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SPONSOR: | Romero | DATE TYPED: | 03/01/01 | HB | |||
SHORT TITLE: | Amend Educational Retirement Act | SB | 109/aSJC | ||||
ANALYST: | Eaton |
Subsequent
Years Impact |
Recurring
or Non-Rec |
Fund
Affected | ||
FY01 | FY02 | |||
NFI |
(Parenthesis ( ) Indicate Revenue Decreases)
SOURCES OF INFORMATION
Educational Retirement Board (ERB)
SUMMARY
Synopsis of SJC amendment
The Senate Judiciary Committee amendment changes the effective date of the allowable service credit purchase from July 1, 2001, to July 1, 2002.
Synopsis of Bill
This bill provides for technical cleanup of Educational Retirement Board (ERB) statutes to clarify language; move into compliance with new IRS rules and regulations, clarify compliance with New Mexico community property laws and allow the Educational Retirement Board to set certain interest rates regarding purchasing of service credits and payments to members to make them more reasonable for service credit purchase and certain pay-outs to members or their beneficiaries. Much of this bill is technical in nature.
FISCAL IMPLICATIONS
The Educational Retirement Board reports that any small costs associated with this bill could be absorbed by the Educational Retirement Fund.
OTHER SUBSTANTIVE ISSUES
Allowing the board to set the interest rate on the refund of contributions and the purchase of service credit is a very important change. The board could set the interest rate at a rate lower (or higher) than what the current statute calls for. The purchase of service credit today for example may be prohibitively expensive under current statutes because of the strong returns on the fund in recent years. But there is also the other side of the coin.
As an example, on a refund, the board could set the rate closer to the interest rate set by the Federal Reserve Board (when five year average rates of return on the Fund are exceptionally high and current interest rates are comparatively low, as they are now). Conversely, the Board could set rates closer to the rate of return on the Fund in periods when the fund performed below average (and interest rates are high).
ADMINISTRATIVE IMPLICATIONS
Minimal.
POSSIBLE AMENDMENTS
To protect the active and retiree members in regard to the setting the interest rate, a possible amendment might provide for interest rate minimums in the case of refunds and interest rate maximums in the case of the purchase of service credit.
JBE/ar