CS FOR SENATE BILL NO. 85(L&C) "An Act relating to credited service in the public employees' retirement system for temporary employment." JEANNIE SMITH, staff to Senator Jerry Mackie sponsor of the bill, testified. Currently, employees in the PERS system could buy back their temporary time. However, this time did not count toward the minimum service needed for their retirement eligibility. She told the committee this bill would allow these employees currently covered under PERS to buy any temporary time and have it credited toward that minimum service time for retirement. It would provide equity among state employees. It was an issue of fairness. They should be allowed to pay for months that they actually worked. The fiscal impact on this legislation for temporary service as recognized under the retirement system provided that the employee would pay the full actuarial cost. There were no general funds involved. There would be computer programming necessary to implement the program as reflected in the Department of Administration fiscal note. The legislation would allow the state to realize immediate cost savings by enabling employees to meet the retirement eligibility threshold sooner. The employees prone to use this for retirement credit were employees with the higher service codes thus they are on the higher end of the pay scale, according to Jeannie Smith. She continued saying SB 85 was a responsible piece of the puzzle in the development of Alaska's long term budget solution. This was a reasonable economic tool that may be used to minimize the impact of downsizing Alaska's state government. She spoke of a position statement submitted by the Department of Administration. It said that the bill would have the effect of allowing the employees to meet the retirement eligibility threshold sooner than they would otherwise be anticipated. She then noted a list of Alaskan employers who were included within the umbrella of this bill who did not work for the State Of Alaska. She concluded by stating that this bill sent a positive message to state workers and other employers and employees across the state. Guy Bell and Bill Church returned to the table to address this bill. Guy Bell commented that this would allow employees to pay the cost to use temporary service that they had worked as membership service toward their retirement. Public employees with temporary service time would be affected. Currently, they could buy that temporary service time but could not use it toward retirement eligibility for 20 or 30 and out contracts. This would allow them to pay some extra, which would be the actuarial costs. He gave examples of the police or firefighter component of PERS. The full responsibility for paying the cost would rest with the employee. Senator Randy Phillips asked if there was a difference between seasonal and temporary employees. Guy Bell explained that a seasonal employee was considered permanent and they did pay into PERS during their period of work. A temporary employee was not a PERS employee. There was no deduction from their salary and they did not receive PERS credit. Senator Randy Phillips wanted to know how many temporary employees were in the state system and what was the average length of service in that status. Bill Church said the division did not know since people did not claim their temporary service. Senator Randy Phillips asked how many permanent temporary workers were there. Bill Church responded that the division did not track that information. Based on the employees who did claim their temporary service, they could prepare an estimate. Guy Bell added that there were many public employees in the retirement system and state employees were only a part. There were people with temporary service who worked for other employers. Senator Al Adams asked about the fiscal note for SB9 and wanted to know if this program could be implemented with the computer modifications made to the other program for school employees. Bell replied that the changes were slightly different but that it was a small cost to the system. The two were calculated separately because it was not known if both bill would be adopted. Co-Chair John Torgerson asked if this would be handled on an individual basis or would a single percent be imposed based on the actuarial costs. Guy Bell replied that it would be calculated on an individual basis since each case was different. The difference here was that an employee would purchase time that they worked probably a number of years ago. Very often, a person first worked as a temporary and then worked into a permanent position. That had to be calculated on an individual basis. Senator Randy Phillips compared this to the last bill where seasonal employees had no control of the number of months they could work. He wondered if with the employees addressed in this bill, were there any inequities within the group of temporary employees that needed to be adjusted. He spoke about the different classifications of people and assumed most were serving a probationary period before entering a full time status. Guy Bell said this was different than probationary since they were hired as temporary employees. When a person was first hired in a permanent position they were on probation but still contributed to PERS, he explained. Co-Chair John Torgerson was confused about initial testimony saying that temporary time did not count. Could an employee go back and pick up time served in temporary service even when they were not in the system. Bill Church responded that employees could once they were vested in PERS. Then they could claim all full-time temporary service. That was the main difference with this bill and SB 9. SB 85 dealt with employees who by the nature of their employment were excluded from becoming a vested member of PERS. They could then claim all full-time temporary service and pay the rate for that. Co-Chair John Torgerson wanted to know if buying in counted toward becoming vested. Bill Church answered no; a person must already be vested. Co-Chair John Torgerson asked if once they were vested, how would the division calculate the payment for the five-year period. Bill Church said once they employee is vested they could go back and pay for the earlier temporary service. He detailed his own situation with his three months of temporary service. Co-Chair John Torgerson wanted to know what was the average term of temporary service. Bill Church said it varied and depended on the term of employment. Co-Chair John Torgerson had questions about qualifications for PERS. Church replied it was calculated by time served as a paying member of PERS. Co-Chair John Torgerson asked if this bill had a retroactive clause for an employee who was out of the system. Bill Church replied that an employee would be able to pay into the service to meet the eligibility for retirement. The employee could chose to buy it as just credited service or also for service to be credited for accrual. It was an individual decision. Co-Chair John Torgerson asked if this was an irrevocable election. Bill Church affirmed. Co-Chair John Torgerson asked why there weren't the same triggers in this bill as in the last bill of 90 days and 180 days. Tape: SFC - 99 #74, Side B 8:50 AM Bill Church responded there was already an existing period of service that had happened in the past. The election could be made at any time before the employee retired. The only difference would be the amount of interest accrued and charged based on how long ago the temporary service was performed. He detailed the differences in accrual procedures between this bill and SB 9, which was an on- going program. Co-Chair John Torgerson then asked about the effect this bill would have on the RIP. It seemed to him that this would have a greater direct affect than the last bill had. He noted that in order to qualify a saving to the state had to be shown. Would this change some of those determinations? Bill Church said this would only apply to retirement qualifications and cost savings would still be up to the employer. Senator Randy Phillips asked if there was a difference between union and nonunion employees' retirement. Church said there was not. Senator Randy Phillips referred to a letter in the packet by a school district temporary employee on the Kenai Peninsula. She had worked for nine years as a temporary. It seemed like a long time for temporary. Church clarified that the testimony was directed at the wrong bill and really applied to SB 9 because she was a school district 9- month employee. Senator Randy Phillips noted different classifications for different employees and the different benefits afforded those. He wanted to know if this would cause inequalities for those employees. Bill Church replied that union affiliation would not matter in this program. Barbara Huff testified via teleconference from Anchorage in favor of the bill. She spoke about the difference of this bill from the previous bill. This bill would impact the majority of the members her organization represented within the Anchorage Municipal Employees Association. She did not see a significant number of employees who would be impacted one way or another, but this bill would grant them an opportunity if they chose. She spoke about the temporary employees covered in the bargaining unit. Co-Chair John Torgerson ordered the bill held in committee.