NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

New Mexico Finance Authority

Public Employees Retirement Association

SUMMARY

Synopsis of Bill

House Bill 257 amends the Public Employees Retirement Act to expand the definition of "public employer" to include the New Mexico Finance Authority. The bill also amends the New Mexico Finance Authority Act, Section 6-21-4, adding a new subsection L, to provide that the NMFA is a public employer for the purposes of the Public Employees Retirement Act. Section L clarifies that if it is determined that the authority is a government plan, the NMFA may become an affiliated public employer and adopt state general member coverage plan 3.

Significant Issues

The effect of House Bill 257 is to allow NMFA to clear the way to apply for PERA coverage as a "public employer." If the bill is enacted, NMFA will have to complete a questionnaire that PERA uses to make an initial determination whether an employer that seeks to affiliate with PERA is a governmental plan for the purposes of Section 414(d) of the Internal Revenue Code. The federal law requirements are in addition to state law requirements for PERA affiliation. It should be noted that, in cases of doubt, PERA reserves the right to ask the employer to seek an IRA determination of compliance with the governmental plan requirements. PERA and NMFA have discussed the requirements for PERA affiliation and the requirements have been recognized by the proposed amendments to Section 6-21-4 of the New Mexico Finance Authority Act.

FISCAL IMPLICATIONS

If NMFA becomes an affiliated public employer under PERA, NMFA will have to pay the employer portion of the contributions for its current 12 employees. The authority currently has 12 employees. NMFA would be responsible for the employers contributions for those employees. According to NMFA they will be able to provide the calculations of the impact of PERA affiliation on its budget.

The Public Employees Retirement Association does not anticipate a measurable change in PERA's funded condition as a result of allowing the NMFA to participate as a "public employer."

ADMINISTRATIVE IMPLICATIONS

According to PERA, there will be some initial administrative impact to their staff during their review of whether NMFA meets the Internal Revenue Code definition of a governmental plan. However, the procedures and systems to handle newly affiliated public employers under the PERA Act are in place.

OTHER SUBSTANTIVE ISSUES

PERA neither supports nor opposes the bill as drafted.

LMK/gm