CS FOR HOUSE BILL NO. 335(STA) "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 reemployed 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 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 crimes for defrauding a state 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 to Representative Bill Hudson, explained that this legislation was a retirement and benefits cleanup effort and it was introduced at the request of Division of Retirement and Benefits. She noted that this legislation would bring the State of Alaska in compliance with federal laws, court settlements and other technical issues addressed in updated laws. She added that efficiency measures requested by the various retirement boards, was also included. She declared that there was nothing in this legislation that enhances or diminishes retirement benefits currently available to any state employees or retirees. Senator Phillips asked if the word "interpret" was included in this legislation, with regard to allowing the Administration the authority to make arbitrary interpretations of the statutes. GUY BELL, Director, Division of Retirement & Benefits, Department of Administration stated that he did not think that this word was included anywhere in the bill. He reiterated that this bill outlined technical clean up to existing statutes. He noted that this legislation clarifies the hearing process available to members, which usually center around disability appeals. He advised that this legislation addressed confidentiality of member records and more specifically it makes needed changes to a law enacted last session, SB 9, based on a settlement with National Education Association (NEA) Alaska. He specified that it addresses physician board member appointments and reporting issues. He continued that this bill separates the Public Employees Retirement (PERS) Board from the Personnel Board. He added that currently three of the five members on the PERS Board serve by virtue of being appointed to the Personnel Board. He asserted that because of the volume of work involved for each of these boards, it was decided that these board appointments should be made separate. He then outlined general changes to related board election rules. Mr. Bell outlined technical issues relating to the ability to roll member contributions directly into individual retirement accounts. He noted that this specifically addressed previous problems regarding the division of these accounts under qualified domestic relation orders. He addressed the small, related fiscal note for $29,000, which allows for a $150 honorarium for members who serve on the PERS Board. Senator Phillips referred to Sections 58 and 59. He asked for an explanation regarding each. He wondered if these sections were in place before the bill passed out of the House. Mr. Bell responded that, yes, they were. He pointed out that the Elected Public Officers Retirement System (EPORS) language was added to the Public Employees and Teachers Retirement Statute for simple and technical clarification related to payment of indebtedness. He noted that this language would only affect 62 individuals eligible for EPORS benefits and of this, quite a number of them are still living and not receiving retirement benefits. Senator Phillips pointed out that these individuals withdrew their money, and they are now given the ability to opt back into the system. He then referred to lines 21 - 23, on page 29. He read the following language: ".who has withdrawn the balance of the officer's individual account, who returns to service as the governor, lieutenant governor, or as a member of the legislature." He commented that this was a very exclusive group of people and pointed out that this measure was repealed by the voters in 1976. He pointed out that if someone has withdrawn his or her money, this should be a final decision. Mr. Bell responded that the idea of this clause supports an individual who has chosen to withdraw their membership contribution accounts. He continued that if this same individual needs to return to work, they must pay this refund back, the employers contribution has already been made to the system for this individual. He noted that this clause would create a consistency situation with all other state public employees. Senator Phillips responded that these particular individuals are elected, this being the main difference, and he wondered if these individuals were really state employees. Mr. Bell countered that from the perspective of the Public Employees Retirement System, yes. Senator Phillips stated that he had a problem with this provision. SHEILA DICKMAN, President, Matsu Classified Employees Association testified via teleconference from Matsu. She explained that she was speaking on the behalf of the Matsu School District employees. She stated that this legislation makes many changes to the retirement system, more specifically Sections 37 through 40. She added that there are a number of employees in Matsu with work hours reduced from 12 months to 10 or 11 months beginning in August of 2000. She noted that these employees have two options under current law, they can do nothing and receive a partial year's credit for the rest of their work life or they can participate in the alternative option under SB 9. She advised that if they choose the latter, they must pay for the year 1999-2000 even though they will not receive any benefit for this school year. She pointed out this was an oversight, which occurred in SB 9, and HB 335 will fix this problem. She added that this change would also allow for members who are paying for this service to revoke their choice under some very strict guidelines if their job status changes in the future. Ms. Dickman read a written statement by an employee named Gloria Lee as follows: "Public Employee's Retirement system confirms that if HB 335 does not pass, all current employees must choose to participate in alternative retirements or they will not be eligible next year. That means current twelve-month employees will be required to pay for the 1999-2000 school year, even though they do not receive any benefits. PERS states that the division has no choice due to the way the bill was drafted last year. I thank Senator Green for her assistance on this bill and I support to move this bill from the Committee for the benefit of classified employees." Amendment #2: This conceptual amendment removes Sections 58 & 59 from page 29, line 14 through page 31, line 21 of HB 335. Senator Adams objected. He stated that these state employees should be treated fairly. He continued that these 62 individuals have completed their public service to the state. Senator Phillips countered that this was a special arrangement passed a previous legislature, which changed from a two percent to a five percent standing per year up to 15 years or 75 percent of a person's salary. He added that after this action was taken, in 1976, voters repealed this section. He commented that at this same time, if an employee withdrew their money from EPORS and then wanted to come back into the system, the employee [indiscernible.] A roll call was taken on the motion. IN FAVOR: Senator Leman, Senator Donley, Senator Phillips, Co-Chair Torgerson. OPPOSED: Senator Adams, Senator Wilken, Senator P. Kelly. PASS: Senator Green. The roll was voided to allow Senator Green to amend her nonvoting status. BILL CHURCH, Retirement Supervisor, Division of Retirement & Benefits, Department of Administration clarified the issue raised by Senator Phillips regarding repayment of refunded contributions as noted in Section 58. He detailed the way in which this legislation presently reads. He continued that someone who has withdrawn his or her contribution and returns to work, has the opportunity to reinstate their credited service and repay the indebtedness of the reinstatement cost including interest within one year of the date of re-employment. He continued that this section treats this group of individuals like any other under various state retirement systems. Senator Phillips agreed with this illustration that most state employees are presently at two percent for the first ten years, but he pointed out that a special piece of legislation passed in 1975, set these 62 employees at a five- percent benefits advantage and to that he objected. Senator Donley stated that he agreed with Senator Phillips. He stated that these individuals are receiving an added benefit that no state employee has gotten since. He noted that going back retroactively in this instance, would not be the same thing. Mr. Bell referred to Section 59, which does not deal with indebtedness payments, but deals with distribution of member accounts under qualified domestic relation orders in the event of divorces. He pointed out that this section would bring the State of Alaska in compliance with federal law. Senator P. Kelly asked if these individuals would repurchase time under the old system or under the present two percent system. Mr. Bell responded that these individuals would repurchase as EPORS members at five percent. Senator Leman made a motion to move to divide the question between Section 58 and Section 59. Co-Chair Torgerson stated that Amendment #2A would be to delete Section 58 and Amendment #2B would be to delete Section 59. Senator Adams objected for discussion purposes. He asked how many of the 62 individuals would actually buy back their service time. He wondered how old these individuals were as well. Mr. Church responded that the majority of these individuals were between 40 to 60 years old. He added that he did not have the exact numbers of how many of them would participate, but that it would probably be a minority. A roll call vote was taken on the motion to adopt Amendment IN FAVOR: Senator P. Kelly, Senator Green, Senator Phillips, Senator Donley, Senator Leman, Co-Chair Torgerson. OPPOSED: Senator Wilken, Senator Adams. The MOTION PASSED (6-2) Senator Phillips made a motion to WITHDRAW Amendment #2B. Amendment #1: This amendment adds new and deletes old language as follow: The governor shall fill a [A] vacancy in an unexpired elective term [SHALL BE FILLED] by [ELECTION FOR A NEW SIX-YEAR] appointment for the remainder of the term. Senator Wilken made a motion to adopt Amendment #1, and referred to page 15, line 18 and 19, by reading the following language: "A vacancy and an unexpired elected term shall be filled by elections for a new year term." He explained that during the subcommittee budget process, this exact situation happened and the department was required to conduct an election, which cost $100,000. He then read the pertinent language of Amendment #1 as noted above. Co-Chair Torgerson asked if the terms of office were six years. Senator Wilken responded affirmatively and that they were six-year staggered terms. Co-Chair Torgerson suggested a conceptual change to fill the term until the next election. Senator Leman asked if Senator Wilken had considered another way to fill these vacancies, such as having the existing board fill this vacancy rather than the governor. Senator Wilken explained that the governor appoints three of these members and that two are elected. Senator Green suggested the addition of language, "by appointment until the next regularly scheduled election." Mr. Bell responded that this would create a situation where there are no longer any staggered terms. He added that this was not necessarily a bad thing, but there could potentially be new people re-instated every six years. Co-Chair Torgerson disagreed and pointed out that municipalities do this type of thing all the time. He used the example of appointing someone to take a position until the next election, remaining in this capacity for the remainder of this term. Co-Chair Torgerson called an at ease at 10:05 AM and reconvened at 10:08 AM. Senator Wilken made a conceptual amendment that would essentially allow the Governor to fill a vacancy in an unexpired elected term for a new six-year term until the next regularly scheduled election, while giving the Department of Legal Services the ability to conform the language accordingly. Hearing no objection, the amendment to the amendment was adopted and Amendment #1 was AMENDED. Hearing no objection, Amendment #1 as amended, was ADOPTED. Tape: SFC - 00 #101, Side B, 9:59 AM Senator Wilken made a motion to move HB 335, version 1- LS1217\M as amended from committee with individual recommendations and a $29,200 fiscal note from the Department of Administration. Hearing no objection HB 335 was MOVED FROM COMMITTEE.