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

SPONSOR Sanchez

DATE TYPED 02/10/05 HB

SHORT TITLE Conservation Officer Retirement Plan

SB 507

ANALYST Geisler

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

See narrative

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to: SB 266

Conflicts with: SJM 18, HJM 5

SOURCES OF INFORMATION

LFC Files

Public Employees Retirement Association (PERA)

Corrections Department (CD)

Department of Game and Fish (DGF)

SUMMARY

Synopsis of Bill

Senate Bill 507 adds conservation officer members employed by the Department of Game and

Fish to those employee groups eligible for enhanced retirement benefits provided under State

Police Member and Adult Correctional Officer Coverage Plan 1. The proposed change from

Senate Bill 507 -- Page 2

State General Plan 3 benefits to State Police Plan 1 benefits will result in a 20% increase in all

credited service (past and future) for conservation officers covered by Senate Bill 507.

The contribution levels under the existing State Police Plan 1 (member 7.6%; employer 25.1%)

represent an increase of .18% in member contributions and an 8.51% increase in employer con-

tributions over current contribution levels paid under State General Plan 3 (member 7.42%, em-

ployer 16.59%) for the membership affected by Senate Bill 507

Significant Issues

The primary policy issue raised by SB 507 is whether conservation officer members employed

by the Department of Game and Fish should receive the increased benefits of a 20% service

credit enhancement retirement benefit. There are currently 105 of these sworn officers, who

serve under hazardous conditions at times. In addition, there is a the question of whether the

statutory contribution increases contained in SB 507 are sufficient to finance the unfunded ac-

crued actuarial liability of enhancing conservation officers’ past credited service.

FISCAL IMPLICATIONS

The proposed change from State General Plan 3 benefits to State Police Plan 1 benefits will re-

sult in a 20% increase in all past and future credited service for conservation officers. Benefits

payable to conservation officers will include a 20% service credit enhancement for benefits de-

termination and retirement eligibility.

There are a number of fiscal impacts associated with Senate Bill 507:

1)

The cost of enhancing all past service credit is estimated at $4.5 million by PERA as

shown on the chart below and would require a contribution increase of 6.17% to amortize

it over 30 years.

2)

The cost of covering the future enhanced benefit (normal cost) would require a 10.21%

contribution increase as shown below.

The current combined employee/employer contribution rate for State General Plan 3 is 24.01%.

The combined employee/employer contribution rate for State Police Plan 1 is 32.7%. Moving

the conservation officers to the new plan will provide for a combined 8.69% increase in em-

ployee/employer contributions, which is 7.69% less than the contribution increase required as

shown below. This shortfall will be subsidized by the assets of the state police plan moving for-

ward.

Increase in Unfunded Accrued

Liability

Normal

Cost

$$

% to amortize

over 30 years

Total Computed

Contribution Rate

% of Payroll

10.21%

$4,496,995

6.17%

16.38%

Additional costs include:

Senate Bill 507 -- Page 3

3) Moving the conservation officers to the State Police Plan 1 will require a transfer of associ-

ated assets and liabilities from State General Plan 3 for service-to-date accrued by conservation

officers. However, since State General Plan 3 is only 84% funded, only assets totaling 84% of

associated liabilities will be transferred to State Police Plan 1, negatively impacting the funded

status of that plan.

4) The cost of the increase employer contributions have been estimated by Game and Fish at

$350 thousand in FY07 and continuing thereafter.

ADMINISTRATIVE IMPLICATIONS

PERA will be required to coordinate the election for adoption of the new coverage plan by the

conservation officers and the Department of Game and Fish. PERA will be required to move

affected membership, along with corresponding assets and liabilities, from State General Plan 3

into the proposed State Police Plan 1.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Joint Memorial 18 and House Joint Memorial 5 propose a 2-year moratorium on benefit

enhancement legislation for the retirement systems administered by PERA and the ERB.

Senate Bill 266 provides juvenile correctional officers employed by the Children, Youth and

Family Department a retirement benefit 20% increase of all credited service (past and future).

TECHNICAL ISSUES

Senate Bill 507 adds language to 10-11-27 to include Correction Officers in all sections of the

plan. This language was accidentally dropped during 2003.

OTHER SUBSTANTIVE ISSUES

The PERA Board endorses the two-year moratorium on any benefit enhancement legislation as

proposed by Senate Joint Memorial 18 and House Joint Memorial 5 until sufficient experience is

gained to determine the actuarial impact of benefit enhancements passed during recent legislative

sessions.

SB 507 requires that in order for a conservation officer member to be eligible to retire under the

enhanced benefits provided by State Police, Adult Correctional Officer and Conservation Officer

Member Coverage Plan 1, he or she must accrue 36 months of service credit in the plan subse-

quent to July 1, 2006. When this condition is met, all past service credit accrued as a conserva-

tion officer under State General Plan 3 is enhanced by 20% when transferred to the State Police,

Adult Correctional Plan. B

SB 507 states that the “retirement board” will conduct an election to submit to conservation offi-

cer members the question of adopting the enhanced benefits now available under State Police

and Adult Correctional Officers Plan 1. PERA Rule 2.80.1700 delineates the procedures for an

affiliated public employer to conduct employee elections for a change in coverage plan.

Senate Bill 507 -- Page 4

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

Conservation officer members will continue to be covered by State General Plan 3 and are eligi-

ble to retire at any age with 25 or more years of service credit. Their retirement benefit will con-

tinue to be calculated with a 3% pension factor and are capped at 80% of their final average sal-

ary. For State General Plan 3, members pay 7.42% of their salary in contributions and their em-

ployer pays 16.59% of salary in contributions.

AMENDMENTS

PERA has the following suggested amendment, which will clarify that conservation officers will

be the ones voting in the election.

On page 8, lines 21 and 22:

C. State police member, adult correctional officer member and conservation

officer member coverage plan 1 is applicable to conservation officer members in the first full pay

period after July 1, 2006, if the retirement board certifies to the secretary of state that, of those

conservation officer members to be covered under state police member, adult correctional officer

member and conservation officer member coverage plan 1, [a majority of the members voting

have voted to approve adoption of that plan] a majority of affected conservation officer members

have voted to approve adoption of the plan at an election.”

GGG/yr