[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:

Komadina

 

DATE TYPED:

01/23/02

 

HB

 

 

SHORT TITLE:

Continued Retiree Benefits

 

SB

144

 

 

ANALYST:

Gilbert

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

FY02

FY03

 

 

 

 

Indeterminate – See narrative

 

PERA and ERA Trust Funds

(Parenthesis ( ) Indicate Expenditure Decreases)

 

Relates to: SB53

 

SOURCES OF INFORMATION

 

LFC Files

State Personnel Office (SPO)

Educational Retirement Association (ERA)

Public Employees Retirement Association (PERA)

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 144 amends Section 10-11-3 NMSA 1978 and Section 22-11-25.1 NMSA 1978 to allow Public Employees Retirement Association (PERA) and Educational Retirement Association (ERA) retirees to return to work for any affiliated public employer in New Mexico without suspension of their retirement benefits. Reemployed retirees, however, would not accrue additional service credit for such employment. SB 144 also removes the PERA Act provision which limits annual earnings from post-retirement employment with an affiliated public employer to $15,000.00 per year and supercedes the ERA Board rule, which limits earnings to a maximum of $10,000 per year.

 

     Significant Issues

 

This bill would provide state and local governmental entities and public schools the option to retain their most experienced employees or to employ other highly qualified PERA or ERA retirees.

 

FISCAL IMPLICATIONS

 

PERA and ERA believe that this bill will have an adverse impact on the actuarial soundness of their respective trust funds. Even though ERA and PERA have not provided an estimate as to how many retirees would take advantage of this change or completed germane actuarial studies, both believe that it will cause an increase to the affected retirement plans’ funding periods and be detrimental to the financial soundness of the PERA and ERA trust funds.  Retirement contribution increases from employees, the employer, or both may be necessary to maintain current funding periods.

 

However, according to PERA’s actuary, increasing the PERA earnings amount up to $25,000 per calendar year from the current $15,000 would have minimal impact on their fund.

 

ADMINISTRATIVE IMPLICATIONS

 

Passage of this bill would  require PERA and ERA to revise their board rules and procedures.

 

TECHNICAL ISSUES

 

Although a formal actuarial study has not been performed to substantiate their assertions, both PERA and ERA believe that SB 144 would 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.

 

LG/njw

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