HOUSE FINANCE COMMITTEE March 19, 2007 1:40 p.m. CALL TO ORDER Co-Chair Chenault called the House Finance Committee meeting to order at 1:40:47 PM. MEMBERS PRESENT Representative Mike Chenault, Co-Chair Representative Kevin Meyer, Co-Chair Representative Bill Stoltze, Vice-Chair Representative Harry Crawford Representative Les Gara Representative Mike Hawker Representative Reggie Joule Representative Mike Kelly Representative Mary Nelson Representative Bill Thomas, Jr. MEMBERS ABSENT Representative Richard Foster ALSO PRESENT Charlene Morrison, Chief Financial Officer, Division of Retirement and Benefits, Department of Administration; Annette Kreitzer, Acting Commissioner, Department of Administration PRESENT VIA TELECONFERENCE None GENERAL SUBJECT(S): ^OVERVIEW: PERS/TRS ACCOUNTING ISSUES    The following overview was taken in log note format. Handouts will be on file with the House Finance Committee through the 25th Legislative Session, contact 465-6814. After the 25th Legislative Session they will be available through the Legislative Library at 465-3808.   TIME SPEAKER DISCUSSION  1:41:46 PM ANNETTE Spoke of two of the governor's bills KREITZER, dealing with PERS/TRS issues. HB 204, ACTING a "technical fix bill", clarifies the  COMMISSIONER, death and disability benefits for peace DEPARTMENT OF officers and fire fighters and ADMINISTRATION addresses IRS structural issues. HB 206 deals with accounting issues associated with the cost share legislation. The Alaska Municipal League, the Alaska Retirement Management Board, and the governor, have recommended this accounting change to the PERS Defined Benefit (DB) Plan.  1:43:40 PM CHARLENE Provided a handout entitled "PERS DB MORRISON, Plan - Accounting Issues" (copy on CHIEF file.) She addressed the purpose of the FINANCIAL presentation - to address concerns OFFICER, about the employer level accounting RETIREMENT AND resulting in contribution rates not BENEFITS being supported by employer level accounting records, and to set the stage to discuss a solution - Slide 2. She discussed proposed solutions of the cost share legislation - Slide 3.  1:45:24 PM Ms. Morrison Explained that the state would assume 65 percent of the unfunded liability at 6/30/2006.  1:45:57 PM Ms. Morrison Addressed Slide 4 - the unfunded liability.  1:46:20 PM Ms. Morrison Explained that PERS is one system, but two plans, the defined benefit plan and the defined contribution retirement plan - Slide 5.  1:46:55 PM Representative Asked if there was any deviation from Stoltze the plan to have a Tier IV. Ms. Kreitzer replied there is no change of plan.  1:47:52 PM Ms. Morrison Reported that the PERS DB plan has no impact on TRS, benefits paid to members, PERS as a whole, or PERS Defined Contribution Plan - Slide 6.  1:48:55 PM Ms. Morrison Reviewed the Agent Multiple Employer Plan - Slide 7.  1:49:33 PM Ms. Morrison Related components of Alaska Statutes - Slide 8.  1:50:08 PM Ms. Morrison Continued on Slide 9 with statute information.  1:50:31 PM Ms. Morrison Explained the calculation where assets, minus liabilities, equals a surplus, or unfunded liability - Slide 10.  1:51:14 PM Ms. Morrison Described how employer contributions are accounted for in two separate accounts - Slide 11.  1:52:03 PM Ms. Morrison Explained Slide 12 - Retiree Reserve Account funding sources.  1:52:36 PM Ms. Morrison Addressed Slide 13 - How transfers are calculated.  1:53:12 PM Ms. Morrison Explained Slide 14 - the allocation process.  1:53:41 PM Ms. Morrison Explained Slide 15 - an allocation example.  1:54:12 PM Ms. Morrison Continued with Slides 16 and 17 to show the allocation process. She explained the transfer from the employer contribution account into the retirement reserve account - Slide 18.  1:55:35 PM Ms. Morrison Explained Slide 19 - fully funding the retiree reserve account. She spoke of the various ways an employer can be impacted.  1:56:35 PM Ms. Morrison Discussed the effect of both the allocation and transfer process - Slide 20.  1:57:18 PM Ms. Morrison Addressed how the liabilities are calculated - Slide 21.  1:58:00 PM Ms. Morrison Gave an example of liability allocation - Slides 22 and 23. She termed it an extreme example.  1:59:45 PM Ms. Morrison Addressed the impact on contribution rates - Slide 24. The unfunded liability is the basis of the past service cost portion of the employer's contribution rate.  2:00:29 PM Ms. Morrison Summarized the proposed solution - Slide 25. The PERS DB plan would align with TRS, is supported by ARMB, AML, and the governor, and is simpler to administer.  2:01:57 PM Representative Question the role of pension obligation Gara bonds.  2:02:52 PM Ms. Kreitzer Replied that scenarios will be provided at a later date regarding pension obligation bonds.  2:04:09 PM Co-Chair Commented that members of the committee Chenault have bills regarding PERS/TRS. This issue will come before the committee at a later date.  2:05:36 PM Adjourn.