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SPONSOR: |
Griego |
DATE TYPED: |
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HB |
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SHORT TITLE: |
Public Employee Service Credit Purchase |
SB |
644 |
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ANALYST: |
Gilbert |
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APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
|
|
|
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$0.1
See Narrative |
Recurring |
PERA |
(Parenthesis
( ) Indicate Expenditure Decreases)
Relates to SB 378, SB 716
LFC Files
Response
Received From
Public
Employees Retirement Association (PERA)
State
Personnel Office (SPO)
SUMMARY
Synopsis
of Bill
Senate Bill 644 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.
This provision would be in effect for the period from
Significant
Issues
SB 644 will
effectively implement a 20-year retirement plan for PERA members with sufficient
resources to exercise their option to purchase service credit, regardless of
their member coverage plan.
According to PERA, the primary policy issue raised by SB 644 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 644 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.
According to PERA, in the absence of an actuarial determination, the fiscal impact of SB 644 is unknown at this time. Therefore, it may be contrary to NM Const., Art. XX, Section 22 (no benefits may be enhanced unless the costs of those benefits are properly funded in accordance with actuarial standards).
Senate Bill 644
requires PERA members to pay the full actuarial present value for purchased
service credit. However, 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. It is logical to assume that if
PERA members know of this provision in law, they would all request a purchase
estimate.
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 644 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 644 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 644 would allow a
PERA member in a 20-year plan to retire with only 15 years of actual service.
SB 644 does not
provide for the purchase of service credit by members of the Judicial Retirement
Act or the Magistrate Retirement Act.
RLG/prr/njw