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F I S C A L I M P A C T R E P O R T
SPONSOR Varela
ORIGINAL DATE
LAST UPDATED
1-22-07
1-31-07 HB 224
SHORT TITLE Magistrate Retirement Service Credit Purchase
SB
ANALYST Aubel
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
4.0
4.0 Non-Rec MRA
(Parenthesis ( ) Indicate Expenditure Decreases)
Companion to HB 222
SOURCES OF INFORMATION
LFC Files
Response Received From
Public Employee Retirement Association (PERA)
SUMMARY
Synopsis of Bill
House Bill 224 would amend Section 10-12C-5 NMSA 1978 to allow Magistrate Retirement As-
sociation (MRA) members that have five or more years of service credit to purchase up to one
year of additional service credit.
FISCAL IMPLICATIONS
PERA reports that since HB 224 requires the MRA member to pay the full actuarial present
value for the service credit purchased, it is properly funded as required by Article XX, Section 22
of the New Mexico Constitution and will not have a negative fiscal impact on the fund.
However, PERA reported that PERA’s actuaries will charge PERA a fee for creating an actuarial
table for the service credit calculation, which is estimated to equal the fee charged for similar
actuarial reports. This fee would be non-recurring unless assumptions underlying the report
changed materially.
pg_0002
House Bill 224 – Page
2
SIGNIFICANT ISSUES
PERA stated that the primary policy issue raised by HB 224 is whether a MRA member should
be able to purchase one year of service credit for time not earned. Current law requires that all
other service credit in the magistrate retirement system must be earned either through service to a
public employer, military or prisoner of war service. The service credit in HB 224 is not tied to
any service requirement. Currently PERA members are permitted to purchase additional service
credit in this manner under the PERA Act.
It is not known at this time how many of the approximately 50 active MRA members will re-
quest to purchase this time. Currently, requests for the purchase of service credit are limited to
those who have served in the military or who meet very specific criteria. HB 224 expands the
group of persons eligible to purchase service credit.
PERFORMANCE IMPLICATIONS
HB 224 should not impact any PERA performance measures.
ADMINISTRATIVE IMPLICATIONS
PERA notes that the administrative impact on PERA will be in calculating the actuarial present
value and processing the added service credit. In addition, PERA will be required to amend its
regulations to address the statutory changes to the PERA Act.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
A companion bill, HB 222, proposes to allow Judicial Retirement Association (JRA) members
that have five or more years of service credit to purchase up to one year of additional credit.
OTHER SUBSTANTIVE ISSUES
PERA noted that on December 28, 2006, the PERA board voted to support legislation that would
allow MRA members that have five or more years of service credit to purchase up to one year of
additional service credit. The PERA board believes that it is equitable to provide MRA members
with the same statutory ability to purchase additional service credit in this manner that is now
only available to PERA members.
Furthermore, PERA stated that the purchase of additional service credit proposed by HB 224 can
be particularly important to a MRA member who is initially appointed to fill an unexpired term.
Since terms of office generally end on December 31
st
of the calendar year, a MRA member’s
term of office may end within months of his or her becoming eligible to retire. A MRA member
who would like to retire has no choice but to run for reelection in order to accrue these few addi-
tional months of service credit. Allowing MRA members to purchase up to one year of addi-
tional service credit would remedy this problem.
pg_0003
House Bill 224 – Page
3
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
According to PERA, MRA members will be required to meet the age and service requirements
for retirement. The MRA Act will continue to require that the purchase of optional service credit
must be earned either through personal service, military or prisoner of war service.
MA/nt