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Home My WebLink AboutResolution No. 2011-27thc yof KENAI, ALASKA CITY OF KENAI RESOLUTION NO. 2011 -27 Suggested by: Administration A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA SUPPORTING SENATE BILL 100, WHICH WOULD END REQUIREMENTS FOR TERMINATION STUDIES IN LIMITED CIRCUMSTANCES. WHEREAS, legislation passed by the State of Alaska in 2008 changed the Public Employee Retirement System (PERS) to a cost- sharing plan and established that municipalities and school districts would pay 22% of eligible payroll to PERS; and, WHEREAS, after adopting regulations, the State of Alaska recently began enforcing provisions in State statutes which require employers that terminate a department, group or other classification (group) from participation in PERS to pay the costs determined by a termination study completed by the State's actuary as well as continue to pay the past service rate on the salaries of the terminated employees until the unfunded liability of the system is paid off; and, WHEREAS, these costs can amount to hundreds of thousands of dollars even on a single position; and, WHEREAS, in small municipalities a group is often made up of a single position, therefore small municipalities are impacted by these regulations far more often than larger municipalities; and, WHEREAS, small municipalities are finding it difficult to make appropriate staffing decisions due to the substantial cost of termination studies and past service payments on terminated positions; and, WHEREAS, the State of Alaska Department of Administration, Division of Retirement and Benefits has stated that a vacant position, if it constitutes a group, is the same as a group formally eliminated by amendment of the participation agreement with PERS; and, WHEREAS, a single vacant position can subject the municipality or school district to large and unknown future liability even though there is no continuing salary for the position; and, WHEREAS, municipalities are statutorily bound to make PERS contributions on no less than the June 30, 2008 salary base thus protecting other plan members from underpayment of the past service liability; and, WHEREAS, PERS employers that terminate all participation would still be subject to termination costs and past service liability payments; and, Resolution No. 2011 -27 Page 2 of 2 WHEREAS, recent enforcement of the regulations has put municipalities in the untenable position of not being able to properly manage staffing levels, which means not being able to deal with budget shortfalls and because the application of the regulations are so blatantly unfair to small municipalities. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, supports passage of Senate Bill 100 which eliminates termination studies required by AS 39.35.625 and which makes other changes which protect the State of Alaska and other PERS employers from an employer that terminates coverage completely or reduces eligible payroll below the 2008 salary base. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this sixth day of April, 2011. MIKE BOYLE, VICE ATTEST: Carol L. Freas, City Clerk \thc °f KENAI, ALASKA MEMO: TO: City Council l k FROM: Rick Koch DATE: April 6, 2011 SUBJECT: Resolution No. 2011 -27 Thank you for your attention in this matter. "Village with a Past, Gc with a Future 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 283 -7535 FAX: 907 283 -3014 The purpose of this correspondence is to recommend Council approval of Resolution No. 2011- 27, supporting Senate Bill 100, which would end requirements for termination studies in limited circumstances. Presently the Public Employees retirement System (PERS) requires that a termination study must be performed and costs paid by the plan participants for the study, and past service payments when a group /classification of employee(s) is terminated. The cost for the termination of a group /classification of a single employee, such as Finance Director, City Manager, City Attorney, etc., could cost a municipality several hundred thousand dollars. While I cannot speak for the Legislature, I believe this was an unintended consequence of the legislation which created the shared PERS system. That legislation already contained a safeguard against a PERS employer eliminating a significant number of PERS positions in order to reduce PERS contributions by establishing a "floor" or minimum salary level on which PERS contributions are based. BY SENATOR PASKVAN SENATE BILL NO. 100 IN THE LEGISLATURE OF THE STATE OF ALASKA TWENTY SEVENTH LEGISLATURE FIRST SESSION Introduced: 3/14/11 Referred: Labor and Commerce, Finance 27-LS0272\D A BILL FOR AN ACT ENTITLED 1 An Act relating to employer contributions to the Public Employees' Retirement System 2 of Alaska; relating to requirements that employers who terminate some or all 3 participation in the Public Employees' Retirement System of Alaska pay termination 4 costs; and making the changes retroactive." 5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 6 Section 1. AS 39.35.255 is amended by adding a new subsection to read 7 (i) After an employer's participation in the plan terminates with regard to some 8 or all of the employer's employees who are active members of the system, the 9 employer remains obligated to make contributions under (a) of this section until the 10 plan does not have a past service liability 1 L Sec. 2. AS 39.35.615(i) is amended to read: 12 (i) Termination of coverage of a department, group, or other classification of 13 employees does not bar future coverage of that department, group, or classification [IF 14 THE EMPLOYER IS CURRENT WITH PAYMENTS ON AMOUNTS DUE SB0100A -1- SB 100 New Text Underlined [DELETED TEXT BRACKETED] 27- LS0272 \D 1 UNDER AS 39.35.625]. If coverage of a department, group, or classification is 2 terminated under (a) of this section and the employer later amends its participation 3 agreement to provide renewed coverage of that department, group, or classification, an 4 affected employee may be credited only with future service. 5 Sec. 3. AS 39.35.620(k) is amended to read: 6 (k) Termination of an employer's participation in the plan does not bar future 7 participation in the system by that employer [IF THE EMPLOYER IS CURRENT 8 WITH PAYMENTS ON AMOUNTS DUE UNDER AS 39.35.625]. If a previously 9 terminated employer returns to the system, the employer may only participate in the 10 plan established under AS 39.35.700 39.35.990. Employees may be credited under 11 AS 39.35.700 39.35.990 only with service subsequent to the date of return. 12 See. 4. AS 39.35.958(c) is amended to read: 13 (c) When an employer's participation in the plan terminates [IS 14 TERMINATED, OR WHEN AN EMPLOYER TERMINATES COVERAGE OF A 15 DEPARTMENT, GROUP, OR OTHER CLASSIFICATION OF EMPLOYEES 16 UNDER AS 39.35.957(c)], the administrator shall assess the employer a termination 17 cost that the administrator determines is actuarially required to fully fund the costs to 18 the plan for employees whose coverage is terminated, including the cost of providing 19 the employer's share of retiree health benefits under AS 39.35.880, occupational 20 disability and occupational death benefits under AS 39.35.890 and 39.35.892, and 21 pension benefits elected under AS 39.35.890(h)(2). 22 Sec. 5. AS 39.35.958(e) is amended to read: 23 (e) An employer whose [TERMINATING] participation in the plan 24 terminates shall pay termination costs determined under (c) of this section [BY THE 25 ADMINISTRATOR], or enter into a payment plan acceptable to the administrator, 26 within 60 days after the employer receives notice of its termination costs from the 27 administrator. Termination costs not paid within the prescribed time limit or in 28 accordance with the approved payment plan shall be collected by the administrator in 29 accordance with AS 39.35.610(b). Termination of participation by an employer in the 30 plan does not bar future participation by the employer if the employer has paid in full 31 its prior termination costs. SB 100 -2- SB0700A New Text Underlin (DELETED TEXT BRACKETED) 27- LS0272VD I Sec. 6. AS 39.35.625 is repealed. 2 Sec. 7. AS 39.35.958(0 is repealed. 3 Sec. 8. 2 AAC 35.235 is annulled, 4 Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 5 read: 6 APPLICABILITY. Notwithstanding sec. IO of this Act, secs. 2 and 3 of this Act do 7 not apply to AS 39.35.625(a), and secs. 4 and 5 of this Act do not apply to AS 39.35.958, for 8 termination costs paid before the effective date of this Act for payroll periods or partial 9 payroll periods that occur before the effective date of this Act. 10 Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 RETROACTIVITY. Sections 1 3 and 6 of this Act are retroactive to July I, 2008, 13 secs. 4, 5, and 7 of this Act are retroactive to June 7, 2007, and sec. 8 of this Act is retroactive 14 to January 13, 2010. SB0100A SB 100 New Text Underlined [DELETED TEXT BRACKETED]