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

Public Employees Retirement Association of New Mexico (PERA)

SUMMARY

Synopsis of Bill

This bill amends the public employees retirement act by providing a time limit for final decision in the appeal process.

This bill would require the Public Employees Retirement Board to make a decision within one hundred twenty days of the date of the conclusion of the appeal hearing. Failure on the part of the Board to submit a decision in the matter within one hundred and twenty days will result in all benefits claimed by the appellant member to be automatically awarded.

FISCAL IMPACT

The Public Employees Retirement Association (PERA) reports that this bill, if passed, would have a potentially adverse effect on the retirement fund. A specific impact was not reported.

ADMINISTRATIVE IMPLICATIONS

The PERA reports that the administrative impacts are unquantifiable. Of note are the time constraints for subsequent exceptions following the decision and the time allowed for same. Additional time is added to the process to allow the Attorney General's Office to advise the PERA Board as to the final administrative decision.

OTHER SUBSTANTIVE ISSUES

The Public Employees Retirement Board of New Mexico (PERB) have a fiduciary duty to protect the trust fund. In doing so, the PERA analyst believes that this bill will compromise this fiduciary duty.

While the fiduciary duty of the Board is undeniable, the relevant question is: can the Board make final appeal decisions within the time constraints provided in this bill without compromising this fiduciary duty?

Several factors must be considered in arriving at an answer.

The first factor is the right of the appellant to due process. This must not be compromised under any circumstances.

Second, the fiduciary duty of the PERA and the members of the Board must not be compromised.

This bill suggests that PERA members also have the right to timely determination of appeals made by the Board. The gravity of this right is important. In circumstances where the appellate member's only source of income may be their retirement benefits, timely determination is of utmost importance to the member. The current process does not appear to fully address this reality.

While the PERA analysis attached hereto addresses important and necessary procedural measures in place to insure that the Board fulfills its fiduciary duty under the law, the procedural measures may be ignoring the members right to timely decisions.

The appeal process serves to protect the fund. The time it takes the appeal process may serve the Board and the fund, but it does not appear to serve the members without whom the fund wouldn't exist.

It may be that the inordinate amount of time it takes to make a final administrative decision is linked to the frequency of the retirement board meetings and the communication flow between the Board and PERA staff.

If this legislation is passed, PERA will have to reevaluate the current appeal process, and find ways to streamline the process that will not compromise their fiduciary duty to the trust fund. As the legislative analyst of PERA, all indications suggest that the PERA staff have the ability and creativity to do so.

POSSIBLE QUESTIONS

The PERA analysis describes the role of the Attorney General in this process. The Attorney General provides the Board with an opinion regarding the hearing officer's decision in the matter. Does the Attorney General's Office feel confident that they too will be able to provide opinions to the Board under the time constraints provided in this bill?

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Attachment