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

SPONSOR Rodella

DATE TYPED 3/15/2005 HB 142/aSFC

SHORT TITLE Volunteer Firefighters Retirement Credits

SB

ANALYST Geisler

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

.01

See Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to: HB 144

SOURCES OF INFORMATION

Public Employees Retirement Association (PERA)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment to House Bill 142 amends the number of years a

member may post or adjust service credit for one or more years prior to January, 2005. This was

changed from 10 years to 5 years. The bill now duplicates HB144.

Synopsis of Original Bill

House Bill 142 allows an active member to post or adjust up to 10 years of service credit already

earned prior to January 1, 2005 by filing with the PERA no later than December 31, 2005. Cur-

rent law requires the posting of service credit for the preceding year on or before March 31

st

of

each year.

Significant Issues

Whether volunteer firefighters should be given a one-time opportunity to post and/or adjust ser-

vice credit earned for one or more calendar years of service, not to exceed 10 years, earned prior

to January 1, 2005. PERA does not oppose this bill.

House Bill 142/aSFC -- Page 2

FISCAL IMPLICATIONS

According to PERA, it is not anticipated that posting past service credit through this legislation

will require an increase in the current contribution to the fund due to its strong actuarial position.

See additional discussion under substantive issues.

ADMINISTRATIVE IMPLICATIONS

Allowing members a one-time opportunity to correct service credit that was earned for years

prior to January 1, 2005 but not posted to their member account may have a significant adminis-

trative impact on PERA. PERA is unable to assess the extent of the impact, because it does not

presently have information regarding the number of persons who will seek to post or adjust ser-

vice credit as the result of this legislation. Additionally, PERA will incur increased printing

costs associated with printing pertinent information and required “Corrected Qualification Re-

cord” forms and require additional staffing to correct and post service credit.

CONFLICT, DUPLICATION, COMPANIONSHIP OR RELATIONSHIP

House Bill 144 and House Bill 142 are duplicates except that House Bill 142 permits a member

to post up to ten (10) years of additional service credit, while House Bill 144 imposes a five (5)

year limit.

OTHER SUBSTANTIVE ISSUES

1)

Background on Service Credit Issue

House Bill 142 allows an active member on the rolls of a fire department to post or adjust up to

ten (10) years of service credit earned prior to January 1, 2005 by filing with the retirement asso-

ciation no later than December 31, 2005. PERA does not oppose increasing the 10-year limit to

reflect posting of an active members actual, earned service credit. Current law requires the post-

ing of service credit for the preceding year on or before March 31

st

of each year.

PERA does not have the demographic information or actuarial study to evaluate the fiscal impact

of this amendment. However, PERA is aware that there is a significant portion of the Volunteer

Firefighter Fund membership that has not had service credit posted to their accounts through no

fault of their own. Prior to 2003, certain members were statutorily ineligible to post service

credit because their first year of service was performed when the member was 45 years of age or

older. This limitation was removed from the statute effective June 20, 2003, however, the

change was prospective only. In addition, the volunteer nature of the fire departments that con-

stitute the membership of the retirement plan has led to failures in the reporting of service credit.

House Bill 142 will place the responsibility of reporting service credit corrections upon the

member rather than the individual chief of each fire department.

2)

Funding for Volunteer Firefighter Plan and Actuarial Status

The Volunteer Firefighters Retirement Plan (“Plan”), passed by the Legislature in 1983, is unlike

any other PERA coverage plan in that it is not funded based upon contributions from salary.

Volunteer firefighters are not salaried employees and their “retirement benefits” do not derive

from employment. Rather, the benefits are provided by the Legislature and funded by the Legis-

lature from the Fire Protection Fund. The source of funding to meet the Fund’s statutory obliga-

House Bill 142/aSFC -- Page 3

tions is an annual appropriation of $750,000. This amount is supplemented, as required, to meet

unfunded obligations. Adding new liabilities to the fund may increase the annual contribution to

the Fund in order to keep it actuarially sound. However, due to the recent favorable experience

of members retiring less frequently than anticipated, the Plan is currently 185% funded. It is not

anticipated that posting past service credit through this legislation will impact the current contri-

bution to the Fund.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

Volunteer Firefighter members will be required to have service credit for the preceding year

posted to their accounts by March 31

st

. Failure to post service credit by the chief of each volun-

teer firefighter department on or before the March 31

st

deadline shall result in the member’s loss

of service credit for the preceding year. Volunteer firefighter members with actual service

earned prior to January 1, 2005 that was not reported to PERA will not be able to correct their

service credit histories for retirement benefits purposes.

GGG/rs:yr