Senate Finance, 4/9/26, 1:30pm

Call the Senate Finance Committee meeting to order this afternoon.

It is 1.34 in the Senate Finance Room and state capital.

Present today Chairman Stedman,

Chairman Olson,

Senator Kiel,

Senator Merrick,

Senator Kaufman,

Senator Kronk, and myself,

Senator Hoffman.

We have one item on today's agenda,

that being HB 78.

Retirement systems and defined benefits option.

We will be taking up amendments today for this bill and then setting the bill aside.

We've received a total of seven amendments.

We'll start with the first amendment,

Senator Steadman.

Thank you, Mr. Chairman. I move amendment number one.

And I will object for explanation. I invite.

Staff Pete Eklund to the table to explain what Amendment Number One does.

Thank you, Mr. Chairman.

For the record,

Peter Eklund, staff to Senator Hoffman and the Senate Finance Committee.

And Mr.

Chairman, I thought I would just start for context, just a little bit of high-level history,

Mr.

Chairman.

put in context the amendment of the situation.

So we all know, Mr. Chairmen, back in the mid-2000s we had various problems with our retirement system.

We had problems with the actuary, we had problems with returns, and the whole confluence of things led to, we discovered we had a big mess on our system with the retirement systems, Mr. Chairman.

And at the time, there were multiple PERS employers that had their own individual contribution rates.

And so you might have had a contribution rate of 50 percent and the next PERS employer might have had a contribution of 100 percent. And what happened is things went upside down and there were some PERS employers that had contribution rates of 150 percent of their payroll and north.

And there were going to be people perhaps going bankrupt.

And so the state responded,

and one of the ways we responded, Mr.

Chairman, was we pooled all the assets and liabilities together of the various PERS employers and the retirement systems.

And we came up with a shared cost system, Mr. Chairman,

in part.

And that shared cost system was,

the rest of that sentence is we shared the cost of paying off the unfunded liability because we pooled all everybody's assets and everybody's liabilities together.

And then we set a cap that the other.

On-state PERS employers would pay towards both their their normal costs for their benefits and then for their portion of the past service liability or the unfunded liability, Mr.

Chairman. And so if I can now draw your attention to slide A.

This is from Gallagher, the actuary. We just had them, we spoke with the actuary multiple times, and we had them just kind of rearrange information that was previously submitted to the committee.

And if you want to look at the, on the left, we'll start with the, or actually, Mr. Chairman,

let's just start with the definitions. If you go about a quarter of the way down the page,

you can see in blue there's going to be a defined benefit.

Pension normal cost,

and then lighter blue is defined benefit health care normal cost.

The darker gold is HB78 pension cost,

lighter gold or yellow is HB78 health care,

and then the gray is the defined contribution and health reimbursement account costs.

And the green, the darker green, you have a defined benefit past service employer rate,

and then the lighter green is defined benefit past service additional state contributions above 22 percent to help pay off the unfunded liability.

So Mr.

Chairman, if you go to the column on the left.

You will see under the current scenario,

so under the current law with the current defined contribution system and the past legacy DB systems,

you can see on the bottom of that chart you can see the two blue colors,

and so that's the percentage of pay that goes to pay the defined benefit pension normal costs and health care costs.

Then that gray area,

that 7.67% is the percentage of payroll that it takes to pay for the defined contribution costs.

And then, Mr.

Chairman, I want to zero in on that green area,

that 12.08%.

That is the percentage of the payroll from the non-state PERS employers that goes to pay the unfunded liability,

Mr. Chairman.

Then you see that flat black line,

that's at 22%, and that's what the current cap is for non-state PERS employers.

They can't pay above 22% of their payroll.

And then above that line is the lighter green all the way that extra 7.16%. That's what the state picks up on behalf of those other PERS employers to pay towards the unfunded liability,

Mr.

Chairman.

And so that's the current situation under current law.

If we shift over to the bar on the right,

the chart,

the bars on the right, Mr. Chairman,

it's the same thing,

but just restacked with under the bill the way it's currently written,

HB 78.

So you see the blue bars again,

that's the normal cost for the DB tiers.

And you see the gold and the yellow,

that's the cost of the new HB 78 benefits.

There's still some gray there,

Mr. Chairman, where the actuaries are still going to be some DCR people.

And then you'll see that that 10% in green there,

that's shrunk. That's changed from the current situation where the percentage going that's paid by non-state PERS employers going to pay off the unfunded liability has shrunk to 10% there,

Mr. Chairman.

And then you'll see above the 22% bar,

that area has grown.

And that is the additional state assistance or state contributions that would grow under the bill, Mr. Chairman.

And so those percentages are put into dollar form on the table on the right.

So this is millions of dollars, Mr. Chairman, and if you look at really it's the second row down is what is most pertinent here in this to this amendment.

And that's the defined benefit past service employer rate are the dollars that the non-state PURS employers pay for the unfunded liability.

And you can see under the current, without any change to the law,

currently they would pay $173 million towards the unfunded liability.

Under the bill that shrinks to 151 million dollars Mr.

Chairman so that's a 22 million dollar difference that current that that non-state PERS employers would pay towards the unfunded liability and that 22 million dollars would shift above the 22% cap line to the state of Alaska so there would be a cost shift from the non-state PERS employers of in this case in FY30 of 22 million dollars to the state of Alaska.

And so, Mr. Chairman,

if you want to ship or go to slide B on the next page, this

was a slide provided by Gallagher to the committee on a presentation on February 9th, and I've just changed it with highlights,

Mr.

Chairman.

So you can see on the very left,

you see PERS, there's a box that says PERS, and so this adds up.

Between FY 27 and FY 39, when the unfunded liability is projected to pay off,

this just adds up every year the estimated cost shift to implement this bill from non-state PERS employers to the state of Alaska.

And you can see the total there is just under $400 million,

$394.5 million under this bill would be shifted.

The responsibility for the unfunded liability would be shifted from the non-state PERS employers to the state of Alaska,

Mr. Chairman.

And so that's what this, that's what Amendment number one is attempting to address. And if you want to go then to the next slide,

Mr. Chairman,

that's slide C.

And so.

This is much of the same information. This is also from the actuary,

Gallagher.

So, Mr.

Chairman, just if you step back just for a second or a minute,

the way up until now the analysis presented to this bill ends at 2039, all the analysis I've seen up until now.

And that we requested that the actuaries submit analysis beyond 2039,

and that's important because 2039 is when we expect the unfunded liability to be paid off,

or according to this chart,

mostly paid off.

And so if,

and that's important in the respect that if you're a non-state PERS employer,

Right now, you're capped at 22% of your payroll to pay towards the unfunded liability and also pay the normal cost of your benefits for your current employees.

And so the cost to implement this bill and the new benefits in this bill to a non-state PEARS employer are masked.

They're hidden.

They're not really...

seen by the non-state PERS employer.

But if you look at 39 and 2040 and you compare them and that's what we're about to do,

then that unmasked that cost.

You can see the cost of implementing this bill to the non-state PERS employers.

So Mr.

Chairman,

I'm going to start by just reading the red part and then we'll go we'll kind of go back and forth but again this is from the actuary.

So in the red part, you can read down there in the words it says,

the costs of the H.B.

78 benefits in line one E_ are higher than the cost of the D_C_R_ benefits in one D_ So let's go look at one D_ and one E_ So Mr. Chairman, you can look at one D_ there. So if we, under the current law, if we didn't change the law,

In 2039, the DCR benefits would cost non-state PERS employers $147 million.

But then if you look at 1E under the bill,

that changes to $229 million,

Mr.

Chairman.

And then I'm going to go down now, and let's read the green area. It says because of the higher HB78 cost,

there is less available from this total statutory employer contributions to apply toward the legacy DB defined benefit past service costs in 1C.

So that's what we just looked at in the prior slide,

the very first slide where we saw that increased cost, Mr. Chairman.

But anyway, so if you look at one C,

the difference in the green there of $215 million under the current

laugh we didn't change and 162 million dollars if we change that is less money going to pay the unfunded liability from non-purse uh non-purse state or non-state purse employers so if we go to the blue area

Because the employer portion of the legacy Defined Benefit past service cost decreases in 2B,

the state portion of the legacy DB past service cost increases in 2C to make up the difference.

So again, Mr.

Chairman,

that just shows this is demonstrating the cost shift if we implement the bill the way it is from non-state PERS employers to the state of Alaska.

But if we switch now to the next slide, slide D.

This is where we kind of this is where the non-state PERS employers will see the cost of implementing this bill to them.

Thank you.

So Mr. Chairman, I'm just going to go through, we'll read this again,

Mr. Chairman. We'll go through, we'll read the red first.

The cost of the HB 78 benefits in 1E is higher than the cost of the DCR benefits in 1D.

So yeah, that's the same thing. So you can see in.

In one D_ under the current proposal or under the current law,

non-state PERS employers would have to pay a hundred fifty two million dollars, but if you implement the bill they'd have to pay two hundred thirty eight million dollars, Mr. Chairman.

And so Mr. Chairman also this this then um I'll just go on and read let's go to the green area. However, since the total statutory rate in one F_ is less than twenty two percent of payroll

In line four, that's the total payroll.

The non-state employers pay the entire portion of the legacy DB pass service cost in 1C.

So if you look at 1C,

there's still $60 million in pass service cost,

but now the unfunded liability is mostly paid off and the employer rate's going to fall below 22%. That's what this is telling us. So the rate's going to fall below 22%.

So Mr.

Chairman, though, if I really want to put your attention to 1F,

row 1F.

So this is a non-state PERS employer,

the total contribution they would pay for their systems.

So if we didn't change the law,

Mr. Chairman, in 2040,

if you're one of those 148 non-state PERS employers,

you would have to pay $216 million.

If you, under the terms of this bill,

and if you implement this bill,

that would go up to $302 million,

so that's an $86 million difference,

Mr. Chairman.

So that is the cost for trying to just, trying to unmask the cost to non-state PERS employers.

And so, Mr. Chairman.

That's basically it for the slides. And so going back to the work that we did with the actuary and trying to come up with this amendment number one, what amendment number one attempts to do, Mr. Chairman, is to keep the status quo about who's responsible for the unfunded liability between that ratio between the non-state PERS employers and the state of Alaska as a PERS employer.

There's 149 PERS employers in the state. The state of Alaska's one, one of those PERS employers.

And roughly the payroll between the state of Alaska and the non-state PERS employers is roughly equal.

The state of Alaska is a little bit more, but it's, it's, they're both in the range of 1.4 billion dollars.

And so Mr.

Chairman, in working with the actuary.

In order to avoid the cost shift,

if we implement this bill the way it is, from non-state PERS employers to the state,

that $400 million cost shift,

the actuary recommended moving the cap of the 22% rate cap to 24%. And over the life, over that 13 years between 2027 and 2039,

That cost shift would roughly equal out, Mr.

Chairman.

Some years we tried that. We worked with the actuary. We worked with legislative finance,

worked with the legislative drafter,

worked with the retirement benefits,

and we tried to tease out a way to structure an amendment that would have the non-PERS,

non-state PERS employers rate fluctuate a little bit below.

twenty four percent some years and a little bit above twenty four percent some years, to be more accurate, but we could not come up with language that was satisfactory, and so the actuary just recommended, he said the actuary just said if if you if your if your intent is to try to avoid this cost shift, that if you just set the cap at twenty four percent over time that would roughly equal out and and avoid this cost shift. And

So, Mr. Chairman, um that's what Amendment number one does.

Thank you for that explanation.

We do have online David Kirshner, who is the consultant from Arthur J Gallagher and company for questions.

Do members of the Finance Committee have questions on the amendment?

Senator Kehoe.

Thank you, Mr. Chairman. I guess the first question would be for Mr.

Eklund. Which is the problem?

When we, when we, the state picks up more of the cost or when municipalities pick up more of the cost because you've presented both as the problem.

When we—

Which is the bad thing?

So, Mr. Chairman,

Senator Kehoe, what the, what I believe the amendment number one, the question it poses is.

If Amendment 1 is not adopted, if the bill is left the way it is,

is it proper for the state of Alaska to pick up the cost of implementing the new tier for all the other 148 PERS employers?

Is that the state's responsibility?

Is it proper for that to happen?

Or should the cost be borne by all 149 PERS employers more equal?

Senator Keel.

Okay,

thank you. So then the...

All the stuff you did about the 2040 example is is not a problem then. That's that's just sort of

what

The,

is that?

through the chair, Senator Keel,

what what the the illustration there,

part of the point of that illustration, Mr Chairman, was to unmask

um the cost to non-state purse employers of implementing this bill because it's been cut like i said to me it seems like it's been masked it hasn't come out in testimony we haven't really even heard from non-state purse employers that much that i that i'm aware of um but so i guess mr chairman if the amendment is not adopted uh non-state purse employers would see

The rate, the dollars they pay for their retirement systems would not go down as much as it would otherwise.

You could see the cost of it.

Thank you, Mr. Chairman. I think it would be nice to hear from the actuary because clearly the mechanics and the math behind this amendment is beyond staffs' ability. We don't have the data set, so I would like to hear from Mr.

Kirshner on

on this cost shift issue.

Mr. Kirshner,

did you hear Senator Studley?

Yes, good afternoon.

Please proceed.

Yes.

Please proceed.

Did you hear Senator Studley?

Well, if David Kirshner actuary from Gallagher, I don't know what the particular question is,

but.

Mr.

Eklund summarized the issue quite well.

The basic issue that we're facing is because that 22% cap limits the amount of contributions that the non-state CURS employers pay.

The current costs,

when you factor in the defined benefit plan,

the normal cost,

the legacy defined benefit pass service cost,

and then the PCR cost that the employers pay,

those costs are already, when you express those costs as a percentage of pay,

those costs are already above the 22%.

and the state pays the excess by the additional state contribution.

So when we introduce HB7 and 8 and keep the non-state employer cap at 22%, all we're doing is we're increasing the total cost.

But because the non-state employers pay 22% either way, the increase in the cost due to HB 78 falls to the state. So the only way to...

achieve the goal of maintaining,

as Ms.

Strickland said, the status quo,

which is essentially that over the 13-year period that we're looking at through FY39 to keep the additional state contributions roughly where they are currently,

we determined that increasing that 22% cap to 24% would achieve that result.

And if we look at the period FY27 through FY39,

it's increasing the cap from 22% to 24% would increase the non-state employer contributions to the defined benefit plan by about $417 million based on projected payroll and the additional state contributions for the state would decrease by about $403 million.

So it's not exactly a one-to-one offset,

but it's as close as we're going to get. We could probably achieve a little bit closer equilibrium if we went to, say,

23.75 or something less, slightly less than 24%.

But that's what that 24% does.

And, you know, we've been facing this issue over the last several years that we've had proposed bills that in each case, because that 22% is limiting how much the non-state employers pay,

anytime we increase costs, which we do by potentially reopening the defined benefit plan,

that cost falls to the state.

Senator Stedman.

Yes, Mr.

Kirshner. Are you using the same assumptions that you used with the rest of the bill,

or are these all new assumptions,

or do we have a level playing field here?

Because there's been...

I expressed concerns by some of my colleagues that they weren't quite sure what assumptions are being used in the core bill and what on this amendment.

Could you help us with that?

Yes, through the chair,

Senator DeVe, we are using all of the...

All of these calculations that we're looking at here are based on last year's fiscal note letter which was based on the 2024 valuations and as stated in the bill as specified in the bill we are using the same assumptions that were used in the 2024 valuations except we blend the retirement rates.

75% of the defined contribution retirement rates and 25% of the defined benefit contribution rates,

excuse me, defined benefit retirement rates.

Otherwise, it's all the same assumptions that we used in the 2024 valuations.

And those assumptions assume that all future experience after,

in this case 6 through 24,

matches those assumptions.

And we all know that with defined benefit plans,

there's always going to be risk and uncertainty as to what that future experience is going to be. But for purposes of our analysis,

assuming the future experience overall matches our assumptions, that's what these figures are based on.

Senator Stedman.

Thank you, Senator Stedman.

Further comments?

Senator Keel.

Thank you, Mr. Chairman.

So, Mr.

Kirshner, just so I understand,

we were told that we were unmasking something new here,

but all of these costs except the 2040 number were in your fiscal analysis letter from March of 2025.

Is that correct?

That's correct.

They're displayed a little bit differently here to try and help identify the or to illustrate the issue.

But yes,

all of the numbers through FY39 are based on our fiscal note letter before, but the numbers are just presented in a little bit different fashion here.

Senator Kiel.

Thank you. I appreciate that. That's helpful.

Going back to slide A from Mr.

Eklund's presentation with the bar chart,

can you help me with an ongoing normal cost for DCR members in the 2025 letter?

Um I understood uh Gallagher to assume that all DCR employees transferred to the new DB plan.

Did I did I misunderstand that or is that a a shift?

No, that's correct.

We've assumed, all of these figures assumed that all current active employees within the defined contribution plan, and when I say current,

that means as of 6-30-24 when we were doing, when our valuation data was based on, we assumed all of those active employees would elect to transfer to the defined benefit plan,

and we also assumed

That all future hires, all post-June 24 hires would also enter the Defined Benefit Plan.

Okay, thank you.

So then can you help me with what's – and I took that from the letter where it said as a result the DCR contribution rates are 0% after HB 70. Can you help me why they're shown as 2.71% in here? There's something I've missed.

That's the HRA contribution for HB 78 members,

which in this case is 3% – I'm sorry,

4% of pay for peace officers or firefighters and 3% of pay for all other PERS employees. And then that rate converted to a total pay basis is the 2.71%.

I see. So, so not D.C. employees, but the D.C. element of the nuclear.

Thank you. That's, that's helpful.

Thank you, Senator Keel.

Further questions?

Are we ready for the... Senator Keel.

Not,

not a question, but maybe to speak to the amendment,

Mr.

Chairman.

Speak to the amendment.

Thank,

thank you, Mr.

Chairman.

It's I appreciate the maker of the amendment's interest in keeping the costs as level as possible.

And this has been something that we've discussed throughout the entirety of the bill,

right?

This analysis from the actuary incorporated into the department's fiscal notes has always shown what's been described here.

And I think the Bill's sponsor has made an excellent um set of arguments and presentations by experts about some of the offsetting things that just

don't show up in in those fiscal notes because they're not in the scope of the fiscal notes, right? Um and and we know that 'cause when Gallagher writes a fiscal note,

they say things like savings and recruitment and retraining co retaining excuse me, recruitment and training costs due to the expected higher retention of workers uh outside the scope. Anyway, I won't bore the committee with the whole quote.

But in fact, right, we have

tremendous turnover costs.

And one of the key reasons,

one of the key assumptions that leads to these higher costs projected in the new under the bill is that turnover is going to drop dramatically.

And so payroll growth is going to rise significantly.

And that's sort of the crucial

I think maybe the single biggest element of increased costs under HB 78,

that's going to bring us more efficiency,

more competence,

fewer errors and omissions,

reduced turnover costs both at the state and at munis.

So when you net it all out,

we are not going to see an increased cost here to the state.

Leaving that aside,

the question about then whether

We want to increase what munis have to pay in based

on maybe costs going up, if in fact those actuaries assumptions are wrong. Um

Is a problem for me because it's not maybe the muni's costs go up. If you raise the muni contribution cap from 22 to 24,

the muni's costs go up,

period.

It's sales tax dollars and it's property tax dollars.

Not if the assumptions are wrong.

They just go up.

So...

I think that's pretty problematic for me,

and I recommend that we reject this amendment and stick to that 22% rate.

We could talk about the history of that.

We could talk about how back in 2014,

with a 22% rate in place,

the legislature in those days reamortized the unfunded liabilities, part of why we don't have it paid off,

not all, but part,

which shifted.

I think a couple billion dollars on to munis.

A couple billion dollars compared to maybe, maybe as much as 400 million.

I think the state's still ahead all the way around with this bill without the amendment.

Thanks.

Thank you, Senator Stedman.

Thank you.

Senator Steadman.

Yes, on the amendment,

Mr. Chairman, I have a little different view.

I think this bill has been presented as virtually cost neutral,

which it doesn't appear to be.

And shifting the cost from the municipalities to the state,

I don't support that.

I'm very concerned about it.

Maybe it's not 400 million over 10 years. Maybe it's 300 million.

You know, we'll know what it is 10 years after the fact, but clearly it's a significant number.

And I think the municipalities need to know the costs.

that we're dealing with here,

and they can make their own rational decision what they want to do, or informed decision on what they want to do. But clearly there is cost shifts going on. Some of us have been concerned about it for quite some time, and it is a difficult and complex subject,

and I think the presentation here on amendment number one

clarifies a lot of it makes it easier to understand and see and I think it's pretty creative of the of the actuary to you know make a simple adjustment from 22 to 24 and it'll wash out in time some years it might be a little less some years a little more but over 10 years it could be you know it should be close and in the event there's there's a significant change between now and if this bill's adopted between now and

Year 10 or 15 a legislature could come back and revisit it.

Further comments before we take the vote on amendment number one?

Seeing none. Roll call, please.

No.

No.

Senator Krumpp.

Yes.

Yes.

Senator Kaufman.

Yes.

Yes.

Senator Kiel.

No.

Senator Hoffman.

Yes.

Yes.

Senator Olson.

Yes.

Yes.

Senator Steadman.

Yes.

Yes.

5 yeas, 2 nays.

Amendment number one passes.

Brings us to

Additional amendments, we have amendment number two that will take a brief at ease.

Back to order, Senator Kaufman.

Amendment number two.

2.

Thank you, Chair.

Thank you, Chair. I move amendment number two.

I'll object for an explanation. Uh Senator Kaufman.

Thank you. And uh to the committee that this is uh a little different. This is about the defined contribution healthcare component that's in this bill. And uh

What we're doing with this amendment is following up on some arm board recommendations to assure that we have the 12-month uh requirement uh in the bill for for those who have uh you know not worked the the full uh

uh qualification years. So the the longer you know uh as the bill is, it's twenty five for public employees and teachers, um and twenty years for public safety, so police and fire. But then there's also for those who have uh reached retirement age with ten years who like late hires, um it puts that uh twelve month of service to keep that continuity, that return to work requirement.

To be sure that people don't somehow blow up the system by being able to qualify without that continuity of service or that 12-month return to work.

Thank you Senator Kaufman. Do we have comments upon the amendment number two?

Just a question.

Senator Keel.

Thank you, Mr. Chairman,

for clarification.

Does this apply to those who work what you'd call a full career,

right,

the 30 and out or 25 and out type provision?

Senator Kaufman.

Thank you. So currently HB 78 removes the 12-month requirement for those who reach retirement age only after 10 years.

So that's really the issue right there is that 10 years.

Senator Keel?

Thank you, Mr. Chairman. That's an important, important

Senator

distinction.

Stedman.

Thank you, Mr. Chairman. I was just wondering if this is cost neutral or costs money or saves money or or what uh financial implications are.

Senator Coffman.

Thank you, uh Chair Hoffman. It it uh it should improve cost because it it just can avoid uh an unintended consequence and hence that's uh was the Armed Board's recommendation to have this requirement in there.

With that, I will remove my objection.

Is there further objection to the adoption of Amendment Number Two?

Seeing no objection,

that amendment is adopted.

Senator Kaufman.

Thank you. I will not offer Amendment Number Three at this time.

I will not offer Amendment Four at this time.

I would like to move Amendment Number Five.

Thank you. Senator Kaufman, I will object for an explanation.

Senator Kaufman.

So this amendment has the intent of removing the 12% ceiling on the adjustable employee contribution rates.

And in previous testimony on this bill, it's been stated that really that...

That number is not required because the adjustments will always be so minute that we'll never need the upper ceiling. Um that was stated in a in a house uh finance committee meeting. Um so if we don't need it, um then my question would be why do we have it?

And if we do remove it, that helps assure uh, you know, the kind of the skin in the game piece of it, um for the employee contribution and the employer uh match on that, that we do not end up underfunded or unfunded with a liability. And so the intent of this amendment is to to remove uh that requirement for the cap.

Um because it's my understanding that we'll never need it.

Thank you, Senator Kaufman.

Discussion, do members of the committee have any comments on amendment number five?

Senator Merrick.

Thank you, Mr. Chairman. If we could hear from the bill sponsor,

that would be helpful because something was referred to that happened in House Finance and I would like some verification on what that statement was. Thank you.

Thank you.

Representative Kopp,

Thank you, Mr.

Chairman, and thank you, Senator Merrick.

So

Representative

the question is,

Kopp, do you understand

I'm

Senator Merrick's question?

just going to ask her to restate it. Thank you, Mr.

Chairman.

Senator Merrick.

It was stated, thank you Mr. Chairman, it was stated that there was a comment in House Finance made that we shouldn't need the cap because we'll never reach that,

so it's unnecessary. So I was just hoping you could clarify that.

Yes, so through the chairman,

So,

Senator

yeah.

Merrick, what the actuaries said in House and Senate finance is that they modeled three years in a row of zero percent returns to get the funding level of this plan to drop below 90 percent.

And they said not in the 70 years of us having a pension has an event similar to that ever occurred. So.

In other words, they don't see the levers coming into play that would ever have to raise it above 8% or adjust the employer's contributions or take away from the retirees in the PERPA.

The nature of the plan is it reacts to the market and it's re-evaluated every year.

Further comments upon the...

Amendment number five, Senator Stedman.

Thank you, Mr. Chairman.

Yeah, I remember the comment about three years of zero.

I don't think the markets have ever returned three years of zero, so I'd agree with that.

But there has been decades of subpar returns, and that's where you get in trouble,

continually below your targeted rate.

If it was seven and a quarter, eight and a half, whatever your target is, and go back and look at the s cyclical nautilus nature of financial markets, and they do appear. Um so

by removing this cap uh would give the armoured tools necessary.

I think there's a lot of retirement plans that are under ninety percent funded.

And I agree that having some breaks in this particular piece of legislation to try to prevent substantial underfunding is a good measure.

I support this amendment,

Mr. Chairman, and I think it would be highly unlikely to ever be executed above 12%, but when we look back,

25 years we thought we'd have this unfunded liability on the pension plan dealt with over a decade ago, yet we still owe six billion dollars or seven billion I think or seven and a half somewhere in there I'd have to go look in the latest numbers but it's a significant amount further The amount of seven is followed by a B, that's seven billion.

comments by committee members on the amendment,

Senator Keel.

Well, thank you, Mr. Chairman.

Equally unlikely would be um colossal long-term periods of outperformance. Is there a reason that the amendment um still prohibits the employer employee contribution from dropping below eight percent?

um Senator Kiel are who are you directing that question to?

I guess I'll ask the maker offer of the amendment.

Okay. Senator Kaufman.

Senator Kaufman.

Uh thank you, uh to Senator Keel. Um my concern was really with the unfunded liability risk that's inherent with systems such as this. And so the intent of this amendment was to, you know, to r

Minimize that risk um uh by using a lever that we're told will not be needed. That uh essentially the the adjustments would always be minute um at least based on the the things that I've heard about the bill. So uh my intent was to address that. Uh I had not considered an additional amendment uh with the I think seven that I have. But the

I didn't want to be accused of overachieving.

Is that a deal?

Senator Keel.

Thank you, Mr. Chairman. I don't know that last word. I've never been accused of that.

I guess,

Mr.

Chairman, I...

Don't think the amendment is necessary. Um I I do think that they um the risk of of getting into these adjustments is pretty small. Um and the risk of them hitting four percent or take home pay um eight to twelve or exceeding that is is even smaller. But I guess I I have a fairness concern um.

that it's all downside sharing there,

unlimited downside sharing,

and zero possibility for upside sharing.

So I guess along with the fact that it doesn't touch the other adjuster, which would be on the retiree side,

I'm going to be a no.

Thank you, Senator Keel. Senator Stegman regarding to this amendment.

Thank you, Senator Keehl. Senator Steadman.

Just a quick

question.

Cautionary note,

the previous plan that was in place in the 80s and the 90s that was replaced when the markets were strong, they reduced their contributions and they increased benefits and rolled the plan over and made a multi-generation mess.

I think holding that 8% is sound policy.

And if we have very strong markets over a decade,

we'll just be running a little bit of a surplus and the Department of Retirement Benefits can always come forward with increases not locked in because this is all constitutionally guaranteed,

but they could come up with

You know, several years of added benefits and have them dissipate when the surplus alleviates, and we're actually looking at that with the health care premium or surplus.

But we need to be very careful with this because it's constitutionally guaranteed you cannot diminish benefits,

and it's a one-way door.

So, Mr.

Chairman,

let's not repeat what we did 30 years ago.

And make a mess for our great-grandchildren.

I

Thank

support this amendment.

Thank you, Senator Stedman.

I would remove my objection.

Do I hear further objections,

Senator Kiel?

Yes, thank you, Mr. Chairman.

I do object.

You know, risk sharing is fair, and it's in the bill,

and it's within strong and solid bounds,

broad bounds.

unlikely to be hit but possible so it's it's a safer plan than we've ever had before or than most states even contemplate and so I I don't I don't see fairness in in uncapping and unlimited risk to the to the employees yes

Thank you Senator Keel for the comment.

Seeing none, roll call please.

Yes.

Yes.

Senator Keel.

No.

No.

Senator Merrick.

Yes.

Senator Hoffman.

Yes.

Yes.

Senator Olsen.

Yes.

Yes.

Senator Sedman.

Yes.

Yes.

Yes.

60 A's, one nay.

That motion passes the Senate Finance Committee.

Senator Kaufman.

Thank you, Chair Hoffman. Uh at this time I would not like to offer Amendment six um but I would like to move Amendment seven.

And I would object uh pretty self-explanatory, but please proceed, Senator Kaufmann.

The uh the simple purpose of this amendment is to just adjust that retirement age from 60 uh to sixty five for everyone except for our public safety firefighter personnel.

And again, that's uh to help assure that the plan is robust um and that uh we don't uh somehow create a retirement plan that becomes insolvent.

Thank you, Senator Kaufman.

Dialogue, Senator Stedman.

Thank you, Mr Chairman. Looking at this amendment, uh m it's it's difficult for me to support this amendment, Mr Chairman.

Um I think the this 60 year, if I don't recall,

is balanced through our retirement system. And this would be a little more restrictive and we wanna try to keep a level playing field as far as the benefit packages as much as possible amongst our different tiers.

Um so maybe if Sir uh our Senator Kaufman could uh reflect on that, if that my memory is correct, the rest of the tiers are roughly that sixty years of age, this would be a a significant change.

Senator Kaufman.

Um thank you, I be uh across the different systems I I do believe there are some different ages and so that that's a an artefact of of kind of the evolution of the plans.

But I I would note um you know Social Security, look how it's continued to progress the the retirement age. So it it was mm much lower. And I I'm in that bracket where they started moving the goal posts because of trying to keep the plan solvent. And uh they continue to do that.

I'm afraid if I don't really retire soon I I might not get it. So I I think this is in that same spirit. So, yes, there's different uh different age brackets that in plans and I think this is addressing a similar reality that social security has had to address where people are living much longer and our functional lifespan is much longer. With with the exception um of the fire and safety folks and it's fair to have something different for a

a much more robust career that that has wear and tear uh and trauma. And so um the amendment's offered in you know with those considerations of what's going on in Social Security right now.

I will maintain my objection. Is there further discussion on Amendment Number Seven?

Seeing none. Roll call please.

Revitates.

I'll send the Finance Committee back to order.

Roll call please.

Senator Kaufman.

Yes.

Yes.

Senator Keel.

No.

No.

Senator Merrick.

Yes.

Senator Crump.

No.

No.

Senator Olson.

Senator Kaufman.

No.

No.

Senator Steadman.

No.

No.

Two days, four days.

2 yeas, 4 nays.

That motion...

fails to takes care of the amendments that were offered. I would take this bill and uh set it aside for further consideration by the committee. It's our intent to um invite the affected parties at a later date to that are affected by this amendment and get their input and we'll take that up at a

And when that happens, but tomorrow's meeting is scheduled for 9 a.m. there's nothing else to come before the committee at this time we are adjourned.