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

SPONSOR:	Romero		DATE TYPED:	02/27/03		HB
SHORT TITLE:		Educational Retirement Contributions				SB	609
					ANALYST:		Gilbert

APPROPRIATION

Appropriation Contained		Estimated Additional Impact		Recurring or Non-Rec	Fund Affected
FY03	FY04	FY03	FY04
			$0.1 See Narrative	Recurring	ERB

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Response Received From

State Department of Education (SDE)

Educational Retirement Board (ERB)

SUMMARY

Synopsis of Bill

Senate Bill 609 adds a new section to the Educational Retirement Act, which exempts retired Public Employees Retirement Association (PERA) employees from making employee contributions to the Educational Retirement Association (ERA) fund, should they accept employment with a local administrative unit. Such employees are not eligible to purchase or acquire service credit for the time worked with local administrative units. Local administrative units, however, must make required employer contributions for these employees.

Currently, persons employed more than .25 FTE by an ERA local administrative unit make contributions to the ERA fund. This includes PERA retirees who have not suspended PERA retirement. When such persons leave employment with a local administrative unit, ERA refunds their contributions, plus interest.

FISCAL IMPLICATIONS

ERB believes that this bill would not have an actuarial effect on their fund. However, under current law, ERA invests employee contributions and returns such contributions and interest upon employee termination. Under this bill, the ERA fund would be impacted if investment returns typically exceeded the interest rate paid on refunds.

To guarantee that SB 609 is consistent with NM Const. Art. XX, Section 22, (no benefits may be enhanced unless the costs of such benefits are properly funded in accordance with actuarial standards), an actuarial study should be performed to verify that this bill is cost-neutral.

RLG/ls/njw