What’s Going on in the States?

U.S. Supreme Court Justice Louis Brandeis, associate justice on the Court from 1916 to 1939, wrote in the 1932 ruling in New State Ice Co. v. Liebmann that "a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”

One of the most recent manifestations of this principle is that various states have established state-sponsored retirement plans to provide coverage to private-sector employees whose employers do not offer a retirement plan. 

This new feature for the NTSA Advisor provides a comprehensive look at what’s going on in the states and the most recent developments in their activity to provide and enhance retirement plan coverage. 

Expanding Employee Choice 

 

The Alaska Senate is considering a measure that would give certain employees who participate in the Public Employees' Retirement System of Alaska and the teachers' retirement system an opportunity to choose between the defined benefit and defined contribution plans those systems offer. 

Senate Majority Leader Cathy Giessel (R-Anchorage) introduced SB 88 on March 1. 

Participation and Transfers. The bill provides that a teacher who was first hired after June 30, 2006, and before the effective date of that section, and who is a member of the teachers' retirement system DC plan may, before Nov. 1, 2024, make a one-time election to participate in the DB plan and transfer all contributions that have been made or should be made to the DC plan for service the member completes before the effective date of the member’s participation in the DB plan. The transferred contributions shall be used to purchase credited service in the DB plan on an actuarial equivalent basis determined by the Alaska Retirement Management Board. 

The bill also includes provisions that would amend Alaska law to provide that an employee or former employee who first became a member of the plan before July 1, 2006, and who (1) received credit for service and (2) qualifies, may transfer those periods of employment to the plan. He or she also may receive credit for retroactive membership service for employment before June 5, 1988, if the employee or former employee met the requirements listed in the bill at the time of the employment.

Contributions. The measure also would amend Alaska law to provide that an employer that employs a member who first participates in the plan after June 30, 2006, shall contribute to the system every payroll period an amount equal to the greater of:

1. a per capita amount calculated by applying a rate, determined by the Alaska Retirement Management Board, of not less than 12% of the total monthly base salaries the employer pays to all members who first became members of the plan after June 30, 2006; or 
2. a per capita amount, determined by the board, that is equal to the amount calculated under (a) of this section expressed on a per capita basis. 

It also provides that the board could increase the percentage rate; however, the increase must be based on a concurrent increase, if any, in the member contribution rate. 

Retiree Health Benefits. The bill would establish the State of Alaska Teachers’ and Public Employees’ Retiree Health Reimbursement Arrangement Plan for teachers who first become members of teachers' retirement system after June 30, 2006, and employees of the state, political subdivisions of the state, and public organizations of the state who first become members of the Public Employees' Retirement System of Alaska after that date.

Employee Elections. Employee elections would have to be made in writing on one or more forms and in the manner prescribed by the administrator. Before accepting an election to participate in a DB plan, the administrator shall provide the employee who plans on making an election to participate in a DB plan with information, including calculations to illustrate the effect of moving the employee’s retirement plan from a DC plan to a DB plan as well as other information that informs the employee of potential consequences of the employee's election. Further, such elections would be irrevocable.

Status. SB 88 is before two Senate committees: (1) Labor and Commerce and (2) Finance. 

Investment of Plan Funds

 

In Georgia, Sen. Marty Harbin (R-Tyrone) introduced SB 266, on Feb. 27, 2023. The bill would amend the Public Retirement Systems Investment Authority Law to establish a fiduciary duty to invest retirement assets solely in the financial interests of plan participants and their beneficiaries.

More specifically, it provides that a plan fiduciary shall not (1) subordinate the interests of the participants and their beneficiaries or (2) sacrifice investment returns or accept increased investment risks in the promotion of any nonpecuniary interests. Such nonpecuniary interests shall include, but shall not be limited to, the furtherance of any social, political, or ideological interests. 

The original bill had included a provision that would have revised the minimum and maximum allowable benefit multiplier for current and future retirees of the Public School Employees Retirement System. It provides that upon retirement on the normal retirement date, the minimum amount of each monthly retirement payment shall be increased from $16.50 to $17, multiplied by the number of the member's years of creditable service. However, that provision was not in the version of the bill passed by the Senate. 

The state Senate passed the bill on March 6 in a 54-0 vote; it is now before the state House of Representatives. 

Enhancing Coverage 

 

The High Plains: majestic broad expanses, amber waves of grain. And those waves are swaying in a recent breeze of  enhancing the coverage available through state plans. 

North Dakota. In North Dakota, the public employee retirement system coverage includes temporary employees. A bill, SB 2239, is before the state Senate that would increase the amount those employees contribute to the system by 1%, beginning with the monthly reporting period of January 2024. The bill was introduced in the Senate on March 3, 2023; that chamber’s State and Local Government Committee held a hearing on the bill on March 9. The state House of Representatives already passed its version of this bill on Feb. 22 in a 77-16 vote. 

Montana. In neighboring Montana, Rep. Terry Moore (R-Billings) introduced HB 226 on Jan. 11, 2023. It would establish a pension special trust fund in the state retirement system that could only be used to cover any difference between the actuarially determined employer contribution and the base rate defined under state law. Further, by July 1, 2023, it would require that state treasurer to transfer $300 million from the Montana general fund to that trust fund. The bill passed in the House of Representatives on Feb. 27; it is now before the state Senate.