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

SPONSOR Fox-Young

ORIGINAL DATE

LAST UPDATED

02/13/06

HB 547

SHORT TITLE Legislative Retirement Coverage Plan Changes

SB

ANALYST Geisler

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

Indeterminate,

see fiscal impact

Recurring Public Employees

Retirement Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Employees Retirement Association (PERA)

SUMMARY

Synopsis of Bill

House Bill 547 decreases legislative retirement benefits for current and future legislative mem-

bers whose terms of office end on or after January 1, 2006. Under HB 547, future and current

legislators will receive retirement benefits calculated under State Legislator Member Coverage

Plan 1 (Legislative Plan 1). The enhancement benefits provided under State Legislator Member

Coverage Plan 2 would no longer be available to previously enrolled active Legislator members;

all future pension benefits for affected Legislator members would be paid under Legislator Plan

1’s enhanced benefits.

FISCAL IMPLICATIONS

By decreasing retirement benefits, PERA believes that HB 547 may have a favorable fiscal im-

pact on the PERA Fund. As a result of Legislative Retirement Plan changes in 2003, there has

been a substantial increase in participation by eligible legislators (retired membership increased

by 30%; inactive membership increased by 49%). For the year ending June 30, 2005, the Legis-

lative Retirement Fund has a funding ratio of accrued valuation assets to accrued liabilities of

61% (80% is the industry standard benchmark for fund solvency).

House Bill 547 – Page

2

SIGNIFICANT ISSUES

HB 547 conflicts with Article XX, Section 22 of the New Mexico Constitution. Members of

Legislative Plan 2 have a constitutionally protected property interest in retirement benefits under

the plan (upon meeting the minimum service requirements of an applicable retirement plan a

member of a plan shall have a vested property right with due process protections).

ADMINISTRATIVE IMPLICATIONS

The administrative impact of HB 547 on PERA will be in administering another member cover-

age plan for Legislators. There will be a minimal administrative impact on PERA. PERA will

be required to amend its regulations to address the statutory changes to the PERA Act.

TECHNICAL ISSUES

In order to modify retirement coverage plans for future legislators, a new Legislative Plan 3 must

be created and apply to Legislators prospectively.

OTHER SUBSTANTIVE ISSUES

Background on Legislative Retirement

In 2003, the legislature amended the legislative retirement plans to provide optional increased

retirement benefits for certain legislators. Legislative Plan 1 was amended to provide for op-

tional increased pension benefits for Legislators who served terms prior to January 1, 2004. Leg-

islative Plan 1 closed to new members on December 31, 2003.

Currently, all current and future legislator members are covered under Legislative Plan 2, unless

they elected to be covered by Plan 1 prior to December 31, 2003. Under Legislative Plan 2, leg-

islator members will receive an amount equal to 11% of the of the per diem rate in effect, pursu-

ant to Section 2-1-8 NMSA 1978, on December 31 of the calendar year the legislator retires mul-

tiplied by 60 and further multiplied by credited service. Annual member contributions under

Legislative Plan 2 are $500.00 and members are eligible to retire at any age with 10 years of ser-

vice credit. The State contributes amounts sufficient to finance membership of members under

the new legislative coverage plan on an actuarial reserve basis from the Legislative Retirement

Fund in the State Treasury, which is independently invested to finance all legislative retirements.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

All current and future legislator members are covered under Legislative Plan 2, unless they

elected to be covered by Plan 1 prior to December 31, 2003. Under Plan 2, legislator members

are eligible to receive an amount equal to 11% of the of the per diem rate in effect, pursuant to

Section 2-1-8 NMSA 1978, on December 31 of the calendar year the legislator retires multiplied

by 60 and further multiplied by credited service. Annual member contributions under Legisla-

tive Plan 2 are $500.00 and members are eligible to retire at any age with 10 years of service

credit.

House Bill 547 – Page

3

GG/nt