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| SPONSOR: | SFC | DATE TYPED: | 3/8/99 | HB | |||
| SHORT TITLE: | State Legislator Retirement Coverage | SB | 731/SFCS | ||||
| ANALYST: | Hadwiger | ||||||
| Recurring
or Non-Rec |
Fund
Affected | ||||
| FY99 | FY2000 | FY99 | FY2000 | ||
| NFI | |||||
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates/Conflicts with/Companion to/Relates to
SOURCES OF INFORMATION
LFC Files
New Mexico Retiree Health Care Authority
Public Employees Retirement Association
SUMMARY
Synopsis of Senate Finance Committee Substitute
The substitute amends the Retiree Health Care Act to allow a former member of the legislature who served in the legislature for at least four years, is no longer a member of the legislature and who is certified to be such by the Legislative Council Service to participate in the state's retiree health care program. It also requires that a legislative member will pay a monthly premium for any selected health care plan equal to one-twelfth of the annual cost of the claims and administrative costs of that plan allocated to that member by the Retiree Health Care Authority (RHCA) board. In addition, a legislative member would pay a monthly participation fee set by the RHCA board.
The bill also sets up two legislator pension plans. The first plan provides an annual pension equal to $250.00 multiplied by credited service as a legislator or lieutenant governor if the member served after December 31, 1959 and ended prior to the term of office beginning January 1, 1999 and provides an annual pension of $40.00 multiplied by credited service as a legislator or lieutenant governor if the member served prior to January 1, 1960. The second (new) plan applies to legislators who serve after December 31, 1998, who are either at least 65 years old and have at least five years of credited service or are any age with twelve or more years of credited services. For terms of service ending prior to January 1, 2001, the annual amount of the pension would be calculated by multiplying an amount equal to the member's contributions for the first twelve years of credited service by a factor of 2.5 and an amount equal to the member's contributions for years of credited service in excess of twelve years by a factor of 1.0. For terms of service ending after January 1, 2001, the annual pension would be calculated by multiplying an amount equal to the member's contributions for the first twelve years of credited service by a factor of 2.5, an amount equal to the member's contributions for the next eight years of credited service in excess of twelve years by a factor of 1.0, and an amount equal to the member's contributions for the years in excess of 20 years by 0.25. Under this plan, legislators would contribute $400.00 for each year of credited service. The state would contribute amounts sufficient to finance members under this plan.
The bill would be effective July 1, 2000.
Significant Issues
According to RHCA's comments on the same language in the original bill, the monthly fees to participate in the retiree health care program is in lieu of contributions and to avoid violation of the anti-donation clause. RHCA indicated that the participating former legislators would not receive a subsidy from current retirees, employees or employers and would pay 100 percent of the cost for the allocated plan.
The provided model pension payments in the attached document relating to provisions in the original bill which are not altered in the substitute.
FISCAL IMPLICATIONS
RHCA indicated that enactment of this bill would not have a significant fiscal impact on their program, because the new class of retirees would pay all of their costs.
The new retirement program would entail additional general fund costs in the year FY2001, however, an estimate of these costs is not available from Public Employees Retirement Association (PERA) at this time. PERA has provided the following examples of retirement benefits if SB731 is enacted. These estimates reflect the substitute's language on legislative retirement, which did not change from the original bill.
Example 1. A legislator who currently has 18 years of purchased services does not run for another term and retires December 31, 2000 (for a total 20 years of service) would owe $6,200 in contributions ($5,400 in back contributions-$300 x 18- and $800 in future contributions) and would receive:
12 years x $400 x 2.5 = $12,000
8 years x $400 x 1 = 3,200
TOTAL $15,200 annually
Example 2. A legislator who currently has 10 years of purchased service does not run for another term and retires December 31, 2000 (for a total 12 years of service) would owe $3,800 in contributions ($3,000 in back contributions-300 x 10- and $800 in future contributions) would receive:
12 years x $400 x 2.5 = $12,000 annually
Example 3. A legislator who currently has 18 years of purchased service retires December 31, 2008 (for a total 28 years of service) would owe $9,400 in contributions($5,400 in back contributions-$300 x 18- and $4,000 in future contributions) and would receive:
12 years x $400 x 2.5 = $12,000
8 years x $400 x 1 = 3,200
8 years x $400 x 0.25 = 800
TOTAL $15,200 annually
ADMINISTRATIVE IMPLICATIONS
RHCA did not anticipate a significant administrative impact from this bill.
DH/njw