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(Parenthesis ( ) Indicate Expenditure Decreases)

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

Education Retirement Board (ERB)

SUMMARY

Synopsis of HEC Amendment

The House Education Committee amendment is a technical correction of language which defines October 1, 1999 as the date after which a member may elect to continue employment. The amendment further clarifies that the "average annual salary" of the member at the time of this election will be the basis of retirement benefit calculations. These issues were addressed in the Technical Issues section of the original bill. There is no additional fiscal impact.

Synopsis of Bill

This bill amends the Educational Retirement Act. Members who are eligible to retire pursuant to the Act may elect to continue working. Upon electing to continue working, the member will have their previously earned benefits withheld until the member finally retires.

Upon final retirement, the member shall receive regular payment of retirement benefits pursuant to the Act using the salary and number of years service credit at the time of election.

Members who continue to make contributions to the fund following the election, will receive a lump-sum payment of the member and employer contributions made after the time of election, plus interest, less any disability benefits received by the member after the date of election. The interest rate applied to the lump-sum payment is calculated to be seventy-five percent of the five year average return of the fund. No additional service credit will accrue towards the calculation of benefits receivable, after the election is made.

Significant Issues

Additional benefits that a member would receive by accruing additional service credit after the time of election, would offset the lump sum payment in three to four years. In other words, after sever years of additional service the total dollar amount of the lump-sum payment would be less than the total dollar amount receivable by the member if service credit continued to accrue after the time of election.

On the other hand, if the member desires to receive a large lump-sum payment upon final retirement, this bill would accomplish this goal.

FISCAL IMPLICATIONS

The Education Retirement Board (ERB) reports that this bill would have a positive impact on the Educational Retirement Fund.

Because it is unknown how many members would elect to continue working after they were eligible for retirement, the actual impact is unknown.

ADMINISTRATIVE IMPLICATIONS

The Educational Retirement Board (ERB) reports that one additional full time employee (FTE) will be required to administer this legislation. The estimated cost of the additional FTE, plus benefits, would be $35,000.

TECHNICAL ISSUES

This bill has no date of enactment.

The Educational Retirement Board (ERB) requests the date of member eligibility be "On or after October 1, 1999, assuming this law would become effective July 1, 1999. This would allow ERB to notify members of the change.

Page 5, line 9, after the first occurrence of the word "the" insert "average annual".

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