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.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

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(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Public Employees Retirement Association (PERA)

SUMMARY

The bill 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.

FISCAL IMPLICATIONS

Under Plan 2, the state will appropriate an additional $630,000 in FY2000 from the general fund. Unexpended amounts will not revert to the general fund.

The Public Employees Retirement Association of New Mexico (PERA) does not know at this time if this amount (630,000) is sufficient to finance Plan 2.

SUBSTANTIVE ISSUES

Formulas A and B of Plan 2 have a structure with two significant characteristics.

The first significant characteristic is experienced legislators with credited service approaching twenty years of service on or before January 1, 2001, may be compelled to retire before that date because of the structure of the eligibility requirements for Plan 2. Legislators with credited service approaching twelve years of service on or before January 1, 2001 may also be compelled to retire because of the graduated decrease in benefits for service in excess of twelve years.

Legislators with more than twelve years of credited service but less than twenty years, who retire, will receive $600 less in annual pension for those service years compared to the first twelve years. This is due to the 1.0 factor applied to the contribution amount. The factor of 0.25 applied to service credit in excess of twenty years, will result in a further decrease of $300 in annual pension benefits for those years. The table on the next page illustrates this effect.

JE/prr

ATTACHMENT