House panel OKS 2 pension fixes, not 3rd

Bills give teacher-retirement trustees cost-cutting power

A legislative committee Monday endorsed two bills that grant the trustees for the Arkansas Teacher Retirement System authority to implement certain cost-saving measures, but it rejected another bill that would have allowed them to enact another cost-saving option.

The measures are among several bills proposed by the system to give the trustees options to increase revenue and cut costs to reduce the more than 100 year pay-back period for the system’s unfunded liabilities.

The Joint Committee on Public Retirement and Social Security Programs recommended passage of two system-backed bills — House Bill 1194 by Rep. John Catlett, D-Rover, and House Bill 1200 by Rep. Gary Deffenbaugh, R-Van Buren.

HB1194 would allow system trustees to change the multiplier for service earned after July 1, 2013, for members paying into the system to between 1.75 percent and 2.15 percent and the multiplier for members not paying into the system to between 0.5 percent and 1.39 percent. It requires that service earned by members through June 30, 2013, would be subject to the current multipliers of 2.15 percent for members who pay into the system and 1.39 percent for members who don’t.

The multipliers are used to calculate retirement benefits for members. The multiplier is multiplied by the worker’s total years of service, which is multiplied by the worker’s average salary based on his three highest-paid years. The resulting figure is the worker’s annual pension.

The trustees wouldn’t be allowed to cut the multiplier for members who pay into the system after their first 10 years of service unless the system’s actuary certifies the pay-off period for the system’s unfunded liabilities exceeds 30 years.

HB1200 would allow the system trustees to reverse “a compounding” of the annual 3 percent cost-of-living adjustment for system retirees and other participants.

The trustees last voted to compound retirees’ 3 percent cost-of-living adjustment in the fiscal year that started July 1, 2009, in a move that system officials estimated cost the system about $19.5 million in that fiscal year.

Hopkins told lawmakers that this bill would probably be the last option that the trustees would consider enacting.

The committee rejected House Bill 1198 by Rep. David Kizzia, D-Malvern, that would allow the system’s trustees to create a new tier of retirement benefits for members hired beginning July 1, 2015, and to cut the annual 3 percent cost-ofliving adjustment for their benefits.

Under this bill, the trustees would have the option to pay a 2 percent or 2.5 percent annual cost-of-living adjustment for the these new members’ retirement benefits, Hopkins said.

Rep. Homer Lenderman, D-Brookland, said he worried the bill would open the door for the Legislature to make additional cuts for new employees in the future.

In other business, the committee endorsed Senate Bill 137 by Sen. Bill Sample, R-Hot Springs, to increase Arkansas Local Police and Fire Retirement System’s vesting requirement for retirement benefits for members hired on or after July 1 from five years to 10 years, extend the deferred retire-

ment plan from five years to a maximum of seven years, and grant participants in the deferred plan a 3 percent costof-living adjustment during their sixth and seventh year in the plan.

It also endorsed House Bill 1164 by Rep. Allen Kerr, D-Little Rock, to allow a member of a local police and retirement pension plans’ deferred retirement plan to be hired by a participating city as long as the member has a break in service of at least 30 days as a police officer, starts working in another law-enforcement position, and becomes a member of the Arkansas Local Police and Fire Retirement System.

The bill would apply to members of these local pension systems after their break in service regardless of their original date of hiring by a city that participates in the Arkansas Local Police and Fire Retirement System.

Clark said the bill would help fix the system’s error that allowed three retired members of Little Rock’s police pension plan to return to work and become members of the system, including Little Rock Police Chief Stuart Thomas, before the law changed in 2007.