Public Retirement & Social Security Programs-Joint

I can morning members of both of the committee but also of the different retirement systems and those are watching live on Facebook or via social media we're glad to have you joining us this morning for the first retirement meeting of this General Assembly and not going to go into a lot of comments other than say honor to serve the side Representative warned and we want to the people's business and take care of those that are in our systems and do the best we can to just make sure that we keep their stress level to a minimum of at all possible want to recognize and say thank you to a barber over here and she is one of our staff members that is going to be helping us and then also we want to thank thank represent one what you would give your opening comments and recognizes the only others please or definitely glad to be back have this opportunity to be here serve again we want to give a special thanks to Estelle Smith who filled in for us with all that's been going on and kindred roan is our other staff person and cantor is out sick today so uh keep gender in your thoughts and prayers but we're glad to have Barbara back the hopefully will get back to some normalcy was staff but they have been jumping through hoops taking care of us so special with the first meeting we we really appreciate them but looking forward to working with everybody and it's sort of weird to look out and see our retirement room without overflow capacity so that that's nice. The. All right members of first thing we need to do an want to say thank you all for being on this committee we know Monday morning eight thirty is a tough gig and appreciate you all being here and thank rededication we have a few motions that are traditional to the committee that we need to get the before you for action in order to be able to take your business as we move through first of all we need a motion authorized the cochairs to play shell bills under deferred until they are amended and ready for action or sent to the actuary for study five your motion and second to that please get a motion ninety ride second of their bill sampling discussion. On favor say aye. A post. Second motion is a motion authorizing cochairs to immediately send all bills for actuary study to the Committee actuary once a bill is referred to the Committee. I can get a motion second on that please. From simple motion second motion center sample second any discussion. All favor say aye. Third motion is to send bills to the actuary if the amendment requires additional actuary study thank you for motion second on this please. Motion sample second. A second any discussion. All favor say aye. The post. Good place to quit wearing it everybody's unanimous all right no just the observation two thirds vote is required for a bill amending an existing public supported retirement system by increasing multiplier changing terms or allowing the purchase of credit service shortly invested periods or shortening the years of service required for standard retirement up penalty or which would be established or which would establish a new or expanded public retirement program and that's a a no record that you'll take two thirds vote if we're going to do that the question. All right very good show on the agenda today what we're gonna do is we've got a briefing from each one of the retirement system directors without objection would actually like to ask if we would allow Jody to go first and part of the reason I'm asking for this is because Jody is probably going to reference some acronyms in some other language that as the retirement system's come up and say what they gotta say it may help lay the groundwork for understand the majority the members are returning but we do have a few new members on the committee and without objection would like to move him up so that we can have that jury objection. All right Jody which come up in your presentation identify yourself for the record with your name and who you're associated with place. Yes Sir I am Jody Carreiro actuary with Osborn Carreiro associates here in town. Holders gas. And I apologize what is the rule about wearing a mask while I while I do the presentation. Jody remove your mask if you want to wipe six good way from anybody in yeah make a leisure understand. Yes just just for to be clear in thank you. Okay as I mentioned Jody Carreiro with the Osborn Carreiro and associates are informations on there thank you have a copy of the. The slides for your package Our team of of actuaries and consultants here in Little Rock they're not with me for obvious reasons and but Steve Osborne as the other actuaries you might see from time to time and those of you that have done this before of have met Steven and. So we're happy to do this this is I believe the twelfth session it did we of sorry this committee and we appreciate that opportunity. Senator hammer said our purpose today is is not to talk about each of the systems but maybe to lay out some of the terminology that will be used to kind of give you some background on how this works maybe some reminders because I know many of you Sir before so we want to kind of hit those things remind us of of what's important and and how these of these retirement systems work and I always like to do this this is this is one piece of information from every system and a chart of the the various counts of folks Act is deferred vestige of those that will get a benefit at some point in the future that no longer work for one of one of this the folks around drop and then the retired folks they're getting a up a. A benefit every month right now and if you add all those numbers up that's over two hundred seventy five thousand are Kansans that are directly affected by these retirement funds and do the math that's about one out of every nine adults that directly benefits from one of these retirement funds and when you count families and everything else it's it's much more effective than that hundred three thousand of that two hundred seventy five or thirty seven percent of the participants currently get a monthly benefit from one of the systems and to the bigger system is just just for reference is teachers is going to pay out over one point two billion in benefits this year a personal probably top six hundred million in benefits this year all together all the systems are going to pay out to two point one billion dollars in benefits and says this is from a defined benefit system this is not somebody taking out of their savings those are very spendable money so those things are very effective as two billion dollars ninety five percent of it or so goes stays in the Arkansas economy different economists talk about the multiplier and how that that that does that one economists estimated that two hundred fifty million state or local taxes come from the retirement benefits of the system so it's a big deal it's a it's a a big economic driver in the city in this for the state not only taking care of people but thank you for the state and in that sense as we know our retirement benefits in this state are provided by defined benefit systems those defined a monthly benefit so you'll hear about that you sometimes hear about D. C. or to find contributions that's like the profit sharing for one K. than lots of small business and business issues. Today but that's not what the state uses we use defined benefit systems and. Here's a nice little chart that kind of compares what the differences are between defined benefit defined contribution I guess to the big things of note is that the plan is invested by the professionals that are hired by each system they're not directed by the individuals and that is one reason that the plans are so effective another is that the benefits are set by formula so the benefits are guaranteed they're not subject to the up and downs of the market and and and you see all the other differences there there but. in addition most of our state employees and the employees that are are in the systems have access to some other savings time plan like a four fifty seven or four oh three B. that that are available to them in fact in two thousand thirteen the legislature made it so that state employees automatically our role in the diamond planets which the four fifty seven point. just. Basic formula that that affects all retirement systems and and has an effect on all of these folks is that money and equals money out of money in its contributions and investments the money out of benefits and expenses and the what the system to do and the reason that the system is running pretty efficiently is that when I pull the assets like we talked about on average they are in one to two percent more than what individuals do when individuals are investing their own money and you do that over a whole career and that makes a huge difference they also keep the expenses down they the systems run very efficiently as far as the expenses it takes to run though so if you make the investments as large as possible to keep expenses down you get the most benefit for the contribution in fact one thing that I've said many times is that when properly managed to find benefits are the most efficient use of taxpayer money in providing benefits they're not always cheap as we know but they are efficient and and providing the benefits that they provide. We'll talk about assumptions and actuaries have to use assumptions to make all these calculations and here's some of the key assumptions that are every time there's economic which have to do with with the interest rates discount rates price inflation salary increases those things and how they affect that in particular interest in the discount rate that you used when the interest rate goes up that would push the plant costs down if the interest rate goes down which it has been in recent years that pushes the plant costs up and so I just kind of gives you an idea of how those go demographic assumptions or things like retirement age in life expectancy and and those things and and you get an idea of how those affect the cost of the plan. But every plan what what happens those are just assumptions as we know so do the these options change the cost of the plan well no the the they are they are assumptions about what's going to happen but does that mean that they're not important well they're absolutely important and why are they important well the financial objective all all these retirement system's is laid out in the law already in twenty four to seven oh one and there's two points out of that section of a very important one is to establish a received contributions that expressed as percent of active member prior all remain approximately level from generation to generation some people say generational equity we're trying to keep the costs as low as possible and trying not to push the cost on to the next generation so that's one of the goals of everything that we try to do and the other goal is to make sure the contributions are sufficient to cover the cost of benefit commitments and a level payment over reasonable number years to pay for unfunded commitments and we'll talk about those terms here in the next couple slides. So what actuary calculates this is one of the first term you here's a present value benefits and everything we do try to put a single number on that stream of payments so over a period of time you have all these payments and we know there's more talent involved we know there's interest involved and we try to benefit get discount all that back to have a single number to represent that and those payments standard discounted to whatever age that were at to to do that you can say that when you're looking at a retirement when you have a particular retirement age that the way to illustrate that is that we're stacking up our coins and a peek out at retirement age so that while we're working we're trying to accumulate funds and then while we are retired we're managing the paths and that's what these systems do and I do that so couple more actuarial terms you'll hear this one a lot of their actuarial accrued liability sometimes you'll hear a ill for accrued liability and that is the point where where our goal that's our funding goal at a particular point that is what actuaries do to allocate the cost to a particular point in time so again with our illustration if if were somewhere a few years before retirement are actuarial accrued liability might look like this it's on the building stage we're getting close to retirement so we see what we've built up to that point so that accrued actuarial liability will grow until you get to the present value of benefits at retirement age so what about after retirement well after retirement. We have an expected stream of benefits that are to be paid and then a few years in retirement we've already made some of those benefit payments but we still have benefit payments to Mike and so are our accrued liability is going down and you see it represented here. So another key terms you hear a lot as normal costs and that normal cost is the amount is allocated to reflect the cost of the current year service that's that piece that's in the funding goal is is to cover the cost of benefit commitments for the year is the cost of that particular year if if we were looking at our picture well now we are it's the number of points we need to stack up each year so that we get to the right place at retirement so normal cost is the number of points each year it's not this hi to the stack it's the number of points each year. Then we add up all those accrued liabilities all across from retired and active in every other source and we compare that with the assets but all these funds use what's called an actuarial value of assets it's not the market value but it's a market value smooth for the most recent for five years which helps to smooth the contribution right that's the purpose of that so we don't have quite as much Bob in the contribution right if the year end add ins that are particularly good or particularly bad point in the market fluctuations so then what that means is that you end up a what's called unfunded actuarial accrued liability you'll see you A. L. R. U. A. A. ill and some of the presentations today that's what that is that's the unfunded and that is not a unfunded as an it's a bill that's due today it's an unfunded is that's our long term commitment that's our goal funding now every system has a goal of having zero unfunded accrued liability. But we all have to work to get to that goal and and that were in different places on that. So. We often use the illustration of the House so we add up all those accrued liabilities out all these pieces work together add up all those and that's our defined benefit House. And then we can say that the actuarial value of assets then use the equity in our house so we have that much of our house covered with assets and that's our equity in our house and then are unfunded actuarial accrued liability then is the mortgage that's remaining on the house and that little yellow house on the side that's our normal cost or are additions or improvements what we say that's our annual cost of operating so to speak. And so those are the pieces that are out there in the in the benefit formula so how do we know if this is well funded or not is our house in good shape or is it not in good shape well how do we know is well funded one is the terminal here is funded percentage and I said we have a reasonable amount of equity in our house if you're twenty five years old and you have only five percent equity in your house that's okay got a long time to pay for but if you're seventy five and you only have five percent equity in your house that could be a problem you also to much money and don't have time to pay it off and so we will to is these plans mature we will that funded percentage to continue to go up and ultimately be at a hundred percent and then the other way we know of our houses well funded is if we contribute enough to pay the mortgage I off the mortgage and pay our annual expenses just like at home we have to be able to pay our mortgage and pay are a regular expenses at home so in words how all that works is that by healthy contribution policy pays the normal cost and it pays an amount to pay off that unfunded liability in a reasonable amount of time. Current state law suggested the reasonable amount of time is thirty years or less what all the systems are working on and I may talk about that today and may not get into this because this gets pretty D. is that we want to have a pay off for you that is much less than thirty years and in fact the goal is I think eighteen or twenty years or less to be paid for the pay off of that unfunded accrued liability so the contribution right then is a combination of those things so what our job for the committee our job for the Committee them is to tell you what the changes are for any legislation and do that so here's an example without numbers let's say that someone presents a bill for a. What happens if we change retirement eligibility so we remember from our picture before we had an accrued actuarial liability that was there for an active person that was based on the retirement age that was right there in the middle of that stack let's say that I present a bill that says we're going to move retirement age back to this point right here. So what does that do to our stack of coins in the flow of that will watch closely yes. Senate Aphex NO extra charge the the stack of coins is now taller. And I have to stack up points faster so what is that maintain actuarial terms of my terminology that means the accrued actuarial liability has gone up and the normal cost the number of coins I need to collect each year has gone up so this type of a change we would say you're going to see this type of increase in normal cost plus an increase in the unfunded which will increase the pay off in the fund so that's what goes into everyone of the cost studies one thing that's in your packet today is a whole set of disclosures those disclosures are to be considered part of every report that we give you and that's things that actuaries have to do to meet all their professional targets. But to be efficient we don't want to include we don't want to give you a eight page report for every bill so we've got those disclosures separate and they'll be referred to each time as they need to be and that's all that I have and be happy to answer any questions I have a lot of things here that we could talk about but I'll only talk about them if you want to ask a question. All right members have any questions. Jody thank for the excellent presentations morning kind of gives point references the various The individual's comportamento ation NO questions members. Thank you Jody our recognize represent one to call up the next presenter please. Chairman. Our next presenter will be Duncan Baird who is executive director of the Arkansas public employees retirement system and appreciate working with Duncan I just wanna save all these guys are presenting we did the road trips these guys were great to work with presenting all across the state and we appreciate all your hard work and presenting this morning so Dunken if you would identify yourself you will. My name is Duncan Baird I'm the executive director of the Arkansas public employees retirement system. And I have handed out a paper copy of the presentation so we'll have it up on the screen and I have a paper copy as well as we go through this. So what I want to do today is a go through several slides I wanna touch first on the importance of the apers benefits and I want to give you all financial overview I kind of want to I think you back a little bit on some majorities comments about the plans and how they're changing over time and planned maturity and then I will look at the past we've come down as represent Warren mentioned we have town halls it's a really is an agency we've come down a path over the last couple years in developing our a legislative package and I want to tell you some about that today and so the slides I have for the same slides that we used a couple weeks ago I spoke to about two hundred and fifty members of the state employees association we had a virtual town hall we had very good attendance there and us I wanted to take some of those same slides and show them to you today. So I wanted to begin with the summary and I think this is really may be a summary of the last two years and a summary of the session but you know I I think it's important for us to maintain a strong system into the future the proposal that we have today as I mentioned was based on you know feedback that we've gotten from our members over the last couple years primarily to the town hall process. The purpose of the changes to strengthen the system you know we want to be better positioned over time is Jody mentioned you know plans are trying to lower their amortization period trying to increase their funded levels and and you know we're trying to do the same with a person so want to go through some of that today and then if you have any questions or feedback weather's today or this week or any time during the session feel free to let me know. Someone in the store with a couple slides on the importance of a strong apers you know from our member standpoint we provide guaranteed income for life in retirement and that's something that's I think very were rare in this world we also provide protection cases of death and disability and we were ward employees for the long term service to the State or to a county or to the city. Firm lawyers one of the things that we heard at the town halls over and over again is you know how good attention is for recruiting and retaining employees so I I think that's you know one of the things that we need to think about when we think about the pension you know is also different than what's offered in the private sector so I think in some ways you could argue that it gives us a little bit of a competitive advantage we're offering something as public employers that you really can't get for the most part in a lot of a lot of other places so we've heard over and over again that the I. apers benefit this pension benefit is the most important benefit just because of the the difference that it makes in an overall benefit package. When you think about the pension from a statewide standpoint and you look at the economic impact Jody should some numbers earlier here's a little bit more detailed breakdown by county but apers did pay about six hundred million dollars in benefits last year and if you look at those benefits impacted every county in the state so even the smallest counties in the state. Might have had a million dollars or two million or four million dollars in benefits paid but if you look at the larger counties Pulaski we paid a hundred forty million Faulkner thirty two million credit fourteen million you can see really on a county level the impact that this plan has so I just wanted to show you that date as well. So from a financial standpoint I wanted to go through a few slides it would just give you a kind of a high level overview of some of the characteristics of the system and how the system is changing over time. In the first one is this slide that shows the number of active members and the number of retired numbers for the last twenty years and you'll see that the number of active members back in two thousand one was around forty two or forty three thousand and today is around forty five but you can see generally that number has been pretty flat over the last twenty years if you look at the number of retirees we've gone from just over fifteen thousand to almost forty thousand during that same time period. You look at that as a ratio. We've gone from two point six activists per retiree back in two thousand one to one point one today you go further back to nineteen eighty that number would be more like five or six to one so over time the the plan continues to change and mature as we as we move forward. From a benefit standpoint back in two thousand one we were paying about a hundred and fifty million dollars a year in benefits today we're paying over six hundred million and so that just kind of gives you an idea of how long you know once again how the plan is maturing House changing over time I will say that none of these things are unexpected you know this is exactly you know the way. I think things were expected to happen you know this is you know what attention is designed to do such I do wanna make sure you understand that I'm not saying that these are unusual or unexpected but but these are things that were expected over time. From a a funded ratio standpoint you know one of the things that you'll see when you read the weather's the you know newspaper Arkansas or national news or you know certainly in these committee hearings but you hear a lot about the funded ratio and a percent funded ratio is seventy nine percent as of FY twenty if you look at our liabilities we had about eleven point five billion in liabilities about nine billion in assets which leaves us with about two point four billion in unfunded liability but if you work out the ratio that's about a seventy nine percent funded ratio there. If you wonder how does that compare to other plans nationally this is national data for for nazara which is the national association of state retirement administrators it's of many of the top public pensions plans in the nation but you'll see that mark seventy two point four is the median so we are above the national median and I do I do wanna make that clear that up you are seventy nine percent is above I kind of the mid point there VOL pensions nationally. Some of the larger bubbles the bubbles are asset sizes of the largest one is CalPERS but you have Texas teachers California teachers some of these really big plans are you can kind of see where their position on the chart. When you think about liabilities and assets over time. If you look here we've got our liabilities is the Orange Line and we've got our assets is this kind of greenish gray line you'll see that back in two thousand and two we were one hundred percent funded over time we've developed a gap and that gap has persisted through twenty twenty it is really geared around the you know market returns if you think about the early two thousands we have the tech bubble we had to Enron worldcom the other issues around that time you can see that a gap developed there started to close around two thousand and eight but then at that time we had the great financial crisis that impacted not only eight percent all plans I think if you look at similar figures for most plans nationally you you would probably see a similar general trend on a chart like this. So when you look at that gap you're looking at are unfunded liability and so on this chart you can see that back in two thousand and two we are basically a hundred percent funded we developed a gap and now once again that gap this protest per persisted over time and were were two point four billion. And through all of that we've increased employer contribution rates we were up about thirty nine percent since two thousand and eight we were eleven percent then worth fifteen point three two now so I did just want to give you some context on what we're contributing to the plan how that is changing just let you know that even with you know increased assets increased employer contributions we still saying this site unfunded liability remain at a pers. I'm trying to move pretty quickly to this if you have any questions feel free to jump in and out I'll keep moving along to talk about some of the process that we've been through and and some of the normal process for the board on a regular basis the board reviews our actuarial data and our investment data our board meets quarterly at least quarterly and at every meeting names you investment data every five years they conduct an asset liability study to make sure that our investment assets are aligned with the analysis of our liabilities. From an actuarial standpoint we have that and you actuarial valuation every year we. Visit with our actuaries at our August meeting in our November meeting and review those numbers we also do a systematic review every five years we do and experience study to review some of the assumptions that I Jody talked about earlier this demographic economic and other the other assumptions. So as part of that you're going through that process over time our board has consistently asked the question of how can we improve the strength of the system how can we reduce our unfunded liabilities and increase our funded ratio. So going back to two thousand and nineteen Senator sample and represent war and let us around the state and we appreciate your doing that but they let us through eleven town halls all around the state you can see a little flags on the map there we had anywhere from a hundred fifty to two hundred members at each of these meetings so they were very well attended in in that was members from all the systems. We're able to get input and feedback and I've put some of the input on here that is really influence that package that we put together. The top thing that we heard and really what we heard over and over again was about to collide that the couple is a priority specially for those who are currently retired in those near retirement and so I think we heard over and over again don't change the color because we already made these decisions based on the color as it stands. We heard people say make sure you reward long term service to the plan make sure you will reward employees to stick with it for a long time. People suggested that we consider implementing small changes over time rather than large changes at once they said that was something they would like to see. Members also seem to show a preference to increasing the member contribution rate rather than significantly changing benefits we also had members to suggested that we continue to increase the employer contribution rate as part of any package going forward but I think overall you know we heard a lot of thank yous I think people are very appreciative of the fact that all of the systems were out there the legislative committee was out there. Dialoguing with the members listening to the members and and so that was something that really stood out in my mind. So after these meetings we came back started working with our boards we had five special and regular meetings in twenty twenty we did them remotely because of because of it but by doing the remote it enabled more members to participate in our meetings that we've ever had before we had record attendance at our board meetings throughout the year as we work to craft a plan with our actuary. Through this process we came up with eleven different potential packages that had for components age. We I started considering the heat of the the good things and bad things about each of the potential packages. As part of the process we looked at the other systems we look at what the teacher retirement system is done we look at the highway system what they've done and we noticed some commonalities what we were talking about and what they had done a member contribution rates final average compensation in the Cole of the. And so ultimately we settled on one final package that is made up of three different items we have one change to a benefit provision one change to a member contribution rate and one change to the cost of living and I want to go through those with you all today. So the first one is the proposed change the member contribution rate and what we propose doing is moving it from the current five percent up to seven percent and we would do that a quarter percent increments increments over the next eight years. And so you know as you know if Jody showed you have come you have your contributions plus your investments as the income side of the pension formula and so we want to use this is one of the tools to help strengthen the system because it does go to once again these contributions do go towards funding your retirement benefits. We would face a minute overtime that was based on the town hall feedback we've heard that but that the town halls but we also heard from our stakeholders when we had our board meetings we heard from the SCA the counties in the Municipal League one of the consistent things we heard was if you change the member contribution rate do it steps over time. If you think about the impact based on our average salary based on our actuarial data it would be an impact about three to four dollars per pay period per year if we did this change and I wanted to note that would align with the change body to yours in Asher's they have both enacted changes to go to seven percent so we would be in alignment there. The second change would be a change to the final average compensation this is part of the final benefit calculation. We would change from the current three years to five years and we would put in place a provision that takes a snapshot of the three year on July one of twenty twenty two the purpose of that would be to address members who are nearing retirement so we can go ahead and take a snapshot of every members F. A. C. E. but it would benefit those who are in your retirement by going and walking in that three year and then as we go forward we will compare that three year snapshot to the ultimate five year calculation is something in the future and make sure the member always gets the highest of the two and that's similar to what the teacher retirement system is doing is and as I understand it that something somewhere to with how we systems proposing as well. And then the third component is the total of we would propose to change our Colette to be based on a lower of three percent or CPI this was only be for new hires should only be for those hired after July one of twenty twenty two this once again is based on town hall feedback we heard from our retired members in many of our active members that they didn't want to see the couple changed I've already made plans around the colon and so it would only be for new hires which means people would have years and years to plan for what their potential coal would be. In thinking about this with all what kind of color would make sense if we were designing any plan and we thought it would make sense to have a couple of the cost of living adjustment this based on the I. national data and the calculates cost of living in this is similar to what's been at an active by the highway system I think they did that last session. So in summary this is the final package I want to put this slide in just so you have a quick reference throughout the session. And so what would the beneficial impact be it simply put it would be we would accelerate our progress towards reducing the unfunded liability which is currently two point four billion and also in increasing the funded ratio is Jody mention plans used to target a thirty year amortization or thirty years or less now we're all moving towards the eighteen to twenty you're currently eight percent twenty three years so the steps would help us accelerate our progress towards getting under that that new board that we're setting. So once again you know we want to work to maintain a strong system we've crafted the proposal based on the feedback we've heard and if you have any feedback or any suggestions over time please let me know that's what we're talking about it that's what we're trying to get it out for members of the town halls and you know the other other things that we've done so any feedback you have I I would definitely appreciate. All right thank you note and also want to recognize it a couple weeks ago all the directors had a June town hall meeting in which you shared a lot of the ideas thank you three interpretations of walks and if I'm not mistaken is that correct. So that was we we did that in conjunction with the state employees association they they sent it out to their membership to the newsletter they have a email list I think. Maybe over ten thousand people so they have five publicize that vary widely we had yes Sir over two hundred fifty people on that call and then they did a follow up that call they sent the video back out to their members as well so even those who work on the call we're able to see the presentation are thank you for a open lines of communication Senator Teague question. Thank you Mr chairman. More. One so a couple question. So freezing the Cola. At three percent or CPI. So. If it is five percent of the CPI they're only going to get three percent. Two point five percent are going to two point five that didn't seem exactly fair to me to go. Well he in essence it would if if if inflation is at five percent in the coal would work exactly like it does right now you know we have a three percent compound color you know so we have five or six percent inflation our members get three percent compound Cola you know so on the high end it would work exactly like it does right now it's really kind of on the lower end you know if it's I think inflation's average something like two maybe two point two percent over the last decade and so it would you know that for those members in the future it would tie that hello to the cost of living you know but thinking back to Jodie's formula you know if you think you have investments on one side and part of your investment returns driven by inflationary component of the return you know on the expense side we have a benefits and right now our expenses are driven by fixed three percent compound color and so is that like a low inflationary environment we kind of get out of whack on that. That That pension formula in essence you know we have returns that are pulled down I think for you know every pension across the country to returns come down our sanctions come down but then on the benefit side you don't have similar adjustments so I think if you look across the country I think a Cola judgment has been very common but I think the lower three percent or CPI would still be very generous compared to how other states of adjusted. So okay I move to another question that so Twenty six years at four dollars the patriots. Twenty six months twenty six patriot four dollars to a hundred dollars which again is that. I mean pulling. So we have a round at over forty thousand active members. So. Twenty thousand to add to it so that's two hundred thousand. Or two million two million. It would be several million dollars and so the You know it does if you think about the you know so does our crew of benefit to the system over time you know as you're contributing more to your retirement you know the great thing is it it remains your money so if the member terminates they leave the system they actually get all that money back which they don't get for the employer contribution you know if they stay with the system and that contribution helps to maintain the benefit that we offer and once again it is similar you know we're going to the same place that the teacher retirement system is gone you know we we would plan on going to the same place that the highway system is is going to and so in essence would be asking for a seven percent contribution rate that. Would really provide parity between all three of the systems and the employees and all of those systems. I think a much Micheline we let those other do that so anyway I appreciate we probably all the business of time about that again okay absolutely yeah they were here right you're welcome thank you Senator. Raper W.. Chesterfield A. twenty eight. The light on are you calling on me again I was going on Senator Rapert what what to the board is not sync up to worry all or sitting so I'm a recognized recognize Senator Rapert and then center Chesterfield I will come to you next thank you you will. Question is. the last thing I said Senator Rapert. I try that one. A lot. Yeah. Right now. All right hang on hang on a second members whose I also got. The runner. All right Duncan lectures up would you please. All right. Senator Rapert. Ledgers of would you. Okay okay not hang on second center Chesterfield U. lectures up if you want to. Okay and then center. Okay members will get it straightened out if they will stay seated we are for remainder of the committee meetings will get the board lined up right okay all right senator. Raper there we go all right thank you I just a quick question because I haven't heard lately and you got numbers for twenty twenty yet on the performance on the plan. The Performance of the plan we were and I think we had a positive two percent return thank for twenty twenty so that would've been of June thirtieth twenty twenty. The prior year I think we were around five percent. You know if you look at the ten year period that I would need to go back and I've got the numbers I would just need to flip through and find those but but you know we're normally looking at the longer term period like when we look at our at the documents from from our investment consultant we're looking at ten year periods and thirty year periods. Trailing ten right now. I think it's around nine percent but I would want to But check on that before I. Tell you for sure that that's what it is all right we'll talk about it more later thank you select. Should be Senator Chesterfield. Thank you Mr chairman ninety in. When we talk about increasing from five to seven percent you're basing it on an average salary of forty thousand two hundred sixty nine. There are so many state employees were making in the twenties. And this is going to have a huge huge impact on them. You are going to do this of. Two five per year. Is there any plan to increase the salaries of these individuals so that it will hurt them as bad means it might hurt them right. You know I think part of the reason we were doing it at a quarter percent a year at I think they were just some discussions of. You know even larger increases than that but one of the things we heard from the state employees association was that if we went down that route that quarter percent you're with something that they thought. Could could be achievable and and I think the reason for that is you know simply because over time people may tend to see some kind of small salary increases that quarter percent a year hopefully would just be a fraction of any increase over time you know any if you think about it it takes you know twenty eight years to hit a normal retirement age we're talking about an eight year ramp up of this we're really talking about you know in leased a quarter of a career so we're doing it over a very very long time frame and we don't propose to started until July one of twenty twenty two so we're really delaying the implementation plus we're doing it over a very long period of time based on the feedback that we we got it and you know once again I think that feedback really comes from the sensitivity of everyone to the people make and twenty thousand thirty thousand forty thousand that if you make this change you want to make it in a way that okay really doesn't gradually over time I need to know how you compare your rate of return. To the other systems. Because the stock market just going off the chain why is our return so much less. Well and I don't think our return is I am any less we can get you date on that I think our performance has been good over time but you know if you remember June thirtieth what is just a few months into the pandemics of the the market come down it was on the upswing at that point I think it was a lot of volatility so you probably saw wide distribution of pension returns but I think we were somewhere probably will you know right there in the middle of pension returns you know and I think over time the same is true with I think that we've had good returns so you know I think some of the factors you know when I mean if you look around the nation you know I think every system for the most part is making some kind of adjustment if you look at Arkansas you know what I think anything about teachers and Asher's they have made adjustments I don't think it's driven negatively from negative investment for for performance I think is driven by other things like people living longer I think you know other assumptions like Jody said you know you make your assumptions I think you hope that they're very good but but in the end of that at the end of the day the reality is what impacts where you are as a plan and you know for example if people live longer than you assume that that's gonna have an impact on your plan a US investment return assumptions you look Ford tend to come down that's gonna have a impact on where your planets as well so so investments are part of it I think we've done a very good job on investments you know I think what we don't want to do and what we've seen in other states is people have felt like they can maybe take more risk and make it up with investments but a lot of times it doesn't work out you know you saw you know plans get in hedge funds after You know two thousand eight two thousand nine and and those things didn't actually work out very well so. Right Senator Elliott has withdrawn questions or moving on to representatives right. Represented right Europe. Thank you thank you Mr chairman chair on page twenty one I'll take you someplace fourteen on the packet it mentions cold. Four new hires only. Okay I'm guessing that that would mean it is normally three percent unless the consumer price index went down now what would happen if the dollar actually went down is there anything protection was in here for folks that have been on the system for a long time where if if actually our our dollar went down. You know I don't think there's currently the protection that I'm aware of that and so that's you know I think that's probably just the. Maybe just a risk for all of us whether it's pension benefits or salaries are investments I think that you know when you think and think about things like the dollar performance of the value of the dollar You know I don't know that I don't know how this being accounted for but you know really were taken in our proposal we're taking a three percent compound Cola we're turning it into a compound called based on the cost of living you know but it back to the value of a dollar I mean if you assume that you know if if the dollar declines that maybe you have some inflationary pressure you know you might assume that we would hit the three percent CPI mark every year and you know if we do we would essentially have the same color in the future that we do now which is a three percent compound Cole a secret on was viewed as no change in the color. All. Bonecrusher. Okay bear but let's just say that the dollar fail. And your inflation was six percent this one change from three percent. No I mean are current Cole is a three percent compound colorless so if we have six percent inflation we have a three percent compound Cola under the proposal we propose either three percent or CPI. And so if you have six percent inflation you would have a three percent compound coal so under that scenario you would have the same coal and now is you would have in the future there would be no change. Thank you Mr chairman I thank represent right right Dunken we're going to get you to the judicial retirement system members I just wanna make you mindful that look at the agenda and we do have to bills at the end of the presentations that will need to discuss it just please be mindful of that and with that don't you are going to the judicial retirement system please yes Sir thank you and everybody should have a hand out it's a one page handout that has the judicial retirement system on it it's got that on one side has the state police on the other. And so I'm just gonna give you some highlights of the judicial retirement system is created in nineteen fifty three they're governed by a five member board they have one hundred forty two active members nineteen of those are in tier one one hundred twenty three year in tier two they have one hundred forty eight retired member C. consists of very small system. The funding comes from employee contributions as well as employer contributions and then you received the transfers from the State Central Services and constitutional officers fund. They are funded very well they have a ninety three point five percent funded level their system that they've taken steps over time to you know really try to achieve a hundred percent funded level they have a very low investment return assumption I think it's five point seven five so is below six percent so that really moved in a very good direction there there's no legislative proposal from the system this session so I really try to keep it simple as far as their presentation goes today. All right a question. Okay we'll move on to the state police that please and so state police is on the other side they were created in nineteen fifty one they have a seven member board they have I'd to tears in tier one they have twenty five active members that that doesn't include members who are in the drop in tier two they have four hundred fifty seven ACT is there's fifty nine drop participants in their six hundred eighty seven retired members at this point the funded from employer contributions of twenty two percent but as many of you know they also get transfers from the interest premium tax fund and they have some other fees driver's license fees and other fees that they can go to the benefit of the system and they're funded currently at seventy four four percent we do have one bill from the system as a cleanup bill around that you're to drop it's a bill that would make clear that members can use reciprocity the reciprocal service to get into the tier to drop which hadn't been clear in the law I do some discussion of that last session but we do want to clear that up and so we will have that bill and another side discussion of other legislation as well the system. Right members any questions. Okay Dunken thank you we appreciate the oversight the overview of the plans. We're gonna move on to the teacher retirement system Clint Rhoden if you come forward please identify yourself for the record who represent members while he's coming just want to do a public service announcement the deadline to file retirement bills is this Friday January twenty ninth and so if there any retirement bills out there that you're working on or that you know somebody's working on remember Friday the twenty ninth is the deadline to file it also it's the intent of the chairs to have designated days for the directors of the plants to come and present their bills in their package so that members of the system can have as much advance possible notice so that they can be watching and waiting in we did have a just a of one one some meeting with the directors and we're gonna try to work that out so there's plenty of a publication what days will be presenting on members that miss rosewood Jenner dished up for record proceed. Yes thank you Committee on point road in the Arkansas teacher retirement system give me one second I get this pulled up. Okay good morning so I will start with a quick presentation of the teacher retirement system and one of the one of the good things about following Jody and don't get is that this thank you such a thorough explanation of the defined benefits system in general I want to try to keep it to the specifics about a TRS one of the things I would want to point out reiterate about the benefits of a five benefit plan for the educators of Arkansas is is a very helpful tool in in recruiting and retaining and rewarding career educators. So with that I'm going to start with just some simple member data this is as of this month so we currently have seventy two thousand seven hundred fifty eight active members actually working in the schools and educational agencies. We have eighty one thousand six hundred sixty five retirees currently drawing a benefit and to those retirees we pay out roughly one point two billion dollars a year I believe that was records by Jodie's presentation. you also see that the property assessments by thirty five hundred the property assessments and we have about four thousand work and retirees at this point. One of the things I like to include is the map that shows you the distribution of that one point two million dollars or one point two billion dollars I should say as to how that flows out into all the counties of Arkansas as Jody recognize that is a is a very strong economic engine for the state and and it is true that about ninety five percent of that money stays right here in Arkansas so you can look at your corresponding states on this handout and are your corresponding counties and just see how much money flows in your county from the retiree benefits each year. Here's a quick slide it talks about the contributions that I cherish receives we were seen of five hundred eighty three million dollars in contributions from both employers and members this past year that's that goes to help pay at one point two billion dollars each year in retirement benefits the remainder it course has to be made up higher investments. Our members. This is a list of the slide of all right to include that kind of just illustrates the longevity of the members in the teacher retirement system we it is predominantly made up of females. And as you know females have a tendency to live longer so our Long Givati might be a little bit longer hi you know higher than other systems we currently have over a thousand members that are over ninety years old and we have thirty seven of them actually over one hundred years old. We have one member who is one hundred six years old. And of course the mail. All right. Little glitch here on mine. On this. Slide here but maybe I can read through it here eighty one percent funded is that teacher retirement funding status. So as Duncan pointed out the seventy two seventy three percent is the national median and that currently gives a terrace a twenty seven year in relation. We a have a amortization period target of eighteen years that's quite a bit down from the target of thirty years that the systems used to have in the past. Of the current actuarial value to the system as of June thirty with eight was eighteen billion dollars. Whereas. and that's the actuarial value that's this for years moved value. the market value you know this is not a particularly good market year for any of the systems HRS included our market value as of June thirty was sixteen point five billion dollars. that was down about a billion from the prior year market level. However since. June thirtieth this year to essentially all last week that value has increased to nineteen point nine billion dollars. So you can see quite a bit of a increase in the market value of the system in just the last six months represents of a well over fifteen percent return so far this year and up were optimistic that it will will maintain that. The next line essentially just shows how the eight years assets are invested fifty three percent in equity. And then we have forty percent fixed income of five percent an opportunity opportunistic alternatives of investments that try not to reflect the The. The equity markets do we have thirty percent in real assets forty percent private equity and and a goal of less than one percent cash. This is this this quick slide shows the It reiterates the slide that docking heading is that essentially all the systems have pretty much the same the same chart it shows are accrued liabilities with the red line whereas you know we were all pretty much funded somewhere around the year two thousand at the top of the the dot com bubble and then of course the dot com bubble burst and you can see the decrease there around twenty two thousand two. trying to make some recovery had about a billion dollars worth of unfunded liability up till you know two thousand seven and then we had the financial crisis of two thousand seventeen thousand eight and we have been trying ever since to try to make that up and we're still holding at about a four billion dollar unfunded liability So that's essentially the difference between a twenty two billion dollars worth of liability and the eighteen billion dollars worth of accrued are actually the actuarial assets. So this is why we are continually trying to. Maintain the cost of our system try not to pass bills that increase the cost of the system one of the best things we can do is not let this this liability car of the red line here in a increase in steepness we want to try to flatten it down. And hopefully then our assets can catch up with it. So little bit better news is you know I try to be and with this slide that shows yes we do have a four million dollar under funded liability. But if you'll really look at what the system is trying to do is work we're continually Hey now The goal the systems to pay benefits and this Green Line down at the bottom that's growing at a very steady gradual pace is the amount of benefits we pay out each year and for twenty twenty that represents roughly one point two billion dollars. Compare that to the the at least the projected value of the system as of this year and roughly nineteen billion dollars so we have a lot of money in the bank every time we have a dip in the market you know go down a bit but by holding steady and having long term investment goals of that money grows over time and that is the goal of our system. And what will go from there just a quick note about the eight years packages this year as has been pointed out eighty arrests had to go through a lot of painful adjustments to our member benefits back in two thousand seventeen. We are not planning on doing anything like that this year our our package this year is we're still in a wait and see pattern until our next experience study and the packages years essentially clean up language she clarifies our law with the procedures that we have some comments from legislative audit shouldn't be anything overly controversial this year but thanks cost. Any questions. Senator Elliot chief your. Yes yes Mister Mister chair I know that this is we know we don't have bills on the agenda today but I'm going to take the primitive I ask and if Senator Teague bill is out there that's causing so much ruckus if we could just hear a quick explanation of exactly what that bill is doing so that we can ask in a clarifying questions if you need to absolutely be glad to the Mr Roden yes I make a comment if you would please there are two bills on the agenda that we have to discuss today one of them is Senator Teague but is not related to the question Senator Elliott I'm just doing this for public. Comment okay yeah the well I don't know if we're going to actually get to them or not we're going to get to it I can just wait well no it's not the bill thank you referencing and now I didn't see it all right but without objection the chair would like to allow Mr Roden an explanation but we're not going to take questions or discuss it because it's not on the agenda okay let's give you would and if you would maybe point to the website because I found the explanation on your website for for the purpose of public information. Would you just give a response to the question and summarize what what the you know what it does any any members have any objections. Five thank you absolutely thank you senator Elliott for that question I'll be glad to help clarify on this bill and I am going to read directly what's off our website so that I don't bungalow words so so let me start with the Senate bill one seventy four the title roughly relates to the termination of active membership and normal retirement age. The first thing to point out regarding Senate bill one seventy four is that the requirements for full retirement in other words the twenty eight years of service or age sixty is not being changed by this bill. This bill eliminates the one my separation from employment after retirement when a member has thirty eight years of service if the bill passes all retirees will have to separate from employment for six months before becoming reemployed unless they meet the requirements of the normal retirement age. Currently the normal retirement ages simply six age sixty five. This bill changes the definition of normal retirement age to be age sixty five or a rule of one hundred. The rule of one hundred is satisfied when a member has at least sixty is at least age sixty that has sixty and have service in H. the total one hundred or more for example a member AT sixty with forty years of service would satisfy the rule of one hundred. I member that hasn't that has attained the normal retirement age is able to draw full retirement benefits and remain employed without separating from the employment. This bill would not take effect until September one of twenty twenty one. There is a Bayesian rule of ninety nine for the first fiscal year that is fiscal year twenty twenty take. Eight years currently supporting this bill but we do we we will have to wait until the actual work before the call study to see if the system can afford all right thank you and members. Would love to have a discussion but it is and checking with staff it is not on the agenda we really don't need to have any discussion however would you make yourself available afterwards Mr and they have an appointment at any any time and thank you for bringing that up but in my cell phone number cell phone number is well published on the website and you all are all welcome to call me at any time they are not served or they operate thank you thank you Mr chairman you're welcome Sharon would you for the for the general public would you. Say exactly where that is on your website because I did find it but I had certain make it simple so so the quickest way to find it is on our home page the the the any executive director update newsletter at the bottom when I sign off has my mobile number on it or would you just favor email that to Barbara that explanation to all the members shall email to her will push it out to the membership of the committee like to ask maybe pushed up in the tire membership and then we can help our constituents absolutely all right thank you I appreciate your help on this bill thank you thanks for the question center Elliott let me ask you a question back on the program back on the presentation on page eight. The we want the Green Line in the red line to be closer together than what it is correct yes Sir we had we would love to go back to your twenty third two thousand okay and it is obviously an up hill battle to get there are he is a dangerous thing or realistic request that based on the changes that are being proposed in your packages that you could extend that graph out maybe for five years under understanding there on there are certainties we we don't know like to move into the stock market such as that but is there anything you're going to bring that's going to give us indicators that those two lines are coming closer together is that represented in this handout on another page this this would be the the best I could probably do as far as the assumptions you know we we have to send that I mean every year of the liability of the entire system goes up and you can see if this to steady pace since you know your two thousand and that's to be expected every year so the you know part of our our goal is to you know make good long term investments and try to bring the in the asset value up to meet that okay thank you any questions members. All right with books of the the Senator Elliot at thank you Mr this is on the presentation itself I want what I look at we talk about the separation of the lines and how for a we're advertised out we often hear just in general conversation I'd like to comment on that our system and sometimes written all over systems I'm asking about the teachers retirement system now our systems are in trouble and I would like you to comment on is that an accurate statement from your perspective I don't see it when I look and and usually in comparison to other state he will bring up Kentucky Illinois California who's doing a lot better now would you just comment on what these lines remain compared to being in trouble and not get in trouble like those of the state I just mentioned. This so thank you senator the best way that I could answer that is I really do not think a TRS is in trouble per se an eighty one percent funding right is rated funding status is is a nice funding level to be apt obviously we're not below average we're above average but we can't rest on you know just leaving things the way they are we always have to strive towards being a hundred percent funding. So you know. That the changes that the system made in two thousand seventeen it's not really easy to see in this graph but there is a slight downward of the State nous of our liability Kerr as a result of the two thousand seventeen legislation that you will help us pass and then the board has implemented You know over time you know the next decade or so you know. I mean right now we're at twenty seven years we're trying to get with we would be a hundred percent funded all the assumptions we have made right now come true. And and that's you know that's not a bad place to be we would rather sh. Have the liability Kerr you know any downward a little **** the asset Kerr any stronger up and let's meet that goal in eighteen years. but again a lot of this is based on assumptions and the one thing we know about the sanctions is there always are all so. Let's go. All right anyway thank you though that Mr that's sufficient for me I just just want to get that we can start discriminating on that yeah thank yes ma'am thank you thank generally any other questions from members. With room we thank for being here look forward to the future discussions thank you all right next on the agenda is the Arkansas local police and fire retirement system's David Clark would you come in name and title for the record please and you can go recognized him percent. Yes thank you Mister chairman David Clark the executive director of the local police and fire retirement system gonna help you with your agenda my comments to be very brief because of your bill to dovetailing with what you already talked about as well as you preach to directors with Duncan and plant a lobby is on that a fiscal years on a calendar year basis many December thirty one it's when we end our year so we're still closing out twenty twenty however are our most recent information has the system as seventy six percent funded we're at two point seven billion in assets. Of the system what is a hundred percent of the employer contribution rate that is required to fully fund the benefits on a monthly basis that's a really important detail because even over thirty six percent funded and obviously we want to move to a fully funded position which is the board of trustees of desire and and have a plan in place to do so so the required contributions made each and every month by the employers we're at sixteen a half percentage or amortization period that does move around from valuation year evaluation here but obviously that's you in the range that we want to be of another goal the board is to even shorten that amortization period further. Others roughly thirteen thousand three hundred fifty active members of the system covered at seven hundred fifty eight different police and fire departments we cover of active members that are up paid members as well as volunteer members that you think of like the rule Ballinger Farrer park to splurge for the volunteers out of the equation. Of the roughly ninety two percent of the benefit payments and I believe you have that one page map it your of desks this shows the benefit payouts for January of this year of roughly ninety two percent of all the benefit payments go to Arkansas residents so those dollars turnover in the Arkansas economy which you've heard about the multiplier effect earlier as well. So for do our legislative plan for twenty twenty one we have to bills and we work closely with the membership and with employers of which we really were able to death dovetail in on the Joint retirement regional meetings that were held in the fall of twenty nineteen. The thing that we talked about most was the fact that we have disability experiences in the lobby that are far greater meaning we have more people go out under disability retirement than comparable plans around the state to cover police and fire and so we have proposals that all were drafted by Senator sample and Senate bill four is going to address disability retired from both the employer side as well as the member side and this bill was drafted with ideas that were played by the board by it the members through a disability advisory committee that the board assembled and that committee met over twenty nineteen and twenty twenty over nearly a year period to help frame out what we need to do with a disability provisions of the system. And that committee again was made by members trustees and employer representatives so we were able to bring all parties together all stakeholders together to help frame out what we have planned for Senate bill four Senate bill five has a couple of items that address reciprocity and also qualified withdrawal domestic relations orders or water rose and other than a couple of administrative items we want to clean up as well so in summary our goal is the retirement system collectively is to protect the benefits of the career oriented members make sure that we have a fully funded retirement system and have employer contribution costs that are reasonable and we feel like that those goals are all compatible we don't have to have one goal be arguing against another we can actually achieve all those goals but collectively and we feel like that towards that end is that Senate bills for five would be very helpful to us and I believe that were calendar for potentially next week bill present bring those bills before this committee Mr chairman those are my comments and available for questions. The questions. Thank you look for senior thank you meetings all right next we got robin Smith with the Arkansas State Highway employees retirement systems while she's coming members without objection were under the for number seven which is the Arkansas diamond the deferred compensation plan till the next meeting Amy called me of Friday afternoon and of asked if we could do for that for the presentation they are in the process of hiring a new EBT director and she would like to have the drive to be able to come in that they select at the proper time so without objection we're going to for that to hear about that plan in the future any objection. All right very good so you take seven off the list for today all right with that being said robin would you go ahead and introduce yourself for the record and you are recognized to proceed. Good morning chairman members of the committee thank you for the opportunity to speak with you today my name is robin Smith I'm the Asher's executive secretary before we get started I would like to draw your attention to the booklet in front of you this hand out gives you a brief overview of our system and the benefits that Asher's provides also if you take a peek in the inside cover you will find my contact information should you have questions or concerns I would like to talk with you about that at a later date. The Arkansas State Highway employees retirement system is the single employer defined defined benefit plan of the Arkansas department of transportation Asher's is a mature system it can it is comprised of approximately one active employees contributing funds for everyone retiree receiving a benefit. As of June thirty twenty twenty Asher's unfunded liability was three hundred seven point five million we had a funding percentage of eighty two point three five percent and a funding period of thirty nine and a half years. So you can see above this line Asher's has made improvements in fiscal year twenty nineteen we've cut approximately nineteen million from are unfunded liability we've increased our funding percentage by one point fourteen percent and we reduced our funding period but closed fourteen years. Over the last five years you have allowed us to make changes which of strength in the sustainability of our system let's quickly review what actions have been taken we've had a couple reduction we reduce the interest rate on refund of contributions we increased employer contributions we increased employee contributions and we removed the healthcare stipend from the annual cold calculation. When looking for solutions the Asher's Board has made a concerted effort to make strategic changes that share the burden with all stake holders of the system the color change affect current retirees the contribution increases affected active employees as well as the Arkansas department of transportation while the interest reduction affected those withdrawing from the system all interested parties have been asked to under a little pain in order to ensure the system is healthy in the long run. Looking at this graph you can see the blue and orange bars signify contribution levels the blues for employing the oranges for employer the bold line at the top of the graph marks the level of contributions necessary to reach the benchmark identified in the Arkansas code of a thirty year amortization period. This growth exemplifies how the legislation and policy changes adopted during the last five years have moved Asher's closer to that thirty year amortization. You can see where we made the color change. If you look at the school year twenty and twenty one that's where we kicked in the contribution increases and then toward the upper right hand corner of the graph it shows that our gap is narrowing. Now let's take a moment to talk about the objectives of our current package this year's proposed legislation is designed to capitalize on the progress we've made by providing some additional tools thereby enabling a continued level of improvement and achievement of our funding goals the Asher's legislative package is divided into three categories contribution policies benefit calculations and eligibility requirements. First let's take a look at contribution policies. Senate bill one or two would allow the ashes Board with commission approval to set the employer contribution rate based on actuarial calculations this is not a new concept to the state systems of Arab papers and lot be boards currently have the authority to set their employer contribution right. Senate bill one of three is two fold for new hires it would change the employee contribution requirement for drop again this is not a new idea what the requires employees under up to continue contributions and actually served as Asher's for tier two dropper disciplines. This bill would also ask for a change in the employer contribution requirement on drop employees this would provide Asher's with funding parity with the other state supported systems apers teachers walk the Arkansas state police retirement system's they all require employers to remit contributions for employees on the drone. Let's take a look at that graft again the yellow portions of an added to reflect the expected impact of these contribution policy changes assuming that all other assumptions are met these changes are anticipated to propel Asher's to that thirty year amortization lying and slightly beyond. Now let's turn our focus to benefit calculations. Senate bill one oh four would allow the use of a high five year consecutive average salary for benefit calculations rather than the three year currently used. Teachers made this change in twenty seventeen. And not apers is pursuing a similar change during the session. Also in this bill for reciprocal service benefit calculations rather than use the state high salary we would ask that we could use the are not salary for answers benefit calculations this would align benefit payouts with actual funding received by the system based on the salary for which Asher's collected contributions. Senate bill one of six would delay the healthcare stipend for future drop participants until they terminate employment and begin receiving a monthly annuity benefit. This bill is intended to remedy a duplication of funds for the same intended purpose currently the Department pay state match on these and individuals is active employees and then Asher's pays the healthcare stipend as part of their monthly drop deposit. Thank grant third version. The Green Line illustrates that the projected impact of these benefit changes would be a reduction of the amortization period. This next one is the snapshot of Asher's fiscal year twenty twenty statistics in comparison with the estimated impact of the proposed legislative package projections are that the unfunded liability would be cut another seventeen million dollars bringing us to two hundred ninety point six million the funded percentage would increase by one percent to eighty three point three five percent and most dramatically the funding period would drop by about eighteen years your prob approximately a twenty one point six year pay off period. These improvements one enhance the system's financial stability moving us closer to achieving our funding goals as well as providing providing some tools for future management of the system. Our last piece of legislation addresses eligibility requirements. Senate bill one oh five is strictly a cleanup bill it would reduce the marriage requirement for option B. survivorship from two year to what two years to one. Making it consistent with other policies within Asher's as well as bring us in line with social security survivor benefit requirements. In closing please turn to the last page of the booklet page fourteen. Filled with charge. And we provided our traditional map of the Asher's economic impact on the state of Arkansas although we realized that the system is a cost to the state it also serves as a built in to the Arkansas economy Asher's pays benefits and also the seventy five counties providing our retirees with spending power. With that I think my time is that thank you for your time and attention today and as always I look forward to working with the should be the session are enrolled we got a question Senator Teague. Yes. That may. Yes to a higher so when we talked the other day you told me to go on from three years to five years. Say two and a half percent that might help me remember what that number was well it would it would mean about a two to two and a half percent returns to an adequate waters that lie. That's because the cost of living raises every year rated enough to all set to do that is that basically what happens yes. Thank. All right members any other questions. Okay if not robin thanks for being here for the actual presentation report working with you in the future. Five members we're gonna go on and there was no objection to moving the Arkansas diamond through the for so when they get the Director income so we're gonna move on to the regular agenda which has to bills the first one is going to be Senator T.. But yes Sir and we'll have the presenters at the table just because the sound is a little better from the table change. And while Senator Teague is coming up just a simple had not from Jody out there if you will Jody this did not require an actuary study is that correct. All right so just for the record for those who are watching it can she Jody back there this did not require an actuary study to go with the bill before you proceed Senator L. Senator Chesterfield one ask a question before we present your after you presents. Right we did not hear from the other retirement systems because they don't have changes is that what we're sign. The Salafi have any changes or. I think they presented this morning okay I guess I went I went to the ladies room and miss them thank you so much you're welcome thank you. Senator Teague a if you will then you're recognized for is that as C. R. one Larry Teague this she or one is it is the resolution that we dealt with somebody's got me of loud building on let's just say thing. Now is the time for all good men to come to the aid of their country. By more so than ever but anyway I go ahead are we ready now okay so I think it was four years ago monuments six represent Branscum brought this legislation before us. Dealing with us paying social security. Taxes and all that goes with that we didn't get very far that bill and a so my last two years I thought we tried again and simply put. in the in the nineteen forties I believe the legislator elected not to participate in subcommittee program in order to present participate we have to follow resolution and then ask the subcommittee the stage a security administrator to conduct a I guess publish all and so this just would authorize them to do a resolution Hey it always bothered me that we didn't pay social security and our people that. our state employees to our our our people at home DO so that's why I'm here all entry questions laws are easy. Members have any questions before the presentation of the bill. Otherwise I appreciate a good vote Read a question from Senator Ingram. Of I guess this would be more important now because of when you started in the ladies don't go there. It was more of a citizen legislature and a part time legislature and now the with the on set of many members now of drawn the salaries they are this is their primary of income of would that be part of your thinking here senator aspects some of them are so released legislators are moving off that most Americans retired guys like you know. I should have known better. I appreciate a good vote Sir. City limits your question because I've been S. is not just wanna get out there for the public as far as the financial benefit to members of the General Assembly if we do this is it going to create a financial benefit to us from state revenues were from the operations of the state of Arkansas I believe it would create a financial benefit to us because it would add to our our banks are subcommittee but it's I don't think I guess the state matches that it yes so that it would cost the state some money I'm sure it would. All right I'm not sure what dimension is but ladies at my office Max I don't match anyway but I think it would cost to take some money cost us some money could we would have to. They will hold out of us and it would cost the state the mac I thank okay the. I'm a recognized represented Reifer question the Jody I want you to come to the table please. Represent right. Okay we'll represent run hitch button and then once I recognize you don't touch it but again that's okay new system go ahead touch should push the button again. Please all right hang on hello okay good government thank you Mr chairman of the center of your question for you is if this culture requested fiscal impact of the server you have no idea but no more than we parole legislators make it can be much. Okay. What we make a lot more than I did when I got the house in ninety seven. All right the Jody let me ask you the fiscal impact a windows user and you require actual or study but what within. Yes Sir I Arm and hang on a second. The only marks on her mind and the witnesses are we just a little hot or we need. Okay the that area I think the feedbacks gone. Maybe okay it knows it says it didn't affect any of the system was or wasn't a fiscal impact study to do but the impact in my understanding understanding that I didn't do a lot of research I just read the bill earlier but they would have to pay the matching that was mentioned the state would have to pay matching of my understanding is they do have to pay on Medicare so the one point four five percent is already being paid so this would only be so security which would be six point two percent of salary. so the the individual the the legislator would have their reduced by six point two percent and the state would have to match that six point two percent if the legislature participated so security we have a question from Representative Deffenbaugh. Okay now don't you get your yeah I honestly I'm totally lost waters had as its effect. Senator draw social security or your drawn from social security ministration I mean. I don't I don't I don't know what's going on every every year so security does a recheck so it yourselves carries based on high thirty five out of the forty years and so they look at that thirty five years and they're all brought up to date with the sour national salary wage this is a pop quiz in national wage scale and then every year so security looks to see say retired and had a nice consulting job they say okay how much did you make is that greater than one of those thirty five years in the formula and if it is they replace it and recalculate your social security based on that. So that makes sense. That would affect any anyone that participates in social security yes Sir. Not thanks. Represent right. Thank you thank you Mr chairman let me ask you this what if there's folks it's been here for four five six eight years would go backwards or we just are brand new. I thank you just start when you start paying the. And again it just starts when you start paying the social security so it would not go backwards to provide social security benefits for the years before you start. Thank you Mr chairman thank you very Senator Rapert hitch button please. Senator Rapert you're recognized thank you and I guess this be for Jody your option to your one what about our state constitutional officers are they participating in social security that's just to an interesting questions that you're talking about this I don't know the. You better know that I don't think anyone knows the answer sure. It would be on the I'm I mean somebody knows the answer because they're either playing or not I am but I don't think anyone here knows that answer thank you thank all the folks in the audience as well. All right members have any other questions. Senator Teague I want to ask you a question I'm not I'm not opposed to the not opposed to the bill not in favor of bill but in light enlightenment in view of the alignment of today on the conversation would you have any objection if we were to hold bill and get a fiscal impact so we know exactly what the total dollar cost is. I have no objection I'd. Six percent or whatever. Six percent of whatever a hundred thirty five. At forty six thousand. A fairly easy to figure out what sixteen at eight five okay all right so we'll put this first on the agenda next week get fiscal impact can. All right Jody. While work will work together make it a hat five members any objection to that members pull it down as we get the fiscal impact. All right moving on Senator sample Senator sample. You are recognized. Our center sample you're recognized proceed personal presentation Senate bill one sixty two Members I want to point out appointed technicality to make sure that we all leave here on the same page regarding this bill. We begin the median value of. Thank seventeen and voting for the motion to send bills to actuary and so Jody has actually presented an actuary study on this bill alleged offender sample explain some of the finer details as to why it's on the agenda today but I wanna make sure you've noticed that the actual or study is attached to the back of the bill Senator sample you're recognized Percy. Thank you members of. Members normally one Senator Teague would be up here to get them in say that this little bill it doesn't do anything well this is a little bill that does do a lot of right now in the current situation we have and we've had codes and everything that's has changed a lot this bill will simply allow. Members of retire of the vapors actually retirement systems that have retired that have retired less than a hundred and eighty days from this time we are in desperate need of session employees and this bill state Sen here that is it is for regular session or fiscal session or solution solution. And it also shows only. And it's for positions requiring specialized institutional knowledge and experience we need some people and the Senate the. The bureau needs people and Legislative order in these people so this is a bill that will simply allow people to retarded a retired less than ninety days to take in serving temporary position while we are in session because we need people that we can can do a lot of this the specialized findings and that's always be let's. Contributions. Okay the. The Bill pass. I'm I'm a recognized for take that motion appreciate but I want to recognize Senator Elliot who had her but forgot their thank you yeah thank you Mr center sample. How is how is it going to benefit from this well they have some people that they need to tell you can hire for. To do special audits while we're in session and I do still have a amendment with appropriate I haven't been able to interview and that you've got maybe one or two positions thank members would be strictly during the session yes or not this is per sessions only yeah and temporary. All right thank you Mr. Thank members any other questions. Senator sample you close for your bill closed make a motion to pass got a motion to pass Senator Teague one right that second here second any discussion or questions from the members. And I speak for the bill from the general public. Invasion begins bill. Motion the second then is passage of Senate bill one sixty two okay per se I any posed congratulations you pastor bill center sample. All right members there's no other business on the agenda would want to remind you and advise you that the co chairs of a file one shell bill for each retirement system in case something is left out that's which made a motion of well go and before we go Senator Elliott something will share say I just I I just have a request Mr chia hi I would like to have more comfort that when we say per the presentation for Mr Perot that we want to be careful about generational impact that's when we have Bills where we are changing something for the new people are that Mr Perot be prepared to tell us whatever it is we think we mean by not putting a disproportionate impact on the new folks coming in that must be prepared to have some discussion about that because I'm so afraid we might say it because it sounds good but we're not practicing that and I just want to be give some comfort at least to me that is more than just talk from there was just a request Mr okay represent one recognized for announcement. Two things but number one I need to meet with my House members before we leave number the to the. I don't know if you know this or not but represented Bruce Cozart mother passed away so just keep him and his family in your thoughts and prayers very good. Any other announcements or anything from the membership. All right we will give as much advance notice of which bills are gonna be presented by each respective of agency so that other public can be aware of it and with that thanks for being here today we're joined.