Legislature(2015 - 2016)SENATE FINANCE 532
04/17/2015 01:30 PM Senate FINANCE
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HOUSE BILL NO. 135 "An Act establishing a Roth contribution program for the public employees' deferred compensation program; and providing for an effective date." 2:22:10 PM ANDY MILLS, LEGISLATIVE LIAISON, DEPARTMENT OF ADMINISTRATION, explained that the legislation would allow for a Roth 457 contribution option for state employees. He relayed that state employees could currently pay into deferred compensation, which allowed them to save additional money, for dispersement at the time of retirement. The deferred compensation option was a pre-tax option, with taxes being paid at the time of distribution. He said that the Roth 457 would allow for a post-tax option, giving the employee the ability to not be taxed at pay out. He stated that the option would allowed for diversification in retirement choices and was optional. He explained that in January of 2011 the federal government began offering the option. He added that the option would be useful given the uncertainty of future taxation rates due to the federal deficit. 2:25:06 PM KATHY LEA, CHIEF PENSION OFFICER, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, reviewed the sectional analysis (copy on file): Section 1. AS 39.45.050 is repealed and reenacted to provide for a post-tax Roth investment option in the public employees' deferred compensation plan and clarifies that state and federal income tax is not deferred under this option. The section establishes if no positive election is made for a Roth investment, contributions will be deemed to be on a pre-tax basis. This allows the pre-tax target date options to continue as the default option for the plan if the member makes no investment election. The section establishes dollar limitations in accordance with Internal Revenue Code rules and allows the Administrator of the plan to establish rules and procedures governing the election process by participating employees. Section 2. AS 39.45.060 adds a definition of "Roth" contributions to have the meaning under 26 U.S.C. 402A(c) Section 3. Establishes an effective date of July 1, 2015. 2:26:10 PM Senator Bishop asked for more information on how the plan would be taxed. Mr. Mills explained that the bill would allow the investment to be taxed now; at the time of retirement the money set aside, plus earnings, would be tax free. 2:26:56 PM Senator Dunleavy understood that the bill would not limit the investment tools that could be used, such as investing in high risk stocks. Mr. Mills replied that all of the options currently offered by the state would be available to the plan. 2:27:39 PM Co-Chair MacKinnon OPENED public testimony. Co-Chair MacKinnon CLOSED public testimony. 2:28:34 PM AT EASE 2:29:56 PM RECONVENED Co-Chair MacKinnon discussed housekeeping and the suggested a break in the meeting to discuss the course of action pertaining to the legislation on the agenda. 2:31:08 PM RECESSED 3:13:15 PM RECONVENED HOUSE BILL NO. 135 "An Act establishing a Roth contribution program for the public employees' deferred compensation program; and providing for an effective date." 3:13:40 PM Vice-Chair Micciche discussed the fiscal note. Vice-Chair Micciche MOVED to report HB 135 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 135 was REPORTED out of committee with a "do pass" recommendation and with one previously published zero fiscal note: FN 1(ADM). 3:14:51 PM AT EASE. 3:16:14 PM RECONVENED