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F I S C A L I M P A C T R E P O R T
SPONSOR Sanchez, M.
ORIGINAL DATE
LAST UPDATED
1-31-07
3/05/07 HB
SHORT TITLE District Attorney and Staff Retirement Plan
SB 576
ANALYST Aubel
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
See Fiscal Impact
General Fund
$625.5
Recurring
General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
$50.0
$50.0
Non-
Recurring PERA
Total
$625.5
$625.5
$1,251.0
Recurring
General
Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB 576
Conflicts with SJM 6
SOURCES OF INFORMATION
LFC Files
Response Received From
Public Employee Retirement Association (PERA)
Administrative Office of District Attorneys (AODA)
No Response Received
Administrative Office of the Courts (AOC)
SUMMARY
Synopsis of Bill
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Senate Bill 576 – Page
2
Senate Bill 576 creates a new member coverage plan under the PERA Act allowing for district
attorney members to be first eligible to retire with 20 years of service credit with a 3.5 percent
pension factor. SB 576’s newly created coverage plan would be applicable to “district attorney
members", which are defined as “district attorneys, chief deputy district attorneys, deputy district
attorneys and senior trial prosecutors." The member must be in the District Attorney Plan 1 for
18 months prior to being eligible for the proposed benefit enhancements. The member’s
contributions under the proposed District Attorney Plan 1 will be 10.15 percent of salary; the
employer contributions are 22.68 percent.
FISCAL IMPLICATIONS
The estimated increase in unfunded liabilities to the PERA fund is calculated at approximately
$6.5 million. SB 576 does not provide for an appropriation to pre-fund the $6.5 million
unfunded liability that results from the new coverage plan. Providing an appropriation to reduce
any portion of the $6.5 million unfunded liability would reduce the required statutory
contribution rates for the new coverage plan going forward.
The bill proposes amortizing the unfunded liability over 30 years rather than pre-funding. The
additional 6.09 percent for employer contribution yields an additional $625 thousand recurring
operating budget impact from general fund.
The increase in the annual employee PERA deduction will increase by approximately $1,798
based on the actuarial average salary of $65.8 thousand.
PERA’s operating budget will be negatively impacted by SB 576. Every new coverage plan
added to the PERA Act requires system changes to PERA’s computerized pension administration
system. If further revisions to the system are necessary in FY08, PERA will be required to seek
a Budget Adjustment Request to cover the costs of these system changes. Similar changes in the
past have cost up to $50.0 thousand.
SIGNIFICANT ISSUES
Interim committee testimony cited job stress, retention and recruitment as justification for the
proposed enhanced benefits.
PERA pointed out the primary policy issue is whether “district attorney members" should
receive the increased benefits of a 20-year retirement plan with a retirement benefit calculated
using a 3.5 percent pension factor. Currently this benefit structure is only provided to Municipal
Police Plan 5 and Municipal Fire Plan 5 members. Another policy issue is whether the employer
or employee should bear the cost of the increased contribution rates required by the proposed
benefit plan structure to maintain the solvency of the fund.
To date, all employee groups that are eligible for the enhanced benefits of a 20-year retirement
plan or that have each year of service credit enhanced by 20 percent (state police, adult
correctional officers, municipal police/fire, and municipal detention officers) have a
commonality of danger to life as an integral part of the job. PERA cautioned that expanding
enhanced benefits to employee groups beyond these “hazardous duty" employee groups may set
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Senate Bill 576 – Page
3
precedent for all employer groups to seek enhanced benefits from the retirement system. PERA
has expressed concern of the cumulative effect of enhanced plans on the solvency of the fund.
Increasing liabilities increases the risk to the fund if actuarial assumptions do not hold, such as
the 8 percent investment return.
The definition of those attorney employees covered by SB 576 includes: “district attorney,"
“chief deputy district attorney," “deputy district attorney," and “senior trial prosecutor." AODA
noted that these are traditionally the most senior and experienced prosecutors, providing an
incentive for district attorneys to stay in their positions to obtain the enhanced benefit. However,
the New Mexico District Attorneys’ Personnel & Compensation Plan (NMAC, Title 10, Chapter
4, et seq.) contains more classifications of prosecuting attorneys than those listed in the bill. The
DA Personnel & Compensation Plan lists the following positions: “Associate Trial Attorney,"
Assistant Trial Attorney," “Senior Trial Attorney," “Deputy District Attorney," and “Chief
Deputy District Attorney." The Associate and Assistant Trial Attorney positions are ranked
lower than the others because their level of experience is ordinarily less.
ADMINISTRATIVE IMPLICATIONS
PERA will be required to coordinate an election for adoption of the new coverage plan by district
attorney members statewide. PERA would be required to move affected membership, along with
corresponding assets and liabilities, from State General Member Coverage Plan 3 into the
proposed District Attorney Member Coverage Plan 1.
SB 576 will add another member coverage plan to the 31 that PERA already administers.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB 576 duplicates House Bill 595.
SB 576 conflicts with Senate Joint Memorial 6, which proposes a two-year moratorium on
benefit enhancement legislation affecting the Public Employees Retirement Association
OTHER SUBSTANTIVE ISSUES
Article XX Section 22 of the Constitution of the State of New Mexico requires that an increase
in benefits under the retirement system be adequately funded to preserve the PERA fund’s
actuarial soundness. SB 576 provides no appropriation for the unfunded accrued actuarial
liability (“increased liabilities") that the enhanced retirement benefits will cause. Rather, SB 576
provides for a combined employee and employer contribution rate that is sufficient to amortize
the $6.5 million unfunded accrued actuarial liability over 30 years, given actuarial assumptions
hold.
The current combined average contribution rate paid for the affected 156 members is 24.01
percent of payroll (7.42% member and 16.59% employer). SB 576 provides for a combined
contribution rate of 32.83 percent (10.15% member and 22.68% employer).
The consensus of the PERA Board is that the unfunded accrued actuarial liability for SB 576’s
benefit enhancement should be pre-funded through a special appropriation as a safeguard to the
fund’s solvency. Providing an appropriation to reduce any portion of the $6.5 million unfunded
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Senate Bill 576 – Page
4
liability would reduce the required statutory contribution rates for the new coverage plan going
forward.
SB 576 provides for an 18-month eligibility period for a member to first become eligible to retire
with enhanced benefits under the plan. PERA maintained that a 36-month mandatory waiting
period is appropriate before members are eligible to retire from the plan to allow for payment of
contributions at higher levels toward their enhanced benefit prior to retirement. This will lessen
the impact of increased liabilities on the new plan that may occur if a number of members
immediately retired with enhanced benefits sooner than normally projected.
ALTERNATIVES
The elected district attorneys may consider joining the existing Judicial Retirement Plan.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
District attorney members (district attorneys, chief deputy district attorneys, deputy district
attorneys and senior trial prosecutors) will continue to be PERA members covered by State
General Plan 3 and would be eligible to retire at any age with 25 or more years of service credit.
Their retirement benefit will continue to be calculated with a 3% pension factor and are capped
at 80% of their final average salary. For State General Plan 3, members pay 7.42 % of their
salary in contributions and their employer pays 16.59% of salary in contributions. AODA
maintains that the difficulty in retaining experienced prosecutors may continue.
AMENDMENTS
DISTRICT ATTORNEY MEMBER COVERAGE PLAN 1—SERVICE CREDIT REQUIRED
FOR DISTRICT ATTORNEY MEMBERS.—
Notwithstanding other provisions of the Public Employees Retirement Act, to qualify for normal
or disability retirement or payment of normal or disability retirement benefits under district
attorney member coverage plan 1, a district attorney member shall have 36 months of service
credit earned under district attorney member plan 1.
MA/mt