HOUSE BILL NO. 475 An Act describing contributions to the health reimbursement arrangement plan for certain teachers and public employees; clarifying eligibility for membership in that health reimbursement arrangement plan; relating to the 'administrator' of the Public Employees' Retirement System of Alaska; and providing for an effective date. Co-Chair Chenault MOVED to ADOPT work draft #24-LS1685\S, Wayne, 4/11/06, as the version of the committee substitute before the Committee. There being NO OBJECTION, it was adopted. 9:34:32 AM REPRESENTATIVE PAUL SEATON, SPONSOR, updated Committee members on the process to date. He stated that HB 475 was a clean up bill to the Retirement Security Act (SB 141) passed in 2005. Due to the length of SB 141, a handful of errors and oversights were made that need to be changed for the transition to Tier IV. HB 475 is a technical bill and intended to include any policy change. Revisions encompassed in HB 475: · Clarifies the procedure for an appeal to the Office of Administrative Hearings · Requires employer to contribute at least the normal cost rate starting in 2008 · Changes the requirements to receive a conditional service benefit · Clarifies provisions regarding Personnel Employees Retirement System (PERS) and Teachers Retirement System (TRS) death and disability benefits including how those benefits would be funded: Funding death and disability The structure of death and disability benefits The survivor benefit · Clarifies the eligibility requirements for medical benefits · Clarifies requirements for non-vested Tier II or Tier III employees who wish to transfer to Tier IV · Clarifies the basis for calculating employer contribution rates · Gives regulatory authority to the appropriate party · Changes the basis for calculating HRA employer contributions to meet the Internal Revenue Service (IRS) tax qualifications · Definitions · Disallows employment with National Education Association (NEA) as counting towards Tier IV retirement eligibility · Establishes provisions for employer termination of participation in the plan · Clarifies defined benefit and defined contribution components of the plan · Establishes adherence to IRS limitations The changes are not absolutely necessary for Tier IV to come on line July 1, 2006. The revisions clarify many aspects of the statutes, providing a benefit both to the plan and members. If changes are not made, many crucial decisions would be left to the Administrator of the plan without proper guidance from the Legislature. 9:42:19 AM Representative Weyhrauch noted that the sponsor statement was written to version \L and that the Committee had just adopted version\S. Representative Seaton noted the only substantive change to version\S is located on Page 33, Sections 73 & 77, the contribution amount for death and disability. The amount that employers would have to provide was recalculated; it found that Mercer had not calculated in the Cost-of-Living-Allowance (COLA) over time for those in Tier III. 9:44:32 AM In response to Representative Weyhrauch regarding over funding, Representative Seaton explained it was a retroactive date listed on Page 33. The amount was backed- out and given two years to catch up. He added that the Division of Retirement and Benefits had assured his office that under no circumstance would they allow drawing from over-funded to under-funded status. 9:47:49 AM Representative Holm observed the clause that a "period of death" counts toward retirement, questioning what that meant. Representative Seaton replied that it is occupational death and disability and if a member was working for a PERS or TRS employer and died, their heirs would receive the survivor's benefit. 9:49:22 AM Representative Seaton observed that the bill would change the requirement to receive a conditional death benefit until 2010, clarifying that the employee could buy-back years. Representative Kerttula asked the explanation of refunded contributions being creditable. Representative Seaton clarified that after 2010, a member who was in PERS and withdrew their funds and then returns, they would be able to fully buy-back the funds and be eligible for a deferred compensation (DC) plan. They would not be able to do that after 2010. The employee would need the employers consent to buy into a DC plan. If the employee was a Deferred Benefit (DB) employee, they would still be able to buy-back. KATIE SHOWS, STAFF, REPRESENTATIVE SEATON, explained that there are a number of sections that deal with conditional service benefits. The first one clarifies that the employee has until 2010 to payback service to be where they left off, which represents a large unfunded liability to the system. The intent of SB 141 made that change; HB 475 provides further clarification. The transfer is a separate section. Representative Kerttula concluded that a member could refund their service until 2010. Ms. Shows clarified that the employee could still do it until 2010. If the service was not refunded, the employee could do it at any time. The buy-back must be initiated before 2010 in order to return to their previous retirement plan if they are reemployed on a PERS or TRS plan. 9:56:07 AM Representative Seaton reviewed the death and disability aspect, which looks at funding, structure of the benefits and the survivor benefits. The bill also clarifies the eligibility for medical benefits. The member does not have to be continuously insured for their eligibility. Representative Kerttula questioned current practice. Representative Seaton observed that the provision pertains to early retirement. He noted that under the new plan, the medical benefits apply at the age of retirement. If the member returns to work, and shows that they were eligible during that period of unemployment, they would still qualify. Representative Kerttula mentioned the "letter of coverage". Currently, if the person retires early, they receive full medical benefits. Representative Seaton responded that currently, the medical benefits start at retirement age. He added that 75% of all medical expenses are happening on early retirees not on the very elderly. HB 475 was HELD in Committee for further consideration.