SENATE RULES COMMITTEE March 29, 2000 12:16 p.m. MEMBERS PRESENT Senator Tim Kelly, Chair Senator Loren Leman, Vice Chair Senator Mike Miller Senator Drue Pearce Senator Johnny Ellis MEMBERS ABSENT All Members Present COMMITTEE CALENDAR SENATE CS FOR HOUSE BILL NO. 112(FIN) "An Act establishing the Alaska public building fund; and providing for an effective date." -MOVED OUT OF COMMITTEE CS FOR SENATE BILL NO. 85(FIN) "An Act relating to credited service in the public employees' retirement system for temporary employment; and creating a public service benefit in the public employees' retirement system." -MOVED OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION HB 112 - No previous Senate action SB 85 - See Labor and Commerce minutes dated 3/9/99 and Rules minutes dated 3/9/00. WITNESS REGISTER Mr. Bill Church Retirement Supervisor Division of Retirement & Benefits Department of Administration P.O. Box 110203 Juneau, AK 99811-0203 POSITION STATEMENT: Commented on CS for SB 85. ACTION NARRATIVE TAPE 00-06, SIDE A CHAIRMAN KELLY called the Senate Rules Committee meeting to order at 12:16 a.m. Present were Senators T. Kelly, Leman, Miller, Pearce, and Ellis. The first order of business to come before the Rules Committee was SCS for HB 112. HB 112-ESTABLISH ALASKA PUBLIC BUILDING FUND SENATOR LEMAN moved HB 112 with individual recommendations and accompanying fiscal notes for calendaring at the Chairman's discretion. Without objection, the motion carried. SB 85-CREDITED SERVICE FOR TEMP EMPLOYEES:PERS CHAIRMAN KELLY stated the committee has received a request to amend the bill to include pre-1979 employees. MR. BILL CHURCH, Retirement Supervisor for Division of Retirement & Benefits, stated CS for SB 85 will allow current or former legislative session employees to claim the time they worked as session employees prior to July 1, 1979. Mr. Church referred to AS 39.35.360 Section (G), which allowed these people to claim this service before July 1, 1980 by repaying their contributions. Once that sunseted there was no mechanism, except to claim it under the provisions of temporary service which requires an individual to be vested (5 paid years) in the PERS system. CS for SB 85 will allow individuals to claim this pre-1979 legislative session time to qualify to receive a benefit without bing vested. Employees would be required to pay the entire actuarial cost of providing benefits for that service. CHAIRMAN KELLY asked about how many people worked in 1977 and if they had already claimed that time. MR. CHURCH stated that depends on how much time those people accrued. If someone continued to work past 1980, they would have accrued the five years required under AS 36.35.345, the temporary service claim. The group of people who have not claimed those years of work is very small. The employees that didn't make the claim for working before July 1, 1980 are no longer in State or earned enough credit to become vested. CHAIRMAN KELLY asked if an employee worked one session, how much credit that employee accrued. MR. CHURCH stated if an employee works one session that person acquires five months of credit. CHAIRMAN KELLY asked about vestment of a session-only employee. MR. CHURCH replied if they were a session only employee it would count toward one year of the five years for eligibility for retirement benefits. CHAIRMAN KELLY stated they would need to put another four years in before they were vested. SENATOR LEMAN asked if that was including the interim as well. MR. CHURCH answered for session only employees under the statutes, if that person works five legislative sessions that person will receive a year of eligibility toward retirement benefits. The benefit is calculated on the credited service they earned. CHAIRMAN KELLY stated a person could use five sessions to qualify for medical benefits. Five months a year, for five years would only give that person 25 months of credit toward a pension. MR. CHURCH replied yes. CHAIRMAN KELLY asked whether this bill will affect a small group of people and if those people need to pay actuarial costs themselves. MR. CHURCH answered yes. CHAIRMAN KELLY asked if there is any cost to the employers. MR. CHURCH replied no. SENATOR LEMAN asked about adequate protection for the adverse selection phenomenon. MR. CHURCH said yes. CHAIRMAN KELLY asked what the adverse selection phenomenon is. MR. CHURCH replied only those who would take advantage of this would be those who would be advantaged by it. The cost will be calculated over a broad spectrum of the group, and the actuary builds in an additional cost to cover the adverse selection. CHAIRMAN KELLY asked if someone had already retired, whether they can claim this credit for a larger retirement. MR. CHURCH answered yes. CHAIRMAN KELLY asked if those people would theoretically need to pay the money back. MR. CHURCH stated at retirement or when a service benefit becomes available for a person to claim, the actuary will calculate the cost and spread that cost over their lifetime. That is called an actuarial adjustment. SENATOR LEMAN moved amendment number one. Without objection, the motion carried so a Rules Committee substitute was adopted. SENATOR LEMAN moved all versions of SB 85 with individual recommendations and accompanying fiscal notes for calendaring at the Chairman's discretion. Without objection, the motion carried. There being no further business to come before the committee CHAIRMAN KELLY adjourned the meeting at 12:45 p.m.