FOUR teacher pen­sion bills ad­vance.

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - MICHAEL R. WICK­LINE

Four bills that would al­low the Arkansas Teacher Re­tire­ment Sys­tem to raise more money and-or cut its costs cleared the Joint Com­mit­tee on Pub­lic Re­tire­ment and Social Se­cu­rity Pro­grams on Mon­day.

Se­nate Bill 218 by Sen. Jeremy Hutchin­son, R-Lit­tle Rock, al­lows the re­tire­ment sys­tem’s trustees to in­crease the rate charged to em­ploy­ers, in­clud­ing school dis­tricts, from 14 per­cent of their em­ploy­ees’ pay­roll to 15 per­cent if the sys­tem’s pro­jected pay­off pe­riod for un­funded li­a­bil­i­ties ex­ceeds 18 years, rather than 30 years as cur­rent law al­lows, said sys­tem Ex­ec­u­tive Di­rec­tor Ge­orge Hop­kins. The in­crease in the bill would be in in­cre­ments of 0.25 per­cent­age point a year.

Any in­crease in the em­ployer rate may only oc­cur if the sys­tem im­ple­ments cost sav­ings from mem­ber ben­e­fit pro­grams or in­creased mem­ber con­tri­bu­tions, or both, mea­sured after July 1, 2013, equal to the value of the em­ployer rate in­crease be­fore or at the same time. Any em­ployer rate in­crease would be paid out of the Depart­ment of Ed­u­ca­tion bud­get, Hop­kins said

A 0.25 per­cent­age-point in­crease in the em­ployer rate would raise about $7 mil­lion a year, said com­mit­tee ac­tu­ary Jody Car­reiro.

School dis­tricts and other sys­tem em­ploy­ers paid $408.6 mil­lion into the sys­tem in 2016, while their em­ploy­ees con­trib­uted $128.6 mil­lion, ac­cord­ing to Hop­kins. The sys­tem has more than $15 bil­lion in in­vest­ments and more than 100,000 work­ing and re­tired mem­bers.

The sys­tem’s pro­jected pay­off pe­riod of its un­funded li­a­bil­i­ties dropped from 33 years as of June 30, 2015, to 29 years as of June 30 last year, ac­cord­ing to Gabriel, Roeder, Smith & Co. The to­tal of the un­funded li­a­bil­i­ties dropped from $3.7 bil­lion on June 30, 2015, to $3.57 bil­lion on June 30, 2016. Un­funded li­a­bil­i­ties are the amount by which the sys­tem’s li­a­bil­i­ties ex­ceed an ac­tu­ar­ial value of the sys­tem’s as­sets. Ac­tu­ar­ies of­ten com­pare un­funded li­a­bil­i­ties to a mort­gage on a house.

Hop­kins said teacher re­tire­ment sys­tem mem­bers may re­tire early after 25 years years of ser­vice — if they haven’t reached 60 years of age — with 85 per­cent of their re­tire­ment ben­e­fits un­der ex­ist­ing law.

House Bill 1286 by Rep. Johnny Rye, R-Tru­mann, al­lows trustees to fur­ther re­duce ben­e­fits when a per­son re­tires be­fore reach­ing 28 years of ser­vice. The early re­tire­ment re­duc­tion is now 5 per­cent for each year of leav­ing early; the bill would al­low a re­duc­tion of up to 15 per­cent a year.

The board chair­man in­di­cated the max­i­mum re­duc­tion would be 10 per­cent for each year of early re­tire­ment be­fore 28 years of ser­vice, Hop­kins said. That would mean a mem­ber re­tir­ing early after 25 years of ser­vice could re­ceive 70 per­cent of his re­tire­ment ben­e­fits, he said be­fore the com­mit­tee ad­vanced HB1286.

House Bill 1373 by Rep. Gary Def­fen­baugh, R-Van Buren, al­lows the sys­tem’s trustees to cut the stipend for re­tired mem­bers from $75 a month down to as low as $1 a month. The cut would be al­lowed if the pro­jected pay­off pe­riod for its un­funded li­a­bil­i­ties ex­ceeded 18 years rather than 30 years as cur­rent law al­lows, Hop­kins said.

Re­duc­ing the re­tired mem­bers’ $75 stipend to $50 a month would save the sys­tem about $15 mil­lion a year, which is equiv­a­lent to a 0.5 per­cent­age-point in­crease in the 14 per­cent rate of pay­roll charged to sys­tem em­ploy­ers, Hop­kins said be­fore the com­mit­tee en­dorsed HB1373.

HB1374 by Def­fen­baugh gives trustees the au­thor­ity to re­verse the 2009 com­pound­ing of re­tired mem­bers’ 3 per­cent cost-of-liv­ing ad­just­ment if the sys­tem’s pro­jected pay­off pe­riod for its funded li­a­bil­i­ties ex­ceeds 18 years, Hop­kins said. Cur­rent law al­lows that change if the pay­off ex­ceeds 30 years. The sys­tem’s board of trustees would be re­luc­tant to re­verse the com­pound­ing of the cost-of-liv­ing ad­just­ment, which would be com­plex to do, he said.

“It may not hap­pen at all,” Hop­kins said be­fore the com­mit­tee rec­om­mended House and Se­nate ap­proval of HB1374.

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