[1] NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

 

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F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Lyons

 

DATE TYPED:

01/29/01

 

HB

 

 

SHORT TITLE:

State Legislator Insurance Benefits

 

SB

176

 

 

ANALYST:

Gilbert

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

FY02

FY03

 

 

 

 

 

$                 0.1
*See Narrative

Recurring

General Fund

 

 

 

$                 0.1
*See Narrative

Recurring

PERA Trust Fund

 

 

 

$                 0.1
*See Narrative

Recurring

NMRHC Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

 

 

 

 

$                 0.1
*See Narrative

$                 0.1
*See Narrative

Recurring

PERA Trust Fund

 

$                 0.1
*See Narrative

$                 0.1
*See Narrative

Recurring

NMRHC Fund

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

LFC Files

 

Response Received From

Public Employees Retirement Association (PERA)

New Mexico Retiree Health Care Authority (NMRHCA)

 

SUMMARY

 

     Synopsis of Bill

 

New Legislative Retiree Health Care Provisions

Senate Bill 176 would allow former legislators and their dependents to participate in the New Mexico Retiree Health Care Authority (NMRHCA) insurance programs, provided that such legislators have served at least four years as a member of the legislature, even if they did not retire under PERA State Legislator Member Coverage Plan 1.

 

New Legislative Retirement Benefit Plan Provisions

Senate Bill 176 amends Public Employee Retiree Association (PERA) State Legislator Member Coverage Plan 1 to be applicable only to state legislators and lieutenant governors who served terms of office that ended prior to January 1, 1999.

 

This bill also creates a new State Legislator Member Coverage Plan 2, applicable to state legislators and lieutenant governors who serve after December 31, 1998. Under this new coverage plan, a legislator may retire at age 65 with 5 years of service credit or at any age with 12 or more years of service credit.  In addition, the annual amount of pension under option A will be calculated according to a formula calculated by multiplying the legislator’s contributions for his or her years of credited service by a pension factor applicable to a graduated schedule of years of service.

 

For example, a legislator with 12 years of service would pay a total of $4,800 in contributions and then receive an annual pension of $12,000 per year for life. The contributions can be made at the conclusion of service and there is no accrued interest on such contributions.

 

Retiree Health Care Provisions

SB176 would amend the Retiree Health Care Act by creating an additional class of individuals who would be eligible to participate in the NMRHCA program.  Former legislators who previously served four or more years, but who are currently excluded from participation, would now be eligible.

 

New PERA Benefit Plan Provisions

SB176 appears to apply retroactively, thus allowing legislators who retired in calendar years after December 31, 1998 through  January 1, 2002, to “un-retire” and have their pension amount recalculated pursuant to the newly created State Legislator Member Coverage Plan 2. No other PERA plan allows members to un-retire and retire again without a minimum of three years of service credit in the new plan.

 

FISCAL IMPLICATIONS

 

Retiree Health Care Provisions

SB176 does not contain an appropriation for legislator participation in the NMRHCA.  If enacted however, it would not have an adverse impact on the NMRHCA since the new legislative participants would pay 100% of their costs, plus a participation fee.  This bill will not result in additional costs to the NMRHCA. The bill does result in new revenues, but the amounts are negligible since the contributors are merely covering costs, and savings would not be cumulative.

 

New PERA Benefit Plan Provisions

The member contribution into the proposed State Legislator Member Coverage Plan 2 is $400.00 (from $100.00 State Legislator Member Coverage Plan 1) for each year of credited service.  To be eligible for coverage under State Legislator Coverage Plan for years prior to January 1, 2002, a legislator merely makes the necessary contributions in an amount that totals $400.00 for each year of credited service.

 

Although PERA has not conducted an actuarial analysis of State Legislator Member Coverage Plan 2, the additional contributions from the general fund to make this plan actuarially sound would be considerable. However, Section 9 of SB 176 allows PERA to annually request the amount of contributions needed on an actuarial reserve basis, as it does under current law.

 

According to PERA, their Board has not endorsed this plan change and no actuarial study was requested for a new State Legislator Member Coverage Plan 2 as proposed by SB 176.

 

ADMINISTRATIVE IMPLICATIONS

 

According to PERA, SB176 implements a significant plan change that needs to be studied by PERA’s actuaries prior to implementation.  PERA also would be required to administer another membership coverage plan, make changes to their automated systems, and retroactively change some retired members pension amounts. 

 

Retiree Health Care Provisions

There may be a question as to whether the enactment of this bill violates the Constitution’s anti-donation clause.  Program participants who retired prior to their employer’s effective date with the NMRHCA must pay an additional $5.00 participation fee to enroll in the NMRHCA program since they did not make contributions to the program while working.  However, since SB176 proposes that former legislators pay the additional $5.00 participation fee, in addition to paying 100% of their costs under the program, this is probably not an issue.

 

New PERA Benefit Plan Provisions

In the absence of PERA Board approval and a formal actuarial study for this significant plan enhancement, PERA believes that SB176 may violate the Constitution of New Mexico, Article XX, §22(E), which prohibits modifications to public employment retirement systems that do not enhance or preserve the actuarial soundness of the affected trust fund.

 

RLG/njw:prr

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