SB 100 - PERS Termination Costs

On Tuesday, March 29 the Senate Labor & Commerce Committee heard SB 100 - PERS Termination Costs (http://www.legis.state.ak.us/basis/get_bill.asp?bill=SB%20100&session=27).  Michael Lamb of the Fairbanks North Star Borough testified that if a PERS employer reduces their employee count by altering or suspending a program or service, then PERS can send that employer three bills:

1. The cost of a termination study,
2. A bill for the amount the termination study determines that the employer owes the system due to the position change(s), and
3. A bill for the past service costs on each of the position’s salaries until the unfunded liability is paid off.

Mr. Lamb wondered if past service liability would ever be extinguished, making the termination payments perpetual.  The bills to an employer could run from several hundred thousand dollars to millions of dollars for each termination study.  The law should be fairly and equally applied to all PERS employers, but the Div. of Retirement & Benefits says the state is exempt from termination studies and their financial impacts.  The state is the biggest PERS employer, but is not subject to termination studies.  Mr. Lamb said this disturbs other PERS employers.

Kathy Lea, acting director, Div. of Retirement & Benefits, said the State of Alaska does not have to do termination studies because state participation in PERS is mandatory, while all other participation is voluntary.  All the participation statutes refer to “changes to a participation agreement.”  That refers to the voluntary participation of municipalities and school districts; the State of Alaska has no participation agreement.  Ms. Lea said when the State of Alaska makes changes or reduces employees, while it may not have a termination study and may not have to amend an agreement, it still has to pay the liability.  No liability shifts to other employers as a result of state personnel actions.

Mr. Lamb said current requirements for termination studies