Public Retirement & Social Security Programs-Joint

Read with their agenda. First item up item number B.. The. Consideration of a motion to authorize the chairs to approve special expenses incurred by the joint committee on public retirement social security. All right we've got a motion got a second. Any discussion. All those in favor say aye. Any opposed same sign. Motion carries. Next up we've got our. May eleventh two thousand twenty twenty twenty minutes. The Committee. Has just making sure that we. We're on target with twenty twenty. Forty four. About twenty twenty one. Okay. I just making sure we didn't have a twenty twenty one meeting the question is actually okay all right get enough. All right so all entertain a motion to approve the minutes. All right got a motion second. A discussion. All those in favor say aye. Any opposed same sign. Motion carries. Next up I would like to ask good Jody Carreiro and David Clark to come to the table. to provide an overview of the summary of the actuarial valuation data and results as of December thirty first two thousand twenty for the Arkansas local fire and police pension and relief funds. If you would gentleman please identify yourself and then you're recognized to speak. my name is Jody Carreiro and today and for for this I'm here is actually for the Arkansas fire police pension review board. And I'm David Clark the executive director of the Arkansas fire police pension review board or PRB. You're recognized hi Sir as already established. Your your committee has has not had a special meeting since the last session and since that time we completed the end of twenty twenty valuations for the local municipal plans that does still exist and we we do several evaluations for those and those are calendar year and so they are there and then the report you have before you is a summary of those which by law the the pension reward supposed to report to you and let you know what's going on with those municipal plan so this is that report of you just look at the the first page of the report after the cover page you'll note that this group of plans continues to shrink because either because of size or because of administrative needs more of them have consolidated with a law offering and consolidated their administration they're still they're still considered a municipal plan and and the the financial responsibility of the municipality but they are administered them by lawfully so agency the last several years went from eighty two plans down to sixty that were valued at the end of twenty twenty and we're working on the end of twenty twenty one valuations at this time and I think there are fifty four fifty one of those And David says there's another one that is reach the threshold that the is a small plan that will have to be consolidated this year so the group of plants continues to shrink which is what the expectation is. As a group of these plans you can kind of see them in total you can kind of see what the a representative the liability funded so there is some improvement in the liabilities that are funded and they're holding roughly the same on the contribution part you flip over a couple of pages there's a page that has Page one at the bottom. Says exhibit one of the top shows page one at the bottom. And this was this out there only six police unit municipal plans that are not consolidated the fire the paid fire there's sixteen I know that that done it done at up to sixty but there are all those sixteen plans have paid members and volunteer members so there the pain volunteer in those two columns that you see there but only sixty plans left that is eight hundred sixty seven. folks that are receiving benefits there are ten actives which are volunteers very few of those the other thing that we do at during this process and not gonna talk about this but this will point out what's called exhibit six and it starts was starts on the page thirteen but then Page fourteen to the end as a listing of all these plans that are still valued and different risk factors funded percentage how they're contributing what the earnings are and so you can actually visually see what kind of shape some of those plans are in and so this is also the time where we will project any plans they could deplete their assets and those that are ten to twenty years are noted they know that that's the case those that are less than ten years we we go to some extent of work to make sure that everybody is fully aware that they are in fairly imminent danger in pension plan terms less than ten years is imminent but you know it fairly imminent danger that they need to to do that so that's the information that you have and Dave and I would be happy to answer any questions of anyone as an. Senator Chesterfield you're recognized. Is there anything that we can do to help them aren't are they making arrangements Stanton moved for one case or what are they doing in order to make it better for them of the. Well and. It's kind of a process as as is most things but all those that get below that ten year threshold the pension review board I will send them a letter to say you are a plan that by law are considered a projected insolvent plan and here are your things that you can do when that first happens to a plan we prepare a report with all kinds of different projections so they can see if we do this this happens if we do that this happens if they consolidate would love for you here's what it would cost you know we we cover all the different ways that they can do that so that they have that all of that information and then everybody this year in this report were follow up plans and so we didn't do a new big long thing where we went and sat down with them and went through everything we just followed up and reminded them and reminded them and offered to provide any additional information so. You them taken positive steps to try to shore up the plans several of them have in in the last year so one of the base full increase the millage and is is pretty low they still need some help but they have they have made some steps they've taken some steps to try to correct that and that's happened we've had several over the last dozen years we've had several that went on this rejected insolvent list and none of them have went broke. They've all taken either small steps or larger steps to correct their issue and and it's not a perfect process but it it has certainly I think helped these plans get to the where they need a majority I'm looking on page fourteen is this the list of the city's who's of plans are in jeopardy or no this is a list of all the cities on the list of all this is a list of all the cities that still have a locally administered plan. What are the cities that are in difficulty the. Are they smaller places is that a part of the problem are there any yes and no yes first and then you know yeah the the the there's only three that were and they were in our really bad listen to it to a more somewhat small farm one was a larger city. So it really has more to do with what what contributions you made over the years if you were making contributions just what the minimum stay requirement was or if you are making contributions to try to funded plan thank you SO we're not gonna know those cities are I it's in the report where is that it's in the cover letter and you can look in the U. L. on the page you were looking you can look in that rejected years until **** depleted. that so failed bill was one of them. Merion fire was one. And. I guess base fully came off Basil was the other one that and I guess that's why because of the relatively flush city so it's fair bill so it has nothing really to do with the size of the city. It has more to do with the liability choices on funding yes thank you thank you Mr. All right representative speaks you're recognized thank you Mr chair I would like to ask about this gas for which is Sam Baxter County. Is this ten years from twenty twenty. It's on page fourteen down at the line on yes It looks like it's ten years out but it is that from twenty twenty. Not not no not Gassville Gassville was it was it was okay it would like Glenwood was twenty plus but it was. I thought that had to be right there and when I looked it said ten years. Okay we may be on the long run called under Gassville. you have you go all the way to the rights you see it's a a funded status the. And then there's Astrakhan the projected years so it it did not project to run out of money all so. Thank you very much that. Representative Perry. You're recognized thank you Mr chairman Jerry when you think you'll have the twenty twenty one report available of David said I'll be done about the. About the end of may okay it's in the may first to June is when when that that'll be all right president to the PRB at their regular meeting June the fifteenth sixteenth someone fifteen okay all right thank you. Senator sample you're recognized thank you. Joe do you own that go back to page fourteen everything this just from members if they'll look at the actual twenty twenty contribution and then look at the actuarial computed contribution those numbers or close that means if there. Their their crew holding their own definite. Well it means that they're funding so that they can hold their own there yes Sir their system okay. Right and those that there actuarial computing contribution is gotten very small or zero means that they're fully fund their full funding okay thank you. Thank you senator. The senator Hammer you have a question. Thank you Mr would you just real quick walk through what you just told Senator sample about those columns and how we know that they're fully funded give take up example off of the walkers through. Okay sure. Well let's look at the the Yeah I mean there's several factors there but will is look at the top three there with with alma first you know that their actuarial computed contribution that column has twenty six thousand four hundred so that's what they need to fully fund in five years that's what that calculation is and their actual is thirty thousand so they are funding so they're not fully funded but they are funding faster than what they need to to to get on track. it and amity is zero so they are fully funded. If you have a zero actuarial computed contribution. And Arkadelphia is one that's one that was on the list a few years ago but is no longer on the list. But they still have some catching up to do they need a hundred twenty one thousand a year to get fully funded in five years and they're able to fund ninety three thousand. per year at this point in time so they're not quite where they need to be but trust me if we look back over the last several years they have made some pretty vast improvements okay then the measure. Me as she is I'm sorry. Would you ask them if you look at ask them they just have a little bit of money coming into and seventy dollars but there's zero so they're fully funded zero is the actual car cat. Okay. All right let me ask you a question of who manages their plans for them the ones that a remaining do you know these are municipally may. Administered and managed a they have there they have the ability to hire their own money manager and and they they and they determine beyond of what the state required contributions are and what they get from premium tax they have the ability to decide how much money they're gonna put in the plan and do you or who is it that looks at those to determine if who's managing their money has anything to do with the financial condition that they're in. That might ultimately drive how much has to be put in it in order to make it you know solve make sure each well we we determined well we we determine and communicate how much we think they need to be putting in and we communicate to all what their long term investment returns look like compared to the assumption for the small plans and then on David's side I'll let him do that they kind of review every year. Let me let you say so I don't several. yeah every year the the local plans these plans here have to file an annual financial report with bench review board PRB. We review the reports for reasonable this make sure the balance Hannah Malter Jodie's office they produce the annual evaluation which that drives these numbers that you see inside this report each one of these local plans though they have their own board of trustees that set up and state code so a law dictates who is going to be trustees for these plans and so each one of these plans is responsible for their own financial condition and working with the municipality to try to secure additional funding if they happen to have a funding shortfall. Are any of them that you know of where they are as far as not being fully funded because of poor investment practices or is it just that they're not being funded by the municipality or whoever it is that they're working for to the level they need to be in order to stay in a. Well it's a combination of factors of there are plans that the investments have not performed really where they should be over the years and there's been. Practices in the past not not there more current but in the past where there have been a questionable investments in the actually the securities department had to get involved with one investment managers then on the other side is with the contributions coming in by the municipality. There are plans that do need to have more contributions coming in but the municipalities have elected to not put anything you know any additional monies in one would be like what we showed here is Fayetteville FOR example fatal fire you know the PRB has communicated with that location for more than a decade now to try to improve its funding condition because it's severely underfunded it is clearly a projected and saw that local plan and will continue that dialogue to try to help you know the the decision makers get to a point where they will bring in more money sent to the plan because they can't invest their way out of the position they need more contributions and that's what I'd want to public record is that. If it comes a point that one of these goes insolvent we get a bunch retired folks working for municipality or county or somebody like that and I trust that you keep good documentation that we have sounded the warning bell for a long period of time that they don't come to us as a legislature checked in us to or the governor you know expecting us to bail out because their local level didn't do what they were supposed to do and you feel confident that that warning bill has been going off long enough now they got the point I really appreciate you saying that because you're exactly right we have been documenting as we go along with each one is local plans if the number of times that we communicated with them the types reports that we provided if we travel to the location of his with the board of trustees and or the city council yeah we have all that document it we will continue to do so on a going forward basis because I agree complete with what you're saying is that this should be a local level of resolution and kicking the can down the road so to speak is not going to make it less expensive is actually going to lightly drive up the cost so if they will address it sooner this this trooper any planned the severely underfunded they will address the underfunded conditions earlier in its life cycle it's who is slightly going to help blunt the increasing costs down the road well don't hiring a staff to do this but what I'd like from you as co chair would agree to it will send it out to committee is just up of a history of the of attempts to notify the Senate are still lingering out there just so that we could have an individually just you know like I said just next year's remote you pull that report together show where you've you know notified them and just give us a little something to hold up okay certainly and the last question is volunteer fire I noticed that in in less I'm looking at this wrong are the volunteer fire is that. Like a volunteer fire departments that what that is it is exactly and and so compared to the to the restroom because they make up a pretty good number of the center on these two pages are they financer their dues ACT eight thirty three money or they supported through the county any or where where's their funding source coming from because they represent a good number on here they do have their funding coming from dues but also insurance premium tax monies will flow to the pension funds so the state of Arkansas has a distribution of insurance premium tax moneys that's used for retirement costs and the PRB proper provides a report every June so we'll be doing two months from now will be doing another report for the twenty twenty to funding but your each one is local plans it does have a Funding requirement there is some amount of money that flows back to them from the insurance premium tax money this over above like a dues or if they do us to some type of a fund raising to generate revenue all right thank you. For the benefit of the committee I just want to get this state. All of these plans that we're looking at right now had the ability to. Join in the lot the plan by they chose not to. So it is there municipalities that chose to carry the burden of seeing these plans through correct yes Sir and to your point there's two hundred thirty six local plans that have consolidated or hand alter ministrations allopathy these are the local plans have not yet made that decision they will continue there will be over its life cycle they will continue to consolidate what we're working with plans right now this year that have said look we're really interested in handing off or administration so we anticipate or you know the next few years more more these plans will consolidate there are some that are very. Adamant about not consolidating they want to Iran locally administered though so those will remain the responsibility of the municipalities not the state legislature that is correct even if they consolidate by the way it is still the location has to make required contributions coming in by consolidating handing out the administration to lobby what it does is it puts them on a measure passed and they actually have a clear glidepath the says okay this is what your contributions will be and so they step up and and they honor that responsibility so the local plans have consolidated each one of those locations of said we recognise or indebtedness and we want to make sure that these retirees receive their benefits okay thank you senator Chesterfield you're recognized thank you miss your following up on Senator hammers request I would ask that when you send that letter it also BCC to the senators and representatives of those areas secure will thing to be caught unaware and then we become those who are blind. Of for the lack of efficacy in the administration of of of these plans okay so when we send that letter I would appreciate a CC to the senators and representatives who are in those areas the other thing is B. B. in Rogers who are labeled what does he mean. Well on page twelve page thirteen the long explanation as to what all all those pieces means okay give me that but the shorter short is that E. means ten to twenty years I mean is that there we we we've got a notified of them that they're not on the bad list so to speak but they're getting close if there's not some not some things that happened in the in the so it's sort of like emergency you need to look at this yeah under ten years is as an emergency and pension plan terms tend to twenty years is is still kind of pending so we're we make sure the thing they know about that part of the process thank you thank you Mr yes ma'am I don't see any other further questions so we will. At this noted is the report has been reviewed. Thank you both very much. At this time uh a. With S. for Allison woods and larg Gilson to come forward with a person and to review the rules for a person that you have. If you would recognize yourself please. Turn your microphone on. Good morning I'm Allison was interim director. I Mark. Thank you I'm Laura Gilson general counsel apers. You're recognized to present. Okay so we have to rules going through the whole promulgation process one of them of two fourteen is in response to Act five eighteen of twenty twenty one that changed the Drug duration from seven years to ten years and then the second one is repealed a possible one the investment policy we still maintain an investment policy is just not housed within our board rules it's a separate policy that's reviewed frequently annually And that's that's it. Members do we have any questions. All right. If there are no questions and we will note these rules are reviewed. Thank you both. Okay that's the we didn't need to do these individually so rules rule two fourteen is reviewed. And then rule five one is reviewed. All right this time uh will move on. The quick road if you would please come forward. With ms Lee will. I still don't know if I let you percent. Taking misli woke from the L. R. I'm not sure I like you anymore. So. Okay thank you thank you thank you for those comments Clint Rhoden Arkansas teacher retirement system and Jennifer Lee well Arkansas teacher retirement system of. Here but please present and my response to those comments is I think I should be commended for my good decision making skills in making this high us you should yeah. All right you're recognized to present thank you. All right so just a quick summary these are seven rules that a tear staff and legal staff has reviewed the the biggest amount of the changes in this build very rather large packet that you have is formatting renumber in style changes in order to prepare for the code of Arkansas rules project that was slated to be you know completed by January one of twenty twenty three so this is our effort to work on that project essentially these are ready to go to drop into that codified project but at the same time we had a twenty twenty one legislative session in which we actually need to make a few substantive changes as we went and I will predominantly just cover the substantive changes in the seven rules but I'll go through them one at a time. And I'm gonna start rule for which is your exhibit F. one. And some of the key points to this rule of. ACT says ACT two seventy nine of twenty twenty one had us clarify some of the language involving the election of the on the board of trustees and regarding administrators we wanted to make positively clear that it matched up with the law that says been administrator had to be employed in a position requiring an administrator position our administrators license I should say instead of just possession of one so it's a that's an important point we wanted to get promulgated in the rules. Another key point deals with the congressional district boundaries boundaries for March. Trust four of our trustees are elected based on the four congressional districts. And and it's based on the maps as drawn and it was never really specified. At what point do we use maps that are in transition so. The so what the board essentially passed a rule this for to Thank you senator. I just told robin that I didn't need this so. All right very good. Okay so for those for trustees that are elected that represent the four congressional districts it came to our attention with the redrawing of the map this in during this time it and that we conduct elections between December and April is that we were going to come across a situation where the map would change in the middle of our election cycle so the board suggested a rule that we use a congressional maps as they exist on July one of each fiscal year for that year's elections so that's that's what that is. we also addressed in this rule to make sure that any campaign materials that trustees sent out I do not have any appearance of an eight year as staff or a tourist board endorsement which is policy not today. That is rule for mainly as or any questions on that. Any questions on rule for. I see none will consider rule for review. Okay so I'll proceed to rule number six it's exhibit F. two in your packet. Of ACT two steps back to ninety of twenty twenty one we redefined what it meant or normal retirement age used to simply be a sixty five and now it is age sixty as long as you have thirty eight years of service so. It's in our rules there was a lot of places it just said age sixty five and we had to change it to use the proper definition of normal retirement age since it got more complex. ACT FOR four three of twenty twenty one dealt with The number of days that and at a member could be all contract before they were required to be contributory in our system the number used to be one hundred eighty one days this this act changed it to one hundred eighty five days and this is just promulgation of that change. The next point was to clarify the reciprocal service from use an alternate retirement systems which are all to retirement plans which are universities We wanted to make sure that any distributions that came out of that wouldn't jeopardize the roof reciprocal reciprocal service as long as it was and and allowable distribution under IRS guidelines essentially no penalties were incurred that was that was dot held under ACT four twenty seven of twenty twenty. a couple of other little points we we modify the rules a little bit to make sure that we review certain a terrace employers periodically to make sure that they still meet the criteria as in the code. And. to that there's a chart at the end of this rule that kind of summarizes contributory non contributory service in an easy to read way and we just updated that as well. And I'll take any questions on this rule. Any questions on rule six okay I'm sorry Senator Chesterfield you're recognized thank you. Could you explain to me why you moved to one eighty five. So. I move into the role of a hundred eighty five days for contract one of the main group that petition and I believe it was wrecked Senator Leding that they actually petition to run this bill two will allow Essentially para professionals who. They they are typically employed just for the number of days that students are in present but they also this group of individuals that's ideal special needs students really require some extra training and predominately is training for their own safety and what it was doing hundred eighty one days kind of push them to where they couldn't get adequate training. And without being forced to be contributory so it was of no consequence of the system just moving from one eighty one twenty five so and the reason I ask is because I'm trying to remember what the normal school year yes. It it's it's somewhat to be one eighty five but it is isn't one seventy eight or something I'm trying to remember so one hundred and. One seventy eight thank you representative so that's how many number of days the students of their and then professional development days on top of that okay so that's where you get okay and typically a school teacher has contracts for about a hundred ninety days so this had virtually no effect on our typical licensed certified teacher so it was just for a little bit group it's a minor tweak test a metal equity to our rules in full retirement age thirty years now. Twenty eight years twenty eight we have not gone to thirty no we have okay so most folks hit that before they get to sixty if they work continuously. Right that is that district twenty two year old can get twenty eight years of service by age fifty as corrupt I know I did so I was wondering about that okay thank you your clarifies. Curtesy no other questions will consider rule six review. You will proceed to rule seven all right rule seven. The short title is for its reporting and eligibility. And Act two twenty dealt with the what the interest that we would charge employers for late contributions it was hard coded. With a certain percentage rate and we wanted to reflect that it should be the actuarial assume great return so that would change as we made those changes without having make law changes and this just brings a rule and conjunction with that act. Of another change that we made it dealt with the reciprocal service of recognizing the highest salaries of another system and we wanted to make you know we didn't always want to recognize the high salary for short amounts of service but we decided that two years of service would be an adequate amount of time in a reciprocal service in order for us to use the highest salary of of those service and this just pushes that through to the rule. we also had an act six ninety one twenty twenty one that allowed us to not treat youth participants of summer programs that we're just kind of passed through organizations these are not typical of members of the system we didn't want them to get snarled up and being classified as members and having to have the contributions and all that so It hasn't been utilized to this point I don't know if it ever will be but at least it's and there. And case that need arises. We. Clarified in the the that our employers will use electronic submission to generate to send us our contributions both in efficiency situation And we also clarified some of the language about when we will refund overpayments of contributions into the system. And that's essentially my comments for rule number seven. Any questions. If not we'll consider rule seven review. Please proceed all right rule number eight deals with purchases and refunds. some of the key points. Was that in purchasing of service it used to be the rule that you had to be an active member in which to do that but sometime back we switched the sim the purchase rules to say purchase law actually says that you have to purchase that actuarial equivalence and it at when it was moved to that point not very many people purchase service and there wasn't a real need to have a restriction of just active members so now active in an active people are members can purchase their service up until the time they retire. Another point the we would clarify the term regular interest where it needed to be there was an ambiguity in that system are in regard to that term of. We wanted to make sure that in this rule that Act two seventy nine also address that free military service would appropriately become a pro rated between non contributory contributory service and doing that calculation. We. And then there was just some some staff comments that actually changed some of the rules to correlate to our actual president processes in dealing with the overpayments of member employer contributions with that I'll take any questions on rule eight. Any questions. I see none will consider rule they review all right. Please proceed to rule none all right rule nine deals with retirement and benefits. Some of the key points for this rule Act one ninety a twenty twenty one that with with situations where we had under reported service for members in the past and we wanted to make sure that we treat those members with you know the respect that they deserve that they are in that service and just because it might have been passed a five year look back as long as it's well documented we work extensively with those members to try to give them credit for that service and that this is just propagating pass that law into the rules. at two twenty three of twenty twenty one was essentially a re write of the disability retirement section in our Ark Code so there was a. As a result of that quite a bit of a language changes that need to be done in our rules as well one of the key points of that is we allowed for a a second review if you are an application that was initially denied that wasn't there previously so all that's been promulgated now and that's the rule. ACT two seventy nine also dealt with the to the to the about this this rule where what's in it once a member gets a forward retirement year service credit essentially hundred sixty days those individuals can actually start drawing a benefit until July one and the main motivation behind as we didn't want to any classroom teachers to be retiring in the middle spring semester didn't want to incentivize that we just wanted and then this just gets social rules brought up to speed and with that law. Of. There was some clean up in a language that to clarify that a member can designated dependent child is a replacement option a beneficiary if the member spouse predates predeceased as the member after the member retires and. And then some cleanup language on how we deal with survivor spouse's their little bit. There's also some language in here that clarified that the board can set a different contributory rate for service credit that's less than ten years That Mainly just a cleanup and clarification there Wanted to make sure that we made it clear how the T. drop residue was calculated I believe this is one of the items I was brought up by legislative auditor that just said it could been re written more clear we agreed this just carries through with that request. Still on the. Disapprove the budget of a. All right and that pretty much wraps up the main points of rule nine. Any questions on rule nine. We'll consider rule nine reviewed. Rule ten. Okay. Rolf's role ten deals with the drop in return to service. Act two twenty one which is again the rule that about the two years a reciprocal service it also applies to to drop so it's in this rule as well. And again and ACT two seventy nine of twenty twenty one we want to make sure that the clear that the board would adopt the interest rates that we apply to the T. drop programs by the first quarter of the fiscal year so that we actually had our investment return data for the board to consider as they were making these interest decisions and instead of them being based on estimates. And there's a slight river the. A modification and what it means to be a part time to drop participant in order to get your to drop deposits each month that was classified based on board action there and that's my comments for rule ten. All right do we have any questions on rule ten. Seeing none will consider rule ten reviewed. And lastly rule eleven lastly rule eleven survivors and domestic relations orders and a couple of minor points here is we We clarified the way that the T. drop a participants residue was calculated between regular contributions and T. drop distributions. The end of. We also made a a a rule change that addressed how we deal with dependents if you'll remember dependents of a member that dies is eligible to receive a benefit as long as are between the age of eighteen and twenty three and they're attending school we had a circumstance where one of these individuals decided to go into the military and and did some did military training in the middle of that and we just and we modified the rule to essentially allow those benefits to keep to be suspended while that military training was being done and it instead of terminating they were able to come back under this rule to draw those benefits if they go back to school after military training. And that's essentially what that's the comments for rule eleven. Any questions. Any questions. If not we'll consider rule eleven review. Right thank you guys thank you. Do we have any other business to come before a committee. If not thank you for your presence today we stand adjourned.