1999 Legislation
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HOUSE BILL NO. 173 – PERSI/retirement allownce/calculate


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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

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fifth Legislature                 First Regular Session - 1999

                             IN THE HOUSE OF REPRESENTATIVES

                                    HOUSE BILL NO. 173


 1                                        AN ACT

 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:


 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.


 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,


 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


 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


 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;  and  effective 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


 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 / Fiscal Impact

                       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


                     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