Public Retirement & Social Security Programs-Joint

Good morning if the committee will come to order jerseys a quorum those wishing to speak for against the bill for an audience please signed up to speak for against the bill and we're going to get started thank your body for showing up early this morning and representative warmth do you have anything you want to search all right well you should have the genders in front of you we've got the house bill eleven ninety three representive Warren you're recognized to present the bill. Thank you Mr chairman committee I'm going to S. the executive secretary from Asher's to join me at the table. And if you would Miss Smith are recognized yourself for the record and you're recognized robin Smith Asher's executive secretary thank you go ahead. Thank you Mr chairman a committee this is a bill we brought to you the first week that we presented bills house bill eleven thirty ninety three. First thing this does is actually. Addresses the structure of the Esther's board of trustees there now two chief engineers the board will have on its membership the chief engineer over operations because that person as most employees under his supervision. the second thing section two of this bill deals with the death benefits provided by Asher's the bill does not change the practice or amount of the death benefits paid but it recognizes the information into one section of code. to summarize the new death benefit provided Death benefits provided or refund of contributions for non vested member the beneficiary of an married vested member will be able to choose between an option a and unity which is a hundred and twenty months certain or an option B. The New Eddie fifty percent survivor annuity or return of the contributions the named beneficiary of unmarried vested member may choose between the option a immunity or the return of contributions. The house bill eleven ninety three would not change the amount of death benefits paid. it's our opinion or it was in the fiscal impact the that house bill eleven ninety three will not have the fiscal impact upon the ashes plan. the one thing that we did was we were removed the spousal consent for a non spouse beneficiaries. So. I'll take any questions are there any questions by the committee. Seeing none is there anybody in the audience would like to speak for against this bill. If not representative warned you will close the bid for the bill I am closed would appreciate a good vote. Was one of the committee. I have a motion to pass in the second. Any discussion on the motion. All in favor say aye by any opposed congradulations of bills passed thank you Mr chairman and you are recognized to present house bill twelve oh one. Thank you Mr chairman I would like to ask that the executive director of the teacher retirement join me at the table. And the legal counsel. Mr road if if if you all take a seat and introduce yourself for the record. And you'll be recognized. Yes good morning committee thank you Clint Rhoden Arkansas teacher retirement. Good morning Jennifer Lee wrote general counsel for a terrace you're all recognized. Thank you Mr chair and committee. you just met Jennifer Lee will she used to draft retirement legislation here in BLR but she went to work for Arkansas teacher retirement system in a new role there she went through the entire Arkansas Code that relates to teacher retirement this bill is to clean up and enhance any areas that was not crystal clear before or needed any corrections here's a summary of what has been done through this bill. Number one the bill has over sixty sections with mostly wording changes for consistency and clarity purposes example retirant is now a retiree which is what we usually use when referring to retirees of the system changing reference to deadlines to allow full calendar months uh for a deadline is supposed to a date in a month to a date in a later month is another key issue. Secondly federal law change that required minimum distribution age to change in two thousand twenty three it goes to seventy three by the year two thousand thirty three it goes to seventy five. We want to be in compliance with federal law and lastly no benefit enhancement is allowed if the end result because the unfunded accrued actuarial liability to exceed eighteen year amortization of the bill includes a definition of benefit enhancement that does not allow it to increase the amortization period by more than one year this allows for people to work to get it back down there's no fiscal impact that occurs from the implementation of this bill when it's an act I'll be glad to take any questions. Are there any questions by the committee. Seeing none is there by an audit is there anybody in the audience that wishes to speak for against this bill. Representative warned you're recognized to close for the bill I am closed and I would ask for a do pass. We have a motion do pass as their second. I have a second any discussion on the motion. All in favor say aye. Any opposed congratulations your bills passed thank you Mr chairman thank you Committee. All right members it looks like we'll be on Senate bill one sixteen next Senator Hammer you're recognized to present your bill. The question. Senator Hammer you're recognized to present Senate bill one sixteen thank you Mr chairman members of the committee on Senate bill one sixteen it is a gap service purchased this bill does not reduce any benefits for the A. T. R. S. member or beneficiary this bill creates a new type of service that can be purchased at actuarial value if a member leaves active employment for a period of time and then returns back to implement the gap years are available for purchase at actuarial value and this type purchases limited to five years the system's actuary found that this bill would have no material financial impact on a TRS and with that brief introductions chair five could defer to Clint to let him maybe give a few more details of the weeds if you don't mind Mr road if you were the the record in addition self again for the record and you are recognized. All right thank you Clint Rhoden Arkansas teacher retirement system of so yes this is this is a bill that Senator Hammer I visited with on this summer just kind of brainstorming with ideas as to anything the teacher retirement system could do in order to help with a teacher shortage issues You know one of the issues is some of our teachers set out for a time during a pandemic and you know one of the ideas is that there was any kind of incentive that we can. Provide to like to pull classroom teachers back in. After setting out for that reason and this gap your services essentially the program we come up with all we talked about it with our taxes tourney to make sure that this type of air time is permissible and which it is as long as we have restrictions on it what you know so we started out by making it narrowly defined just a classroom teachers and of course that the five year limit is also helpful to make sure that it's within sight are qualified plan so I think this is a good bill it it might entice some teachers come back into the classroom this type of service is expensive it probably will have a huge impact but it's just another option that we can throw out there with at no cost to the system. Thank you are there any questions by the committee. Seeing now is there anybody in the audience that wishes to speak for against this bill. That looked like it Senator hammer your clothes for your bill thank O. quit while I'm ahead Mr chairman I appreciate a good vote I make a motion to pass I have a motion do pass as their second. I have a second any discussion on the motion. All in favor say aye. Any opposed graduations your bill is passed thank you Mr chairman members committee. What we're gonna be on house bill eleven eighty six representive Collins you're recognized to present house bill eleven eighty six. Thank you Mr chair Andrew Collins and I'm joined by rodents generally we're both from teacher retirement so this first bill is eleven eighty six and just kind of zooming out help me to do this at least a someone a member of a terrorist retires they start getting into any paid to them so often for the rest of their life was always for the rest of their life but there's an alternative option where they can designated beneficiary and set up what's called the survivor and nubity the way that works is the member's annuity payment is reduced during their life but after they die they're beneficiary gets a payment for the rest of their life the idea behind that is to help the member get their benefits sure some kind of consistent income after they die so in our current law there are two types of people who can be a beneficiary one is a spouse and one is a disabled dependent child and so with this bill of ninety six would do is allow member to designate both a spouse and a disabled dependent child to be co beneficiaries instead of either or so there wouldn't be any change in the amount of the survivor annuity that's paid out it would just be split if this is elected between the spouse and the disabled dependent child for the rest of each of their respective wives of the two other small changes in this bill one is it as a way for disability to be determined as applied to a dependent child and that is determination letter from the Social Security Administration and finally it brings in some workers from elsewhere in code to do two things one it says that a spouse can't elect a lump sum payment if there's a disabled dependent child out there that's just a necessary clarification given what we're trying to do with the co benefits year is and to it just ensures the timing of when benefits start following members death or the same for disabled retirees as for other retirees fiscal impact of this bill is very minimal this few. People who would be impacted think this said no more than five in each case the fiscal impact is small so the overall impact is is between zero and and unmeasurable but I'm joined by both Clint Rhoden and Jennifer and happy to answer any questions. Hi I don't think questions from the committee right now but I have a little question of my own so if you would If you will have to beneficiaries instead of one in the and these payments are paid until the beneficiary dies passes away. It seems that obviously we're doubling the exposure as far as you know it's going half of it's going to be paid until the second one dies right. And and maybe one of these guys you're welcome The Hobbit but it's it doesn't revert if if that's not sure if that's your question but if one of one of the houses paid until that one person dies and the others to the other person dies but that have to inspected the spouse won't revert to this disabled child so long as I understood it so currently is it an option to make the disabled child the beneficiary yes a hundred percent hundred percent or fifty percent is two different options in code yeah what we currently have the fifty percent option or that's what you're creating. Well let me not confuse things I'll answer that so currently you can a retiree can either it doesn't meet their spouse or their dependent child as a beneficiary under option a which is a hundred percent or option B. which the president reduce the new any. these changes right now will allow our retiree to designate both the spouse in the dependent child as an option a or option be beneficiary if something were for example to happen to this surviving spouse the surviving spouse to share of the immunity would not revert back to the dependent child and vice versa. I think that's ahead Senator Hickey you're recognized for a question. Yes thank you I soon. I do we do find somewhere else in the code what it what an actual dependent child is that that that's the with their under the IRS regulations or something because I didn't see where we actually define what a dependent child was. A dependent the statute actually clarify that a dependent child is a child that has been declared incapacitated by a court and then it with our current amendments road expanding that to a child that has received the Social Security Administration letter finding the child disabled. Okay. Right I do see that so. A judge physically or mentally incapacitated. And in just just one more thing if. Let's just say that we had someone like that and they were incarcerated would they continue to receive this or how would how's that so how would that work. The code and rules don't provide for us stopping benefit payments to a surviving spouse or dependent child they're incarcerated okay. Right. Thank you. Okay are you done Senator Hickey. Okay Senator Hammer you're recognized for a question. Thank you Mr one one quick question about what if the. Dependent child is receiving any other kind of sports like a society or anything else like that does it interfere with that or does it have does that have a very with what we're doing here no it does not. So when prohibit them from continuing to receive that by adjusting their income would have an adverse effect on their SSI payment or any other benefits are receiving not that I'm aware of now. Okay thank you. Okay so I've got another question long lines of what Senator Hickey was asking on page two where we define the defendant child. I'm currently it says a dependent child. Of the return who's been a judge physically or medically incapacitated by a court of competent jurisdiction that's what's currently in the law. Now we're creating two different ways to qualify under to define that child will number one is very similar but then number one hands within or. Senator Chesterfield would you like to take the table down there's. Like what I'm getting to. So number two. Which follows number one within or. Is found by the Social Security Administration to be disable I would think that would be a much broader number. Of Children. The what number one covers a number one is basically what's currently in a code it might be and in fact the reason why we even added this language is because we sometimes have members who had a child with a letter from the Social Security Administration but didn't necessarily have a court order finding that child incapacitated so it's possible that that the meeting more children that would qualify as a dependent child with the addition of this language so is there any reason why we don't say what percentage of disability and doesn't the Social Security Administration deems somebody disabled at different levels and this seems to cover all of them. We just wanted to give our members the broadest possible option to cover the independent child I'm I'm not familiar necessarily right now with the different levels the socials Committee six Social Security Administration has for declaring a person disable but we thought that this would be beneficial for our members and to help them secure. A new ET payments for the independent child if they pass away. You know I also would just point out this is just the retirement benefit that the members entitled to anyway and they're leaving their own retirement benefit to independent so it's not like it's creating a new liability for anybody it's the same. Property of essentially of the retiree they're just designating it to this dependent child or the spouse after they're done. Well I would say that's true but part of the actuarial job an actuarial study is to determine how long those benefits are going to be paid beyond retirement and that's usually calculated by an average age of death you know and children usually outlive their parents so you know it could be a. I have an actuarial cost on the system it would send me a representative right you're recognized for a question. Yes Sir thank you Mr chairman commission this is let's just say that you have a school teacher and she has a husband and one child do they receive also known right one hundred percent. Four percent of those. Callously. So as for amending the statute what would happen is you would calculate their retirement annuities that the member would receive and then once the member passed away that immunity would just be split between the spouse and the dependent child equally. Is that answering your questions. Yes ma'am it you know like if if there was a lady that was a teacher and she died at the hospital in. I guess would receive one hundred percent of the benefit to take care of the child at the same time but it shall does a child receivers checked and. If the member designated the dependent child as a beneficiary as well then the new eighty would be split fifty fifty between that the spouse and the dependent child. So it's there's an additional calculation that goes. After the member passes away you have one calculation at the time of retirement the immunities determined once the member passes away even if it's at a hundred percent and hundred percent of what the members receiving as an immunity would be split between the spouse and dependent child if it was if it was the option B. fifty percent annually than fifty percent of what the member was receiving as an annual meeting will be split between the spouse and the dependent child I know you've probably already said this but let's just say that the though the spouse passes away this is a dependent receive the full amount no it does not revert back. The is still fifty percent yes yes ma'am thank you thank you Mr chairman. my chair Warren you're recognized for a question thank you Mr chair. All right so let me make sure that I have this right a retiree has the ability to choose. To get a higher amount and no designated beneficiary correct so if they choose the Max amount with no survivor. Then if they choose the next level which is making sure that someone gets a survivor benefit that is a reduced amount correct. So what kind reduction. Are we talking about. In that case. And then this and I'm I'm pointing that out because. If you've got that split beneficiaries. Then. And it to reduce the mail and it's fifty fifty. I'm just trying to show the reduction in the liability for the system. So if a member retires and only selects the your spouse as a beneficiary the spouse or reduction factors use if it's if they select your dependent child the dependent child reduction factors use if they select then only the spousal reduction factor will be use. But they can select a higher amount and have no other. And I'm trying to because my wife just went on but she could have had a higher amount and just got a check for her lifetime right she I think what you're asking is could she have and like to the straight line right yes she could have done that and there would have been the beneficiary and they would and it would have been a higher amount but when you read when you check that you want to survivor benefits it reduces the amount that that person gets. During their lifetime and for the survivor correct. And in this case fifty percent up to one and the other. Would even be a further reduction after one dies. Yes because it wouldn't revert eight I don't know that it would be a further reduction in just one half of the immunity payment just when and referred back to the other I guess I'm getting to what senator Payton was saying. With the expectation that a child is going to live much longer. It's a reduced benefit and then it would only be fifty percent of the reduced benefits going to a child. Yes. Are you Senator Chesterfield recognized for a question. Thank you Mr president. I'm seeking further clarity let me see if I can I can get to where I want me. The spouse passes away. Fifty percent of what he or she would have made we'll go to the individual in other words they will get one quarter each of what the spouse is that correct. Twenty five percent twenty five percent equals fifty so one's gonna get twenty five percent of the other's gonna get twenty five percent is that correct. Yes that's correct and when one of the other guys they're only going to continue to get that twenty five percent that's correct. Okay so I'm clear thank you And even though we we are now within or. a judge physically and mentally incapacitated by a court of competent jurisdiction or found by the security administration that person no matter how long it is only going to get a quarter of the spouse's benefit. Yes that's correct thank you. Senator Hickey you're recognized for a question at I'm. Hide and this may be written exactly right I just I just want to point out this just in case means we can have a perfect so are we okay Michael one eight where it does say a spouse or a dependent child. I mean should that say it should be and war I mean it is one of those cases so it it almost and I understand we kind of try to define it below that. That you know within that sentence it almost looks like to me it's just one or the other. In the inner we okay with just with with just a child there because kind of long lines what center Chesterfield was just saying. I guess this equal shares up your on line three is that is that we're talking about that you're going to cooperate with the twenty five percent or whatever there's three disabled kids is all that wind out somewhere else. I mean. Because we we're kind of acting like it's just one child here. But what if there what if there happens to be two or three that are. Whereby so security to be disabled. Are they not all three going to share in that. The way that eight our current practices are we yes and there are more if there's more than one dependent child and let me yes right there I don't mean are practice what do we what do we have that in statute that's. A now what practice anymore so if it's in statute five but don't have that in statute as as a pertains to dependent child under this statute but with Surviving children of an active member and under that statute which is seven ten The. It's private the immunities split between the children so I envision that in this situation if there is more than one dependent child then the dependent child's portion would be split among the children. What I don't and personally I think that we should probably put that in there so there's no you know somewhere down the road we get somebody that gets into some type of court battle over that you notice as well it and save it will just says the dependent child I mean I it looks like to me that since we're in the process of trying to create this statute which should at least go ahead and wine all that out make sure we have it to you know considered within here. So. I think it's a good idea Senator Hickey and you know maybe we can answer any other questions or address on and then we can hold this one for a week and get that language in there get that right. Thank you Senator Hickey represented right you're recognized for a question yes. Thank you Mr chairman you know like there is a and there is a baby option ma'am if if someone. To the option may it was a hundred percent. And you had a wives and three children how would that be divided. So the wife would get fifty percent and then the other fifty percent would be split among the dependent children okay thank you. HM. Senator Hammer you're recognized for a question. Thank you Mr have have you done a current assessment to know how many of this would apply now based on the population that we're serving their with regards to the. Fiscal impact that this is going to have or the actuary did we take that in consideration. So right now annually there may be two or three dependent children that are designated by members and our staff has said with the if this bill were to pass it on anticipate more than five cases per year where both the spouse an independent child are elected as designated as beneficiary so my understanding is from our actuary for that because of the. The low number of designations involving dependent children that would occur there's a limited impact to the system. Which really doesn't even where we are right now doesn't even. Drop of like a drop in the retirement system does not does not okay thank you. Representative Collins I don't see any more questions from the committee do you want to proceed under the under want to take it down check into some of this I think what we'll take it down one second to Senator Hickey is questions and we'll do a little work on okay thank you for to see about. I think you have another bill on the agenda. House bill eleven eighty eight percent of all of the recognized to present house bill eleven eighty. Moving right along eleven eighty eight is is pretty straightforward it does three things none of which are subject to changes it first it allows the if you're a sports make rules regarding how full and partial years that are recorded in service credit or used in the calculation of the final average salary this is not a change of law because rules cannot change or supersede law but it would allow the system to clarify some things in rule pursuant to law the second thing the bill does is really just because Medicaid changes somewhere in which that's a little vague to the more descriptive term anti spiking that's the term the system uses they want to have it in code they believe it describes a little bit more clearly what they're doing but it is not a substantive changes just awarding changed and finally this bill sets forth a cabbie out saying that with a member made in a partial service year when the fiscal year immediately following partial service years excluded from the anti smoking cap and this is codifies what they're already currently doing so doesn't represent any kind of substance change with no substantive changes there's no fiscal impact and happy that any questions. Are there any questions from the committee center Chesterfield you're recognized for a question Mr on page two with your anti spiking percentage. Speak to me again about that you. And make sure I'm let me make sure I'm understanding if you work for five years making fifty thousand. That's your average salary. And then you get a job that keeps you up to a hundred thousand dollars. Is that what this might mean is about. Let me understand if you don't through this year to current. This. I'll be glad to take that senator Phil so yes the anti spiking does is exactly that it smooths out the salary history to prevent essentially of smoothed out to about a ten percent increase in salaries each year so if you do get one of those or if you're lucky enough to get a fifty percent are a double your salary like in your example the way to maximize that to your benefit is to stay in that job for five years and then there would be no anti spike so it's it's a it's a double thing it helps the system of control cost from you no real high salaries just that the very end of a career helps move about the scenario where individuals that get credit for their sick days and unused leave days and all that added on their salary ferret at the very end it doesn't cause the system to spike that salary because of that pay out less that's the purpose so so yeah that's that's exactly at all I'll be glad to clarify if you have a okay on on line twenty on page two. Starting their enticement not permitted under subdivision of this section is set no more than one thousand two hundred da two hundred fifty dollars per year no higher. Speak to me about that if. You're not going to allow anything more than five thousand dollars to count toward the salary every is that what you're saying so it works in two different ways it's it's essentially so the percentage will kick in if you have a salary over fifty thousand dollars And current those thresholds are essentially the the guardrails that the board has in order to set the anti spike so currently is it's set at a hundred ten percent. so that means you know if you have a hundred thousand dollar salary you're allowed a ten thousand dollar increase the following year without having any kind of anti spiking. But on the other hand if you Let's let's look at examples where you the individual's bite less than fifty thousand dollars so if you have a twenty five thousand dollars salary and go you know I'm not prepared to do the math in my head but anyway the. The five thousand dollars allows you to have a higher than a hundred ten percent increase. So if you you go from twenty five thousand dollars to thirty thousand dollars. That's higher than a ten percent that's that's roughly a twenty percent increase but we allow up to five thousand dollars. That makes sense okay so how long do you have to work before is considered spiking. If you get a bigger salary you have to work at least five years right this is only my pro rated over three and you don't prorated over that period of time now it's it's strictly the salary reported to the system for that year and if we take the five high salaries and run it through the anti spiking formula okay so yes it if you worked five years that and your current salary you're not affected by it. Thank. Mr yes. Chairman worn for recognized me for questions. If you guys would just. Help me out the on the first page line thirty if you're saying that the board can Says in accordance with rules promulgated by the by the board but then you go through and you change the code. Tell me how the board is going to. Two things. What will the board to hear. Okay so it's not covered and so that because situation with partial salaries we already have it when we are analyzing this section of the code we already had authority clearly set out in the statute to handle the scenario where you have less than five years of service these typically come members and when we deal with reciprocal services or Xcerra but you could clearly interpret that the partial was not included into the rulemaking we already have rules and its pages and pages of rules of how to handle partial salaries in different scenarios but when you really look at the statute it was not Hendren said clear that the partial salaries to be used you know we can use rules to do that we just want to clarify that that's essentially what that is okay that help yeah okay. Thank you I've got a question. So if the board can promulgate rules I mean obviously we are always on the lookout I'm very concerned about whether or not something is a fiscal impact on the actuarial studies. So in the in that rulemaking process how much can they affect. The actuarial studies the fiscal impact size of this. I mean that's a pretty broad question So if we give the board authority to promulgate rules right given the board the authority to have a fiscal impact. Yes and that the board has broad discretion from promulgating the rules to stress about the details of the statutes already it's just this is the belts and suspenders on this particular topic I just wanna make sure we understood that yes could have a fiscal impact sure I mean any any rule could have the fiscal impact actuarial impact and you know that's always cognizant when the boards looking at rules okay and of course you know has to go through the full promulgation Sir process that its review by the apple ale seeks that are so yeah very conscious of that possibility thank you I would just add real quick that if we have the full statute here other sections that say that there are rules authorized to be promulgated this is just specifying with respect to these partials or dentures German more warm has a question just make sure I'm clear so basically if there's something that S. ma'am beauty to it you're able to have your board. Make rules that give you guys clarity to operate then right. Yes yes represent okay yes that is correct I mean it's it's hard to spell out all the particular scenarios that could come up with a partial salary sometimes it's in a member's best interest to use this partial salary sometimes is not some and and over the years we've had several scenarios we deal with with rules thank you. RSNO further questions is there anybody in the audience who wishes speak for against this bill. Representative calling your clothes for your bill close to the bill moved to pass their second on the do pass much I have a second any discussion on the motion to pass. All in favor say aye. Any opposed regulations are bills passed. I don't see any further business for the committee today so. We are German okay hold on just second center Chesterfield you're recognized. Well let me get your vote. Thank you so much I'm I'm wondering. Do we have other bills that are coming from the other retirement system's that we should look for. For next Monday or is this it yes no we have we have several more bills on the in the pipeline and it looks like we'll have. Longer agendas and special order coming up all right thank you so much thank you. Thank you members were turned.