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H0173.......................................by COMMERCE AND HUMAN RESOURCES PUBLIC EMPLOYEE RETIREMENT SYSTEM - Amends existing law relating to the Public Employee Retirement System to reduce the number of months to be used as the base period in calculation of the retirement allowance; and to reduce the amount of the deductions from retirement benefits per month of early retirement. 02/04 House intro - 1st rdg - to printing 02/05 Rpt prt - to Com/HuRes
H0173|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fifth Legislature First Regular Session - 1999IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 173 BY COMMERCE AND HUMAN RESOURCES COMMITTEE 1 AN ACT 2 RELATING TO THE PUBLIC EMPLOYEE RETIREMENT SYSTEM; AMENDING SECTION 59-1302, 3 IDAHO CODE, TO PROVIDE AN ADJUSTMENT IN THE NUMBER OF MONTHS TO BE USED AS 4 THE BASE PERIOD IN CALCULATION OF THE RETIREMENT ALLOWANCE; AND AMENDING 5 SECTION 59-1346, IDAHO CODE, TO PROVIDE AN ADJUSTMENT IN THE COMPUTATION 6 OF DEDUCTIONS FROM RETIREMENT BENEFITS PER MONTH OF EARLY RETIREMENT. 7 Be It Enacted by the Legislature of the State of Idaho: 8 SECTION 1. That Section 59-1302, Idaho Code, be, and the same is hereby 9 amended to read as follows: 10 59-1302. DEFINITIONS. (1) As used in this chapter, each of the terms 11 defined in this section shall have the meaning given in this section unless a 12 different meaning is clearly required by the context. 13 (2) "Active member" means any employee who is not establishing the right 14 to receive benefits through his or her employer's participation in any other 15 retirement system established for Idaho public employees, if such participa- 16 tion is mandated by applicable Idaho statutes other than this chapter. In no 17 case will an employee be entitled to any benefit under this chapter for public 18 service if such employee is establishing retirement benefit entitlements by 19 other Idaho statutes or federal statutes other than military service or social 20 security for that same service. 21 (3) "Accumulated contributions" means the sum of amounts contributed by a 22 member of the system, together with regular interest credit thereon. 23 (4) "Actuarial equivalent" means a benefit equal in value to another ben- 24 efit, when computed upon the basis of the actuarial tables in use by the sys- 25 tem. 26 (5) "Actuarial tables" means such tables as shall have been adopted by 27 the board in accordance with recommendations of the actuary. 28 (5A) "Alternate payee" means a spouse or former spouse of a member who is 29 recognized by an approved domestic retirement order as having a right to all 30 or a portion of the accrued benefits in the retirement system with respect to 31 such member. 32 (5B) "Approved domestic retirement order" means a domestic retirement 33 order which creates or recognizes the existence of an alternate payee's right 34 or assigns to an alternate payee the right to all or a portion of the accrued 35 benefits of a member under the retirement system, which directs the system to 36 establish a segregated account or disburse benefits to an alternate payee, and 37 which the executive director of the retirement system has determined meets the 38 requirements of sections 59-1319 and 59-1320, Idaho Code. 39 (5C) "Average monthly salary" means the member's average salary during 40 the base period as calculated pursuant to rules adopted by the retirement 41 board. 42 (5D) (a) "Base period" means the period of fifty-four (54) consecutive 43 calendar months during which the member earned: 2 1 (i) The highest average salary; and 2 (ii) Membership service of at least one-half (1/2) the number of 3 months in the period, excluding months of service attributable to: 4 A. Military service; 5 B. Service qualifying as minimum benefit pursuant to section 6 59-1342(5), Idaho Code; and 7 C. Worker's compensation income benefits. 8 (b) Effective October 1, 1993, the consecutive calendar months shall be 9 forty-eight (48). Effective October 1, 1994, the consecutive calendar 10 months shall be forty-two (42). Effective September 30, 1999, the 11 consecutive calendar months shall be thirty-six (36). 12 (c) Entitlement to a base period shall not vest until the effective date 13 of that base period. The retirement benefits shall be calculated on the 14 amounts, terms and conditions in effect at the date of the final contribu- 15 tion by the member. 16 (d) If no base period exists for a member, the member's average monthly 17 salary shall be determined by the board, using standards not inconsistent 18 with those established in this subsection. 19 (e) To assure equitable treatment for all members, salary increments 20 inconsistent with usual compensation patterns may be disallowed by the 21 board in determining average monthly salary and base period. 22 (6) "Beneficiary" means the person who is nominated by the written desig- 23 nation of a member, duly executed and filed with the board, to receive the 24 death benefit. 25 (7) "Calendar year" means twelve (12) calendar months commencing on the 26 first day of January. 27 (8) "Credited service" means the aggregate of membership service, prior 28 service and disabled service. 29 (9) "Date of establishment" means July 1, 1965, or a later date estab- 30 lished by the board or statute. 31 (10) "Death benefit" means the amount, if any, payable upon the death of a 32 member. 33 (11) "Disability retirement allowance" means the periodic payment becoming 34 payable upon an active member's ceasing to be an employee while eligible for 35 disability retirement. 36 (12) "Disabled" means: 37 (a) That the member is prevented from engaging in any occupation or 38 employment for remuneration or profit as a result of bodily injury or dis- 39 ease, either occupational or nonoccupational in cause, but excluding dis- 40 abilities resulting from service in the armed forces of any country, or 41 from an intentionally self-inflicted injury; and 42 (b) That the member will likely remain so disabled permanently and con- 43 tinuously during the remainder of the member's life. 44 It is not necessary that a person be absolutely helpless or entirely unable to 45 do anything worthy of compensation to be considered disabled. If the person is 46 so disabled that substantially all the avenues of employment are reasonably 47 closed to the person, that condition is within the meaning of "disabled." In 48 evaluating whether a person is disabled, medical factors and nonmedical fac- 49 tors including, but not limited to, education, economic and social environ- 50 ment, training and usable skills may be considered. 51 Refusal to submit to a medical examination ordered by the board before the 52 commencement of a disability retirement allowance or at any reasonable time 53 thereafter shall constitute proof that the member is not disabled. The board 54 shall be empowered to select for such medical examination one (1) or more phy- 55 sicians or surgeons who are licensed to practice medicine and perform surgery. 3 1 The fees and expenses of such examination shall be paid from the administra- 2 tion account of the fund. No member shall be required to undergo such examina- 3 tion more often than once each year after he has received a disability retire- 4 ment allowance continuously for two (2) years. 5 (12A) "Disabled service" means the total number of months elapsing from 6 the first day of the month next succeeding the final contribution of a member 7 prior to receiving a disability retirement allowance to the first day of the 8 month following the date of termination of such disability retirement allow- 9 ance. During such period, the member shall remain classified in the membership 10 category held during the month of final contribution. The total number of 11 months of disabled service credited for a person first becoming disabled after 12 the effective date of this chapter shall not exceed the excess, if any, of 13 three hundred sixty (360) over the total number of months of prior service and 14 membership service. 15 (12B) "Domestic retirement order" means any judgment, decree, or order, 16 including approval of a property settlement agreement which relates to the 17 provision of marital property rights to a spouse or former spouse of a member, 18 and is made pursuant to a domestic relations law, including the community 19 property law of the state of Idaho or of another state. 20 (13) "Early retirement allowance" means the periodic payment becoming pay- 21 able upon an active member's ceasing to be an employee while eligible for 22 early retirement. 23 (14) (A) "Employee" means: 24 (a) Any person who normally works twenty (20) hours or more per week for 25 an employer or a school teacher who works half-time or more for an 26 employer and who receives salary for services rendered for such employer; 27 or 28 (b) Elected officials or appointed officials of an employer who receive a 29 salary; or 30 (c) A person who is separated from service with less than five (5) con- 31 secutive months of employment and who is reemployed or reinstated by the 32 same employer within thirty (30) days. 33 (B) "Employee" does not include employment as: 34 (a) A person rendering service to an employer in the capacity of an inde- 35 pendent business, trade or profession; or 36 (b) A person whose employment with any employer does not total five (5) 37 consecutive months; or 38 (c) A person provided sheltered employment or made-work by a public 39 employer in an employment or industries program maintained for the benefit 40 of such person; or 41 (d) An inmate of a state institution, whether or not receiving compensa- 42 tion for services performed for the institution; or 43 (e) A student enrolled in an undergraduate, graduate, or vocational- 44 technical program at and employed by a state college, university, commu- 45 nity college or vocational-technical center when such employment is predi- 46 cated on student status; or 47 (f) A person making contributions to the United States civil service com- 48 mission under the United States Civil Service System Retirement Act except 49 that a person who receives separate remuneration for work currently per- 50 formed for an employer and the United States government may elect to be a 51 member of the retirement system in accordance with rules of the board; or 52 (g) A person occupying a position that does not exceed eight (8) consecu- 53 tive months in a calendar year with a city or county when the city or 54 county has certified, in writing to the system, the position is (i) sea- 55 sonal or casual; and (ii) affected by weather and the growing season, 4 1 including parks and golf course positions. 2 (15) "Employer" means the state of Idaho, or any political subdivision or 3 governmental entity, provided such subdivision or entity has elected to come 4 into the system. Governmental entity means any organization composed of units 5 of government of Idaho or organizations funded only by government or employee 6 contributions or organizations who discharge governmental responsibilities or 7 proprietary responsibilities that would otherwise be performed by government. 8 All governmental entities are deemed to be political subdivisions for the pur- 9 pose of this chapter. 10 (15A) "Final contribution" means the final contribution made by a member 11 pursuant to sections 59-1331 through 59-1334, Idaho Code. 12 (16) "Firefighter" means an employee, including paid firefighters hired on 13 or after October 1, 1980, whose primary occupation is that of preventing and 14 extinguishing fires as determined by the rules of the board. 15 (17) "Fiscal year" means the period beginning on July 1 in any year and 16 ending on June 30 of the next succeeding year. 17 (18) "Fund" means the public employee retirement fund established by this 18 chapter. 19 (19) "Funding agent" means any bank or banks, trust company or trust com- 20 panies, legal reserve life insurance company or legal reserve life insurance 21 companies, or combinations thereof, any thrift institution or credit union or 22 any investment management firm or individual investment manager selected by 23 the board to hold and/or invest the employers' and members' contributions and 24 pay certain benefits granted under this chapter. 25 (20) "Inactive member" means a former active member who is not an employee 26 and is not receiving any form of retirement allowance, but for whom a separa- 27 tion benefit has not become payable. 28 (20A) "Lifetime annuity" means periodic monthly payments of income by the 29 retirement system to an alternate payee. 30 (20B) "Lump sum distribution" means a payment by the retirement system of 31 the entire balance in the alternate payee's segregated account, together with 32 regular interest credited thereon. 33 (21) "Member" means an active member, inactive member or a retired member. 34 (22) "Membership service" means military service which occurs after the 35 commencement of contributions payable under sections 59-1331 through 59-1334, 36 Idaho Code, and service with respect to which contributions are payable under 37 sections 59-1331 through 59-1334, Idaho Code, which, except for benefit calcu- 38 lations described in sections 59-1342 and 59-1353, Idaho Code, includes ser- 39 vice transferred to a segregated account under an approved domestic retirement 40 order. 41 (23) "Military service" means active duty service in the armed forces of 42 the United States including the national guard and reserves, under the provi- 43 sions of title 10, title 32, and title 37, United States code. Provided, how- 44 ever, for the purposes of this chapter, military service SHALL NOT include: 45 (a) Any period ended by dishonorable discharge or during which termina- 46 tion of such service is available but not accepted; 47 (b) Any period which commences more than ninety (90) days after the per- 48 son ceases to be an employee or ends more than ninety (90) days before the 49 person again becomes an employee unless such ninety (90) day requirements 50 are waived by the board due to circumstances beyond the employee's con- 51 trol; or 52 (c) Any active duty service in excess of five (5) years if at the conve- 53 nience of the United States government, or in excess of four (4) years if 54 not at the convenience of the United States government. 55 (24) (a) "Police officer" for retirement purposes shall be as defined in 5 1 section 59-1303, Idaho Code. 2 (b) "POST" means the Idaho peace officer standards and training council 3 established in chapter 51, title 19, Idaho Code. 4 (25) "Prior service" means any period prior to July 1, 1965, of military 5 service or of employment for the state of Idaho or any political subdivision 6 or other employer of each employee who is an active member or in military ser- 7 vice or on leave of absence on the date of establishment, provided, however, 8 an employee who was not an active member or in military service or on leave of 9 absence on the date of establishment shall receive credit for the member's 10 service prior to July 1, 1965, on the basis of recognizing two (2) months of 11 such service for each month of membership service. For the purpose of comput- 12 ing such service, no deduction shall be made for any continuous period of 13 absence from service or military service of six (6) months or less. 14 (26) "Regular interest" means interest at the rate set from time to time 15 by the board. 16 (27) "Retired member" means a former active member receiving a retirement 17 allowance. 18 (28) "Retirement" means the acceptance of a retirement allowance under 19 this chapter upon termination of employment. 20 (29) "Retirement board" or "board" means the board provided for in sec- 21 tions 59-1304 and 59-1305, Idaho Code, to administer the retirement system. 22 (30) "Retirement system" or "system" means the public employee retirement 23 system of Idaho. 24 (31) (A) "Salary" means: 25 (a) The total salary or wages paid to a person who meets the definition 26 of employee by an employer for personal services performed and reported 27 by the employer for income tax purposes, including the cash value of all 28 remuneration in any medium other than cash. 29 (b) The total amount of any voluntary reduction in salary agreed to by 30 the member and employer where the reduction is used as an alternative form 31 of remuneration to the member. 32 (B) Salary in excess of the compensation limitations set forth in section 33 401(a)(17) of the Internal Revenue Code shall be disregarded for any person 34 who becomes a member of the system on or after July 1, 1996. The system had no 35 limitations on compensation in effect on July 1, 1993. The compensation limi- 36 tations set forth in section 401(1)(17) of the Internal Revenue Code shall not 37 apply for an "eligible employee." For purposes of this subsection, "eligible 38 employee" is an individual who was a member of the system before July 1, 1996. 39 (C) "Salary" does not include: 40 (a) Contributions by employers to employee held medical savings accounts, 41 as those accounts are defined in section 63-3022K, Idaho Code. 42 (b) Lump sum payments inconsistent with usual compensation patterns made 43 by the employer to the employee only upon termination from service includ- 44 ing, but not limited to, vacation payoffs, sick leave payoffs, early 45 retirement incentive payments and bonuses. 46 (31A) "Segregated account" means the account established by the retirement 47 system for the alternate payee of a member who is not a retired member. It 48 shall include the months of credited service and accumulated contributions 49 transferred from the member's account. 50 (32) "Separation benefit" means the amount, if any, payable upon or subse- 51 quent to separation from service. 52 (33) "Service" means being shown on an employer's payroll as an employee 53 receiving a salary. Service of fifteen (15) days or more during any calendar 54 month shall be credited as one (1) month of service. Service of fourteen (14) 55 days or less during any calendar month shall not be credited. No more than one 6 1 (1) month of service shall be credited for all service in any month. 2 (34) "Service retirement allowance" means the periodic payment becoming 3 payable upon an active member's ceasing to be an employee while eligible for 4 service retirement. 5 (35) "State" means the state of Idaho. 6 (36) "Vested retirement allowance" means the periodic payment becoming 7 payable upon an inactive member's becoming eligible for vested retirement. 8 (37) The masculine pronoun, wherever used, shall include the feminine pro- 9 noun. 10 SECTION 2. That Section 59-1346, Idaho Code, be, and the same is hereby 11 amended to read as follows: 12 59-1346. COMPUTATION OF EARLY RETIREMENT ALLOWANCES. (1) The annual 13 amount of initial early retirement allowance of a member shall be a percentage 14 of the member's accrued retirement allowance. Such percentage shall be one 15 hundred percent (100%) if the sum of the number of years and months of cred- 16 ited service and the age in years and months is equal to or greater than the 17 sum indicated below. Otherwise, such percentage shall be one hundred percent 18 (100%) reduced by one-fourth of one percent (.25%) for each month up to sixty 19 (60) months that the member's retirement precedes the date the member would be 20 eligible to receive full accrued benefit without additional credited service, 21 and further reduced by two-thirds of one percent (.6667%) for each additional 22 month. Effective October 1, 1992, the further reduction for each additional 23 month shall equal six thousand and forty-two ten-thousandths of one percent 24 (.6042%) of the member's average monthly salary; effective October 1, 1993, 25 the further reduction for each additional month shall equal five thousand four 26 hundred and seventeen ten-thousandths of one percent (.5417%) of the member's 27 average monthly salary;andeffective October 1, 1994, the fur- 28 ther reduction for each additional month shall equal four thousand seven hun- 29 dred and ninety-two ten-thousandths of one percent (.4792%) ; and effec- 30 tive September 30, 1999, the further reduction for each additional month shall 31 equal four thousand one hundred and sixty-seven ten-thousandths of one percent 32 (.4167%) of the member's average monthly salary. Entitlement to an 33 annual amount of accrued retirement allowance shall not vest until the effec- 34 tive date of that annual amount of accrued retirement allowance. The retire- 35 ment benefits shall be calculated on the amounts, terms and conditions in 36 effect at the date of the final contribution by the member. 37 If a member's service retire- Then the sum of the member's 38 ment ratio as defined by section credited service and age must be 39 59-1341, Idaho Code, is: equal to or greater than: 40 0.000 to 0.050 90 41 0.051 to 0.150 89 42 0.151 to 0.250 88 43 0.251 to 0.350 87 44 0.351 to 0.450 86 45 0.451 to 0.550 85 46 0.551 to 0.650 84 47 0.651 to 0.750 83 48 0.751 to 0.850 82 49 0.851 to 0.950 81 50 0.951 to 1.000 80. 51 (2) If the majority of a member's credited service is as an elected offi- 52 cial or as an appointed official, except as a member of the Idaho legislature, 53 and that official was normally in the administrative offices of the employer 7 1 less than twenty (20) hours per week during the term of office, or was nor- 2 mally not required to be present at any particular work station for the 3 employer twenty (20) hours per week or more during the term of office, that 4 member's accrued retirement allowance for service credited only during that 5 period shall be computed from an average monthly salary for salary received 6 during that period of such employment only. The initial service retirement 7 allowance of members of the Idaho legislature will be computed under the pro- 8 visions of this section, on the basis of their total months of credited ser- 9 vice. 10 (3) If that member has credited service from any other employment, the 11 accrued retirement allowance for the credited service from such other employ- 12 ment shall be computed from an average monthly salary for salary received dur- 13 ing the period of such other employment.
STATEMENT OF PURPOSE
RS 08815
This legislation will change two components of the formula used
by the Public Employee Retirement System of Idaho(PERSI)to
determine the monthly benefit paid to retiring employees. The
first amends Idaho Code 59-1302 by adjusting the computation of
calendar months for base period from 42 to 36. Secondly, it
will amend Idaho Code 59-1346 by modifying the early retirement
reduction applied to those retiring between 6-10 years prior to
reaching their respective "rule." Currently, the reduction
which is applied is 5.75% per year; and this legislation will
lower that to 5.0% per year.
FISCAL NOTE
This bill would increase the normal cost of the PERSI system by
.32% of pay, which increases the total contribution rate from
15.78% to 16.10%. Of this increase, .20% will be the
responsibility of the employers .12% the responsibility of
general employees, and .14% the responsibility of police
members and firefighters. As of July 1, 1998, PERSI's actuaries
reported that the system's unfunded liability has been
completely eliminated; and, in fact, the funding ratio stood at
108.6%. The actuaries also estimated that, had the changes
proposed in this legislation been in effect, that ratio would
have been reduced to
107.2% (a reduction of $64.4 million, leaving $370.3 million more
in assets than liabilities). The proposed improvements can be
implemented without increasing the total employer and employee
contribution rate above the current permanent rates of 17.78%
that has been established by the PERSI Board and which should
have been budgeted for by employer units. The total contribution
rate is assumed to go to the permanent rate on November 1, 1999,
if the board takes no action to extend the temporary period.
RS 08815 Page 2
CONTACTS:
Representative Bert Marley (For all contacts: 208/332-2100)
Representative Tom Trail
Senator John Andreason
OTHER CO-SPONSORS:
Representative Max Black Senator Cecil Ingram
Representative Wendy Jaquet Senator Shawn Keough
Representative Doug Jones Senator Marguerite McLaughlin
Representative Tim Ridinger Senator Gary Schroeder
Representative Ruby Stone Senator Sheila Sorensen
Representative Shirley Ringo Senator Betsy Dunklin
STATEMENT OF PURPOSE/ FISCAL NOTE BILL NO. H 173