed. Co-Chair Mulder voiced concern with adding something to the benefit. He commented that there has been a determination made without the proper calculation used. He foresaw a large fiscal note "down the road". Representative G. Davis noted that the bill only related to the TERS budget. He pointed out that the State budget would not be directly affected, however, costs would be "passed through" to the school districts. The problem down the line exists with the employee and the employer. Representative G. Davis noted that his concern was having an unfunded mandate. Co-Chair Therriault interjected that staff just informed him that 20% far surpassed the "real" number. JOHN CYR, ALASKA PRESIDENT, NATIONAL EDUCATION ASSOCIATION (NEA), JUNEAU, responded that last year, it was determined that there are about 250 people statewide that would be affected through the proposed legislation. The problem exists because those people are already paying into the system. He noted that if a person works ¾ time, they are paying into the system for the ¾ time rate, however, when they retire, they only receive ½ time rate payment. He emphasized that the system is currently making money from those employees. When those employees leave the system, the money is not retroactive. Representative Foster understood that a net zero would benefit the system and would relate to those employees working 25% and getting 25% rather than 50%. He thought this would be a "wash". Co-Chair Therriault explained that the employee would be required to work a minimum of a certain percentage before they would be eligible. Mr. Bell replied that you would have to work a minimum of half time (50%) to be a member of the system. Mr. Cyr added that each local district decides who is part of either the TERS or PERS system. Representative G. Davis asked what state employees would be affected by the legislation. Mr. Bell stated that there are only 230 employees within that system. He did not know how many of those were part-time. Representative Foster asked where most of the part-time teachers were located in the State. Mr. Cyr replied that the majority of these teachers are located in Anchorage. He acknowledged that there are very few part-time teachers in the Bush area. Co-Chair Mulder noted that he had a conflict of interest as one of his past employees was on the list. [Copy on File]. Co-Chair Therriault objected to Co-Chair Mulder abstaining from voting. Representative J. Davies declared a conflict because his wife could have been a part-time schoolteacher. Co-Chair Therriault objected to Representative J. Davies abstaining from voting. Representative Foster MOVED to report HB 236 out of Committee with individual recommendation and with the attached fiscal note. There being NO OBJECTION, it was so ordered. HB 236 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration dated 2/9/00.