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Pension Update: Week 12


Posted Date: 
March 28, 2013
Contact: 
Sheryl Wood, Associate Director, Montana Association of Counties

It’s been a busy week regarding pension funding bills, with action being taken quickly to meet the March 29 transmittal deadline for appropriations bills. 

HB 338, Provide funding for pension debts, all new hires to DC plan (Regier)

HB 338 passed 2nd reading on the House floor on March 21, and was re-referred to Appropriations.  It was heard in Appropriations on March 22 and tabled in Committee on March 23.  On March 26, a motion was made to blast HB 338 off the table from the Appropriations Committee onto the floor for 2nd reading, but it failed on a vote of 45-54. 

This bill has now missed the deadline for Appropriation Bill Transmittal and is “probably dead.”  (Reviving a bill that is “probably dead” requires a supermajority vote—usually a 2/3 vote—by the House or Senate.)

HB 454, Provide funding for PERS defined benefit plan, REVISE GABA (McChesney)

(Governor’s Proposal) HB 454 passed 2nd reading on the House floor on March 21 and was re-referred to Appropriations.  It was heard in Appropriations on March 22, and Executive Action was taken the same day.  During Executive Action – the bill was dramatically amended.  (Please see the explanations and table below that outline the amendments related to funding and employer contributions.) 

Significant amendments were made regarding the Guaranteed Annual Benefit Adjustment (GABA) for new hires, current employees, and retirees.  Essentially the GABA will be suspended, and/or paid on a percentage, based on the level of funding of the retirement system.

The bill was referred back to the House and passed second reading on March 27 with a 64-36 vote, and it passed 3rd reading on March 28 with a vote of 64-35.  The bill will now be referred to a Senate Committee for hearing. 

SB 333, Establish cash balance benefit tier in TRS and PERS for new hires (Arthun)

SB 333 was scheduled for hearing on March 20 but was cancelled and not rescheduled; therefore, the bill has now missed the deadline for Appropriation Bill Transmittal and is “probably dead.”

Other Pension Bills of Interest that are Still Moving Forward

HB 95, Require Contributions on working retiree compensation (Wilmer)

HB 95 passed out of the State Administration Committee on March 27 with a vote of 7-0.  It will probably be scheduled for 2nd reading in the Senate next week.

HB 97, Cap highest/final average compensation in MPERA retirement systems (Wilmer)

Known as the “anti-spiking” bill, HB 97 was heard in the Senate Finance & Claims Committee on March 25.  Executive Action is pending.

Newly Introduced Bill

SB 406, Statutory referendum on pension reform, new hires to DC plan, not TRS or PERS (Dee Brown)

This bill is scheduled for hearing on Wednesday, April 3 at 8:00 a.m. in Senate Judiciary.

HB 454 as Amended

The amendments placed on HB 454 in the House Appropriations Committee were:

  1. Eliminate the use of coal severance tax revenue;
  2. Provide for a supplemental contribution totaling 4.50%, which will be shared by the employer and the general fund.  The employer portion of the contribution will be a net increase of 1% for the next two fiscal years, while the general fund contribution will make up the rest.  The employer’s share of the supplemental contributions will gradually increase by 1% over the next five (5) years (at .2% per year cumulative), while the general fund share will decrease;
  3. Provides that the state and employer’s supplemental contributions may be decreased if the GABA has been fully reinstated.  This will happen only if the system is 90% funded and the decrease will not cause the funded ratio to drop below 85%. 

HB 454 as Amended

(FOR COUNTY CONTRIBUTIONS TO PERS SYSTEM):

 

 

EMPLOYER

CONTRIBUTION

SUPPLEMENTAL EMPLOYER CONTRIBUTION

TOTAL EMPLOYER CONTRIBUTION

STATE CONTRIBUTION

TOTAL CONTRIBUTION (EMPLOYER + STATE)

FY 2013

6.8%

.27%

7.07%

.1%

7.17

FY 2014

6.8%

1.27%

8.07%

3.6%

11.67

FY 2015

6.8%

1.27%

8.07%

3.6%

11.67

FY 2016

6.8%

1.47%

8.27%

3.4%

11.67

FY 2017

6.8%

1.67%

8.47%

3.2%

11.67

FY 2018

6.8%

1.87%

8.67%

3.0%

11.67

FY 2019

6.8%

2.07%

8.87%

2.8%

11.67

FY 2020

6.8%

2.27%

9.07%

2.6%

11.67

When the system is 90% funded as of the latest actuarial valuation, and the Guaranteed Annual Benefit Adjustment (GABA) has been increased to the maximum allowed under 19-3-1605, the Board shall decrease the contribution percentages provided by a total percentage that will provide that the system is not less than 85% funded.

  • Two-thirds (2/3) of the total percentage decrease must be applied to the general fund contribution and one-third (1/3) of the total percentage decrease must be applied to the employer contribution.
  • If the general fund contribution is too low to be reduced by the two-thirds (2/3), the general fund contribution must be decreased to zero (0) and the remainder of the total reduction must be applied to the employer contribution.
  • If the general fund contribution is zero (0), the total percentage reduction must be applied entirely to the employer contribution.

The general fund supplemental contributions are statutorily appropriated on an annual basis from the general fund to the system’s pension trust fund.

 

Sheryl Wood | (406) 449-4360 | swood@mtcounties.org