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SPONSOR: |
McSorley |
DATE TYPED: |
|
HB |
|
||
SHORT TITLE: |
Allow Purchase of 5years of Service Credit |
SB |
716 |
||||
|
ANALYST: |
Gilbert |
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APPROPRIATION
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
||
FY03 |
FY04 |
FY03 |
FY04 |
|
|
|
|
|
$0.1
See Narrative |
Recurring |
PERA |
(Parenthesis
( ) Indicate Expenditure Decreases)
Relates to SB 378, SB 644
LFC Files
Response
Received From
Public
Employees Retirement Association (PERA)
SUMMARY
Synopsis
of Bill
Senate Bill 716 amends the Public Employees
Retirement Act to allow PERA members with fifteen or more years of service
credit to purchase up to five years of service credit. The purchase cost for each year of service
credit under this bill is equal to the increase in present value of the pension
the member would receive as a consequence of such purchase, as determined by
PERA.
Significant
Issues
SB 716 will
effectively implement a 20-year retirement plan for PERA members with
sufficient resources to purchase service credit, regardless of their member
coverage plan.
According to PERA, the primary policy issue raised by SB 716 is whether a PERA member should be able to purchase 5 years of service credit for time not earned. Current law requires that all other service credit in the public employees retirement systems must be earned either through service to a public employer, military or prisoner of war service. The service credit in Senate Bill 716 is not tied to any service requirement. There is no provision currently in law to allow service credit purchase for time that is not served in some manner.
SB 716 requires PERA members to pay the full actuarial present value for purchased service credit. Therefore, even in the absence of an actuarial determination, this bill appears to be cost-neutral.
PERA’s actuaries will
charge a fee for each actuarial present value request. PERA does not know how many of their 44,030
active members will seek to purchase service credit, but it is logical to
assume that most PERA members would request a service credit purchase estimate,
at considerable expense to PERA.
Additionally, since the
full actuarial cost of the service credit will be based on the member’s salary
at the time of purchase, PERA members may purchase service credit earlier in
their careers when it is less costly.
Currently, requests
for the purchase of service credit are limited to those who have served in the
military or who meet very specific criteria.
SB 716 expands the group of persons eligible to purchase service credit
and will thus increase demands on PERA staff in responding to membership
inquiries relating to the purchase of service credit.
Additionally, PERA
would be required to amend its regulations to address the statutory changes to
the PERA Act.
SB 716 provides that
75 % of the purchase cost shall be considered employer contributions and not be
refunded to the member in the event of cessation of membership. This is contrary to the PERA Act, which sets
each member’s employee and employer contributions by statute according to his
or her applicable member coverage plan.
SB 716 would allow a
PERA member in a 20-year plan to retire with only 15 years of actual service.
SB 716 does not
provide for the purchase of service credit by members of the Judicial Retirement
Act or the Magistrate Retirement Act.
SB 644 would allow
PERA members who have 15 or more years of service credit to purchase up to 5
years of service credit. However, SB 644
proposes a one-year period for purchase from
SB 378 would allow PERA members who have 5 or
more years of service credit to purchase up to 5 years of service credit. RLG/prr/njw