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

SPONSOR Lopez

ORIGINAL DATE

LAST UPDATED

2-13-07

HB

SHORT TITLE Credit Service for Seasonal Employees

SB 181

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$50.0

$50.0

Non-

Recurring PERA

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Employees Retirement Association (PERA)

No Response

Legislative Council Services (LCS)

SUMMARY

Synopsis of Bill

Senate Bill 181 amends the Public Employees Retirement Act to allow a PERA member who

was employed by the legislative branch during a regular session of the Legislature, who did not

acquire service credit because he or she was designated as a seasonal employee, to purchase the

service credit associated with legislative periods of employment.

FISCAL IMPLICATIONS

Because SB 181 requires the member to pay the purchase cost for the service credits, the

enhanced benefit is properly funded as required by Article XX, Section 22 of the New Mexico

Constitution, and the PERA fund will not incur any negative fiscal impact. It is not known at this

time how many PERA members will request to purchase service credit under SB 181.

PERA’s operating budget will be negatively impacted by SB 181. Changes to how service credit

is posted to a member’s account will require significant changes to PERA’s recently

implemented computerized pension administration system, with associated costs, under PERA’s

existing post-warranty contract with the system vendor. For example, by incorporating removal

of the PERA’s post-retirement earning limit into the pension system, PERA incurred

Senate Bill 181 – Page

2

approximately $50 thousand in change orders during FY05. If further revisions to the system are

necessary in FY08, PERA will be required to seek a BAR to cover the costs of these system

changes.

SIGNIFICANT ISSUES

SB 181 proposes to change the definition of “service credit" as that term is commonly used

throughout the PERA Act. SB 181 will allow certain statutorily-excluded employees to purchase

service credit in a different manner than other PERA members. Specifically, SB 181 proposes

that service credit be posted based on legislative-session employment rather than by sufficient

contributions being reported to PERA on behalf of a member. PERA service credit is earned in

one-month increments in which an employee works 20 or more hours in a 40-hour week and is

paid 50 percent or more of his or her salary.

SB 181 proposes to retroactively change a PERA member’s eligibility for PERA membership

and accrual of service credit by allowing certain statutorily-excluded employees to purchase

service credit.

It is a policy decision for the legislature whether a PERA member who was employed by the

legislative branch should be eligible to purchase service credit if the employee was excluded

from PERA membership because the employer designated him or her as a seasonal employee.

ADMINISTRATIVE IMPLICATIONS

The administrative impact on PERA will be in calculating the purchase cost 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

SB 181 conflicts with NMSA 1978, Section 10-11-4(B)(3), which provides for mandatory

PERA membership unless a statutory exemption exists. The PERA Act excludes employees

designated by their public-affiliated employer as seasonal or student employees from

membership.

SB 181 conflicts with NMSA 1978, Section 10-11-4, which provides that personal service

rendered to an affiliated-public employer by a member shall be credited to the member’s account

in accordance with board rules and regulations. PERA Rule 2.80.600 NMAC provides that

members who are full-time employees shall acquire one month of service credit for every

calendar month in which the member is paid 50 percent or more of his or her monthly salary as

reported by the member’s affiliated public employer. PERA Rule 2.80.600 further provides that

members who are part-time employees shall acquire one month of service credit for every

calendar month in which the member works 20 or more hours per week, totaling 40 or more

hours in an 80-hour pay period. 2.80.600.10.A.2, 4 NMAC.

TECHNICAL ISSUES

SB 181 provides that, subject to certain conditions, a “member" employed by the legislative

branch may purchase statutorily-excluded service credit. The PERA Act [NMSA 10-11-1(M)]

Senate Bill 181 – Page

3

defines member as a “currently employed, contributing employee of an affiliated public

employer, or a person who has been but is not currently employed by an affiliated public

employer and who has not retired and has not received a refund of member contributions." Thus

SB 181 will not address the targeted group of legislative-branch employees designated as

seasonal workers who are not currently PERA members.

On the other hand, SB 181, as written, would allow a PERA member to accrue more than one

month of service credit for service in a calendar month contrary to NMSA 1978, Section 10-11-4

(A). Specifically, SB 181 would allow that member to purchase 3 months of service credit for a

60-day session and 2 months of service credit for a 30-day session. As stated above, this is

contrary to how service credit is calculated pursuant to the PERA Act by providing for a “block"

of service credit for a time period rather than calculating service credit on reported wages.

OTHER SUBSTANTIVE ISSUES

NMSA 10-11-3(B) specifically excludes “seasonal" employees from PERA membership. Once

employment has been designated as “seasonal," an employer does not remit contributions under

any coverage plan for that employee. For example, in the case of retirees who return to work for

the legislature, neither the employer or the reemployed retiree pay contributions because the

worker is employed in a category of employment that is clearly excluded from PERA coverage

under Section 10-11-8 (D)(2) of the PERA Act.

SB 181 proposes that legislative employees have the ability to purchase service credit if they did

not receive service credit “solely because the affiliated public employer designated the employee

as seasonal". The PERA Act requires employees designated as seasonal employees to be

notified in writing of this designation and the consequences thereof with respect to PERA

membership, service credit and benefits. NMSA 1978, Section 10-11-3(C).

SB 181 does not require a PERA member to be vested with five or more years of service credit

to purchase legislative worker service credit. All other service credit purchases under the PERA

Act are conditioned on the member’s vested status (including military, airtime, etc). It should be

noted that unless the legislative worker is already a PERA member he or she will continue to be

ineligible to purchase their excluded service credit under SB 181. As a result, certain legislative

workers will not be able to take advantage of the service credit purchase provisions provided by

SB 181.

Further, SB 181 does not address the situation of certain legislative workers concurrently

employed by public employers covered by a single state retirement system. Allowing these

legislative workers to accrue overlapping service credit for the same period of employment under

the PERA retirement system is precluded both by statute and regulation.

According to PERA, SB 181 provides for the purchase of service credit for a narrowly defined

group of PERA members formally designated by their employer as excluded from membership.

SB 181 conflicts with the general concept of a defined benefit plan that similarly situated

members should earn and receive similar benefits. PERA members who were designated as

“seasonal" employees in other capacities are not eligible to purchase service credit for such

periods of excluded employment.

PERA funds can only be used for member-related expenses.

Senate Bill 181 – Page

4

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The PERA Act will continue to exclude seasonal employees from PERA membership. The PERA Act

will continue to limit the purchase of optional service credit earned either through prior service to a public

employer, military service, or time spent as a civilian prisoner of war.

MA/csd