HOUSE BILL NO. 335 An Act relating to information contained in retirement system records; relating to retirement boards; relating to procedures and hearings under state retirement systems; relating to benefits for re-employed retired members of retirement systems; relating to eligibility for normal retirement for members of the teachers' retirement system who have Alaska BIA credited service; relating to disability benefits for members of state retirement systems; relating to deduction of premiums from retirement benefits; relating to protection of, and assignment and transfer of, amounts held in retirement systems; relating to retirement benefits for certain employees earning high salaries; relating to qualified domestic relations orders in state retirement systems; relating to the definition of `retirement fund' in the teachers' retirement system; relating to membership of state employees in the teachers' retirement system; relating to refund of contributions made to the judicial retirement system or to the former elected public officers retirement system and repayment of refunded contributions in those systems; relating to self-insurance and excess loss insurance for persons receiving benefits from a state retirement system; relating to participation of elected officials in the public employees' retirement system; relating to reinstatement of credited service in the public employees' retirement system after a refund because of certain levies; relating to the level income option benefit under the public employees' retirement system; relating to participation of employees of political subdivisions and public organizations in the public employees' retirement system; relating to penalties for attempts to defraud the public employees' retirement system; relating to the definition of `pension fund' in the public employees' retirement system; relating to calculation of years of service and of benefits under the public employees' retirement system for noncertificated employees of certain educational employers; and relating to individual accounts maintained for members of the former elected public officers retirement system. MELINDA HOFSTAD, STAFF, REPRESENTATIVE BILL HUDSON, explained that HB 335 had been introduced at the request of the Division of Retirement and Benefits, and is a clean up bill. Ms. Hofstad noted that according to the Department of Administration, there are federal laws, court settlements and other technical issues that need to be addressed in updated State law. Additionally, indicated in the legislation are some efficiency measures requested by various retirement boards. She added that there has not been a clean-up bill for many years and some of the issues addressed in HB 335 are longstanding ones. Ms. Hofstad added that the legislation is aimed at addressing issues involving clarification of current practices and law, compliance with new federal laws, compliance with various settlements, and board efficiencies. She noted that every effort had been made to stay away from policy changes. Ms. Hofstad concluded that there is nothing in the legislation that enhances or diminishes any retirement benefit for active employees or retirees in any public retirement system, and no section, which will increase employer's costs. Co-Chair Mulder MOVED to adopt the work draft version 1- LS1217\K, Cramer, 2/29/00, as the version before the Committee. There being NO OBJECTION, it was adopted GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRAITON, spoke to the changes made in the version before the Committee. He provided a brief sectional analysis. Mr. Bell commented that he had spoken to each Committee member or their staff regarding the legislation. Representative J. Davies pointed out that discussion had not been to the version before the Committee at present time. Co-Chair Therriault advised that the committee substitute had "dropped out" a few sections. ? Mr. Bell stated that Section 1 was needed as a result of Court action. The section exempts member's records, including retiree records under the Public Records Act. Co-Chair Therriault asked why the retiree organization should have access to that information. Mr. Bell replied that those retirees would be representing the interest of the systems retirees, and disseminating information from the retiree organization. Vice Chair Bunde inquired if that organization was composed only of members from the State system. Mr. Bell replied that the language is specific to retires receiving benefits under one of the State's systems. Vice Chair Bunde pointed out that it was the intent of the Alaska Association of Retired Persons (AARP) to represent people retired from a number of different systems. Mr. Bell explained that the section was more narrowly defined and that they must be affiliated with an organization representing employees in this system. Co-Chair Therriault inquired where that section came from. Mr. Bell replied that piece resulted from requests from the retiree organizations. He could not remember who that group consisted of. ? Section 2 is a technical clean up for the physician board members recommendation for efficiency for medical disability appeals. Representative Grussendorf questioned the appeal process. Mr. Bell explained the way the disability process works. If a claim is denied, the person has the right to appeal. The retirement board then has a formal appeal. If it is a medical disability, the board would include two physicians to participate and then they would make the ruling. He noted that decision could be open to challenge in the Supreme Court. ? Section 3 would carry a fiscal impact. Mr. Bell noted that a fiscal note had been submitted with the bill for $29 thousand dollars. This section would provide an honorarium payment to the Teacher Retirement System (TRS) Board members. ? Section 4 would place in statute, regulations defining a quorum. Representative J. Davies asked what had been dropped. Mr. Bell replied that Section 4 was dropped out of the work draft before the Committee. Co-Chair Therriault noted that after he had requested that the committee substitute be drafted, he had reconsidered his choice. He noted that he had an amendment drafted to address that concern, 1-LS1217\K.1, Cramer, 2/29/00. [Copy on File]. ? Mr. Bell noted that Section 4 was an effort to make the hearing process consistent with the appeals. ? Section 5 makes a clarification or correction which the Department believes is appropriate for the penalty a person takes when they retire early and then subsequently comes back to work. BILL CHURCH, RETIREMENT SUPERVISOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, noted that when someone elects to retire before their normal retirement date, they take a reduced benefit spread over their life- time. When someone returns to work under the current law, they forego their retirement benefit for reemployment. Once they re-retire, their benefit is recalculated, however, the first contract remains in place. There are no adjustments to that benefit currently under law. Section 5 would give equity so that the individual would be able to receive back the equity that they had lost. ? Mr. Bell commented that Section 6 would clarify the existing practice for the Bureau of Indian Services (BIA) section. ? Section 7 adds another clarification of how the State does business on disability benefits for teachers. ? Section 8 addresses filing requirements for disabilities by making them the same for teachers and public employees. It would create consistency between the TRS and Personnel Employee Retirement System (PERS). ? Section 10, contained in the State Affairs version, has been deleted from the current work draft. That section clarified that the TERS board does have a roll in advising on ad hoc pension and post retirement pension adjustments. Representative J. Davies asked why that section had not been included. Co-Chair Therriault noted that the language would "muddy" the waters by including it in statute as the practice is currently being done. Representative J. Davies inquired why the board had requested that clarification. Mr. Bell replied that the Board felt that this was an important role of theirs. He acknowledged that this is not currently an issue. Representative J. Davies acknowledged that he knew very little regarding this area. He suggested that the language might avoid expensive lawsuits. Co-Chair Therriault asked if the Board would be making the policy calls or giving the advice. He questioned if inclusion of that language would provide an opening for potential problems. ? Mr. Bell stated that Section 11 was a clarification of the practice regarding the deducting of retiree insurance premiums from the retirement checks. ? Section 12 addresses the Qualified Domestic Relations Order (QDRO) and allows the alternate employee the right to receive the identified portion of a contribution account. ? Section 13 allows direct rollover of an individual's retirement account to an IRA, which would be a convenience to all members. Representative Phillips questioned if there was a charge associated for that service. Mr. Bell replied that there is no charge or penalty for that service. It is more convenient for the Department. The second part of Section 13 is a deletion for the authorization for a voluntary deduction of the membership dues. It has been deleted in the committee substitute. Representative J. Davies asked why it had been removed. Co- Chair Therriault advised that he personally did not like the automatic system. ? Mr. Bell continued, Sections 14 & 15 clarify that if a person commits fraud, it is a Class A misdemeanor. ? Section 16 is an Internal Revenue Service (IRS) requirement adjustment. ? Section 17 sets a limit on compensation base calculation of retirement benefits. ? Section 18 is a Qualified Domestic Relations Order (QDRO) definition to clarify that a former spouse has a right to the contribution account of a member. ? Section 19 clarifies who in the Department of Education is in the TRS system. ? Section 20 moves the Judicial Retirement System (JRS). ? Sections 21-24 address the same situation in the JRS QDRO's concern and the ability to roll money directly to an IRA and the deduction of premiums for insurance. ? Section 25 takes the same actions for the National Guard and Naval Militia Retirement System. ? Section 26 adds language authorizing self-insurance for the retiree-medical, dental, audio and long term care. ? Section 27 would separate the PERS Board from the other personnel boards. ? Section 28 would change the election process. Co-Chair Therriault advised that Section 28 was included as the Alaska State Pension Investment Board (ASPIB) uses that system. Representative Phillips asked if it was common practice that a majority of members not be present for a vote. Mr. Bell noted that over the past elections years, there have been multiple candidates with voter run off. ? Mr. Bell commented that Section 29 identifies the appointment and number of physician members to the PERS Board. ? Section 30 provides for an honorarium payment to the PERS Board members consistent with that paid to the members of the ASPIB. ? Section 31 relates to the definition of a quorum for the conduct of its business. He noted that this resulted from the passage of SB 9, last session. ? Section 32 clarifies that the PERS Board has the authority to adopt regulations for the conduct of hearings. ? Section 33 is new and applies to PERS membership only in how to move in and out of the retirement system for elected officials. ? Section 34 addresses the early retirement system previously addressed by Mr. Church. ? Sections 35-39 relates to SB 9 and the revocability of an election for non-certificated school district employees. ? Sections 40-41 address the filing requirements for disabilities. ? Section 42 clarifies that the level income option, which was repealed in 1996, is available to people in the system before that date. ? Section 43 would clarify that the PERS Board has an advisory role and ad hoc for post retirement pension vestments. That section has been deleted in the work draft. ? New Section 43 addresses the QDRO for member account contributions. ? Section 44 allows the rollover into an individual retirement account. ? Sections 45-47 removes language no longer necessary because of sections added earlier in the bill. ? Section 48 is the authorization to deduct retiree insurance premiums. ? Section 49 is a new section applying to PERS only. It addresses issues where employee requests the employer to withdraw their coverage in the PERS system. ? Section 50 defines the Class A misdemeanor and added to that particular retirement system. Mr. Bell noted that this was another clarification of SB 9, regarding the basis calculation for the surcharge. ? Sections 51-52 are the highly compensated individual requirements of the Internal Revenue Service (IRS) code for PERS. ? Section 53 clarifies that the income on investments of the PERS fund does belong to that fund. ? Section 54 speaks to the QDRO's related language for the PERS. ? Section 55 would remove the physician's members of the PERS and TRS board from the requirements of Sections 39 and 50. ? Section 56 provides repeller language to the current language contained in law. ? Sections 57-58 are changes to the Elected Public Retirement System (EPORS) and make that statute consistent with the PERS and TRS. ? Section 59 was previously addressed and makes that language consistent. Co-Chair Therriault MOVED to adopt Amendment #1, which speaks to the setting of the quorum. [Copy on File]. Mr. Bell explained that the amendment would provide clear authority in statute to allow the boards to do what they currently have already been doing. (TAPE CHANGE, HFC 00 - 44, Side 1). Mr. Bell noted that any thing that the Board does could be challenged in Court. The amendment would provide an effective way to protect that challenge. Vice Chair Bunde voiced support of the amendment. He asked if the amendment should contain additional guidance language assuming a minimum of members. Mr. Bell suggested that would be a policy call for the Legislature to make. He did not think that it would be a necessary call. The Board does not have independent regulation making authority and it would be subject to public process. Vice Chair Bunde MOVED to report CS HB 335 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 335 (FIN) was reported out of Committee with a "no recommendation" and with a fiscal note by the Department of Administration dated 2/23/00.