Legislature(2003 - 2004)

04/06/2004 08:01 AM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 331-RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES                                                                               
CHAIR WEYHRAUCH announced  that the last order  of business would                                                               
be HOUSE BILL  NO. 331, "An Act relating  to federal requirements                                                               
for governmental plan and other  qualifications for the teachers'                                                               
retirement system,  the public employees' retirement  system, and                                                               
the judicial  retirement system;  and providing for  an effective                                                               
Number 0840                                                                                                                     
REPRESENTATIVE   GRUENBERG   moved   [to  adopt   the   committee                                                               
substitute (CS) for HB 331,  Version 23-GH1009\D, Craver, 4/1/04,                                                               
as  a work  draft].   There  being no  objection,  Version D  was                                                               
before the committee.                                                                                                           
Number 0865                                                                                                                     
ANSELM STAACK, Chief Financial Officer,  Division of Retirement &                                                               
Benefits, Department of Administration  (DOA), told the committee                                                               
that the division  takes care of the  Public Employees Retirement                                                               
System  (PERS),   the  Teachers  Retirement  System   (TRS),  the                                                               
Judicial  Retirement  System,  the  Supplemental  Benefit  System                                                               
(SBS), and Deferred  Compensation.  He offered a  history of "how                                                               
we got here," and stated  that PERS, TRS, the Judicial Retirement                                                               
System,  and SBS  are all  qualified  plans.   He explained  that                                                               
there are  positive aspects to  a plan remaining  qualified, even                                                               
for a tax-exempt agency like the  State of Alaska.  It means that                                                               
members of the retirement system  can "pay their contributions in                                                               
free tax."   He  said that's a  tremendous benefit,  which lowers                                                               
the cost of the system itself.                                                                                                  
CHAIR  WEYHRAUCH   asked,  "Is  that  the   state  deferred  comp                                                               
MR. STAACK  answered:  "No, that  is all of them.   For instance,                                                               
any contributions  you make to  the public  employees', teachers'                                                               
retirement   system,   judicial   retirement  system,   and   the                                                               
supplemental benefit  system are all  pre-tax, in terms  of their                                                               
contribution."   He said the  SBS is  what is called  the defined                                                               
contribution  plan,  while  the   PERS,  TRS,  and  the  Judicial                                                               
Retirement System are what are  called defined benefit plans.  In                                                               
response  to questions  from Chair  Weyhrauch, he  clarified that                                                               
the basic  difference between those types  of plans is that  in a                                                               
defined contribution  plan, the  employer puts  in money  and the                                                               
employee  makes a  match, and  the employee  directs his/her  own                                                               
investments  and walks  off with  whatever amount  is there  when                                                               
he/she  terminates.   The  employer is  not  responsible for  any                                                               
residual or for  paying any money in the future.   For the [PERS,                                                               
TRS, and the  Judicial Retirement System], on the  other hand, it                                                               
is required  by law that  the employee gets paid  irrespective of                                                               
whether  the system  earns  enough  money to  do  it;  it is  the                                                               
responsibility of the state to make up the balance.                                                                             
Number 1029                                                                                                                     
MR. STAACK, in  response to a question  from Representative Holm,                                                               
noted who  falls under which systems:   Under the PERS,  there is                                                               
the  State  of  Alaska,  plus   154  other  employers,  including                                                               
municipalities and school districts; under  the TRS, there are 62                                                               
school  districts; under  the Judicial  Retirement System,  there                                                               
are judges  and certain  members of the  court system;  and under                                                               
SBS,  there  is  the  State  of Alaska  employees  and  14  other                                                               
political  subdivisions that  are no  longer in  social security.                                                               
In response  to a follow-up  question, he said the  University of                                                               
Alaska has its own separate plan.                                                                                               
Number 1085                                                                                                                     
CHAIR WEYHRAUCH stated that he would  like to have an overview of                                                               
the PRS and  TRS.  He noted that the  legislature is "funding the                                                               
shortfalls as  a separate line  item in  the state."   He related                                                               
his understanding of  an issue that was brought  to his attention                                                               
regarding  why there  is  a  huge debt  owed  for  PERS/TRS.   He                                                               
explained that  it is a  result of some assumptions  of projected                                                               
contributions during  a "bear" market.   Now that the  market has                                                               
rebounded,  he  said, whoever  is  responsible  for making  those                                                               
assumptions that  the legislature has to  fund it has not  met to                                                               
revisit what  the legislature  needs to do  to fund  the program;                                                               
therefore,  the  legislature  is   acting  on  improper  data  in                                                               
planning [the  state's] financial  future.  Chair  Weyhrauch said                                                               
it seems  to him  that the  legislature may be  in a  position of                                                               
requiring that  the PRS/TRS  people who  make the  estimates meet                                                               
more often to provide better information to the legislature.                                                                    
MR. STAACK  responded that  he could  bring information  to Chair                                                               
Weyhrauch  and  the committee  that  "we  went through  with  the                                                               
PERS/TRS  board,"  including  an  actuarial  evaluation  and  the                                                               
projections that  were done,  and including  all the  earnings up                                                               
through January 2004  and any projections that were  made for the                                                               
next 25  years that assumed what  would happen with "a  very rosy                                                               
Number 1203                                                                                                                     
CHAIR WEYHRAUCH indicated that the  committee members needed more                                                               
MR. STAACK indicated a willingness  to help the committee in that                                                               
REPRESENTATIVE  GRUENBERG  mentioned  technical problems  in  the                                                               
field  of family  law  with  respect to  the  pension plans,  and                                                               
offered an example.                                                                                                             
Number 1286                                                                                                                     
REPRESENTATIVE  SEATON  asked  Mr. Staack  to  provide  scenarios                                                               
based on the 2004 mortality tables.                                                                                             
MR. STAACK replied that what will  be used are the 1994 mortality                                                               
tables.   He explained that  those are the mortality  tables that                                                               
are used  for the PRS and  TRS.  He  noted that there is  a newer                                                               
mortality table called "RP2000,"  which will update the mortality                                                               
[table] that's used in the retirement systems.                                                                                  
[HB 331, Version D, was held over.]                                                                                             

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