State of Alaska
Fiscal Note
Bill Version: CSHB 55(FIN)
2021 Legislative Session
Fiscal Note Number: 2
(H) Publish Date: 5/17/2021
Identifier: HB55-DOA-DRB-5-17-21 Department: State Retirement Payments
Title: PEACE OFFICER/FIREFIGHTER RETIRE Appropriation: PERS State Assistance
BENEFITS Allocation: All Other PERS
Sponsor: JOSEPHSON OMB Component Number: 2866
Requester: (H) Finance
Expenditures/Revenues
Note: Amounts do not include inflation unless otherwise noted below. (Thousands of Dollars)
Included in
FY2022 Governor's
Appropriation FY2022 Out-Year Cost Estimates
Requested Request
OPERATING EXPENDITURES FY 2022 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Personal Services
Travel
Services
Commodities
Capital Outlay
Grants & Benefits
Miscellaneous 5,300.0 5,600.0 6,100.0 5,700.0 5,700.0
Total Operating 0.0 0.0 5,300.0 5,600.0 6,100.0 5,700.0 5,700.0
Fund Source (Operating Only)
1004 Gen Fund (UGF) 5,300.0 5,600.0 6,100.0 5,700.0 5,700.0
Total 0.0 0.0 5,300.0 5,600.0 6,100.0 5,700.0 5,700.0
Positions
Full-time
Part-time
Temporary
Change in Revenues
None
Total 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Estimated SUPPLEMENTAL (FY2021) cost: 0.0 (separate supplemental appropriation required)
Estimated CAPITAL (FY2022) cost: 0.0 (separate capital appropriation required)
Does the bill create or modify a new fund or account? Yes
(Supplemental/Capital/New Fund - discuss reasons and fund source(s) in analysis section)
ASSOCIATED REGULATIONS
Does the bill direct, or will the bill result in, regulation changes adopted by your agency? No
If yes, by what date are the regulations to be adopted, amended or repealed?
Why this fiscal note differs from previous version/comments:
Updated analysis section for HFIN amendment changing maximum employee contribution from 10% to 12%. There is no change in the
fiscal impact to the PERS system from this change and the attached actuarial analysis reflects the initial version of the legislation.
Prepared By: Ajay Desai, Director Phone: (907)465-4471
Division: Retirement and Benefits Date: 05/17/2021 01:00 PM
Approved By: Leslie Isaacs, Administrative Services Director Date:
OUT OF
05/17/2021
Agency: Office of Management of Budget REPORTED
Printed 5/17/2021 Page 1 of 8 HFC 05/17/2 021
Control Code: GWWSS
 CSHB 55(FIN) - Fiscal Note 2
FISCAL NOTE ANALYSIS
STATE OF ALASKA BILL NO. HB 55
2021 LEGISLATIVE SESSION
Analysis
This bill proposes to open the Public Employees' Retirement System (PERS) Defined Benefit Plan (DB) by adding a new benefit
tier or plan for peace officers and firefighters (P/F). New employees will be enrolled into this new benefit tier or plan of the
defined benefit plan. Existing PERS P/F Defined Contribution Retirement (DCR) members will be allowed an opportunity to
convert to the new defined benefit tier or plan.
The PERS system consulting actuary, BUCK Global LLC (Buck), has calculated the financial effects if this bill should pass as
written. The basic result is that there will be an increase to the PERS additional state contribution because a smaller portion of
the 22% employer contribution for the P/F members will be deposited to the defined benefit trust than is currently deposited
with the defined contribution distribution of funding.
Since this bill would take effect on July 1, 2021, there is no financial impact to Fiscal Year 2021. There is also no impact for
Fiscal Year 2022 because contribution rates for Fiscal Year 2022 have already been adopted by the Alaska Retirement
Management Board. If future experience matches the actuarial assumptions used to value the plan's liabilities, the dollar
increase on the PERS additional state contribution is reflected below:
Year FY2023 FY2024 FY2025 FY2026 FY2027
Dollars (in thousands) $5,300 $5,600 $6,100 $5,700 $5,700
Projected PERS additional state contributions beyond FY2027 are also expected to increase.
See attached letter from Buck dated April 28, 2021. As noted in Item A. on page 1 of the letter, "...by shifting active P/F
members (and all future P/F hires) from DCR to DB, the State will be taking on greater risk of higher [additional state]
contributions in future years. However, this risk is somewhat mitigated as long as the minimum contribution rate to the HB 55
trust (9%) is greater than the actuarially determined contribution rate for HB 55 members."
This legislation includes several cost containment levers. These levers include a minimum retirement age of 55 with 20 years of
service, flexibility for the Alaska Retirement Management Board to change the employee contribution rate as needed (up to
12 percent), a minimum 12 percent employer contribution rate, and the ability to suspend the post-pension retirement
adjustments if the plan's funding level for HB 55 members drops below 90 percent. Also, it does not include the Alaska Cost of
Living (10% of base benefit based on Alaska residency) for Police/Fire Fighters retirees of the new tier.
(Revised 1/13/2021 OMB/LFD) Page 2 of 2
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 CSHB 55(FIN) - Fiscal Note 2
April 28, 2021
Mr. Jim Puckett
Deputy Director/Chief Pension Officer
Division of Retirement and Benefits
State of Alaska
P.O. Box 110203
Juneau, AK 99811-0203
RE: Fiscal Note Analysis for HB 55
Dear Jim:
As requested, we are providing a fiscal note analysis for HB 55.
HB 55 is a proposed bill that would (i) allow for the transfer of Peace Officer/Firefighter (P/F)
active members from the State of Alaska Public Employees Retirement System Defined
Contribution Retirement Plan (PERS DCR) to the Public Employees Retirement System defined
benefit plan (PERS DB), and (ii) provide that all future P/F hires automatically enter PERS DB
rather than PERS DCR. In this letter, we use HB 55 members to refer to P/F members who are
affected by HB 55.
A. Impact of HB 55 on Projected Additional State Contributions for FY23 - FY27
Adverse plan experience (due to poor asset returns and/or unexpected growth in liabilities) or
changes to more conservative assumptions will increase the plans unfunded liabilities, which
results in higher Additional State Contributions. The impact of HB 55 on projected Additional State
Contributions depends on how large the unfunded liabilities become. If the Actuarially Determined
Contribution rate for HB 55 members pension and healthcare benefits exceeds 9%1, then HB 55
will lead to larger increases in Additional State Contributions compared to what would have
happened without HB 55. Also, by shifting active P/F members (and all future P/F hires) from
DCR to DB, the State will be taking on greater risk of higher contributions in future years.
However, this risk is somewhat mitigated as long as the minimum contribution rate to the
HB 55 trust (9%) is greater than the actuarially determined contribution rate for HB 55
members.
If future experience matches the actuarial assumptions used to value the plans liabilities as of
June 30, 2020, the Additional State Contributions for FY23-FY27 are projected to increase due to
HB 55 as shown in the table below. Projected Additional State Contributions beyond FY27 are
also expected to increase.
($ millions) FY23 FY24 FY25 FY26 FY27 5-Year Total
Increase in Additional State $5.3 $5.6 $6.1 $5.7 $5.7 $28.4
Contributions Under HB 55
1 The 12% minimum employer contribution rate for HB 55 members less the 3% HRA contribution.
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 CSHB 55(FIN) - Fiscal Note 2
Mr. Jim Puckett April 28, 2021
State of Alaska
The increase in Additional State Contributions can be explained by the pie charts below. These
show the distribution of the 22% of pay employer contribution for FY23 for HB 55 members
among the various trusts (similar distributions of employer contributions would apply to other
years). Because the percentage being deposited to the DB trust decreases (from 12.2% to
10.0%), the Additional State Contribution increases to make up the shortfall.
Current - FY23
5.0%
3.0% 12.2%
1.8%
DB Trust DCR Trust HRA DC
Reflecting HB 55 - FY23
3.0%
10.0%
9.0%
DB Trust HB 55 Trust HRA
2
HB55-DOA-DRB-5-17-21 Page 4 of 8 Control Code: GWWSS
 CSHB 55(FIN) - Fiscal Note 2
Mr. Jim Puckett April 28, 2021
State of Alaska
B. Summary of HB 55 Benefit Provisions
HB 55 would allow P/F members who are in PERS DCR to make a one-time irrevocable election
to transfer to PERS DB within 90 days of the July 1, 2021 effective date of the bill. HB 55 also
provides that all future P/F hires will enter PERS DB rather than PERS DCR. The PERS DB
benefit provisions that will apply to HB 55 members are summarized below:
Eligibility for normal retirement benefits is age 60 with 5 years of credited service, or age
55 with 20 years of credited service. The eligibility for healthcare benefits will be the same
as the current retiree medical eligibility provisions for P/F members in PERS DCR (i.e.,
age 65 with 10 years of credited service or any age with 25 years of credited service).
Member contributions are 8% of pay (and can be increased by the Alaska Retirement
Management Board (ARMB) to no more than 10% of pay).
Average pay used to determine retirement benefits is the 5 consecutive payroll years that
yields the highest average.
The normal retirement benefit is 2% of average pay for the first 10 years of service, and
2.5% of average pay for service over 10 years.
The Postretirement Pension Adjustment (PRPA) applies, but the Alaska residency-based
COLA does not apply to HB 55 members. The ARMB can reduce the PRPA for HB 55
members if the funded status of the HB 55 trust is less than 90%2.
Retiree medical benefits and member premiums are the same as under PERS DCR.
Surviving spouses are eligible for medical coverage only if the member had retired or was
eligible to retire at the date of death. Election to participate in the retiree medical plan
must be made at the later of age 70 or date of retirement. Retired members and
spouses must pay the full monthly premium prior to being eligible for Medicare.
C. Employer Contributions Under HB 55
In accordance with AS Section 39.35.255(a), each employer contributes 22% of pay.
Our understanding is that a new HB 55 sub-trust (HB 55 trust) will be established within
PERS DB and will be used exclusively to fund the pension and healthcare benefits of HB
55 members. Separate HB 55 trusts will be established for pension and healthcare
benefits.
Employers will continue to contribute 3% of pay to the HB 55 members Health
Reimbursement Arrangement (HRA) plan trust in accordance with AS Section 39.30.370.
Employer contribution rates will be separately determined for the pension and healthcare
benefits provided under HB 55.
Beginning in FY22, the employer contributions to the HB 55 trust will be the Actuarially
Determined Contributions for HB 55 members, but not less than 9% of HB 55 members
pay (12% minimum employer contribution under AS Section 39.35.255(i) less the 3%
HRA contribution)3. We assumed the 9% minimum employer contribution to the HB 55
trust will be allocated between the pension and healthcare HB 55 trusts based on the
Actuarial Accrued Liability of the HB 55 members pension and healthcare benefits.
2 The funded status of the HB 55 trust is projected to remain above 90% assuming future experience
matches the actuarial assumptions used to measure the plans liabilities.
3 We assumed the 9% employer contribution to the HB 55 trust in FY22 replaces what would have been
contributed in FY22 to the DCR plan for occupational death and disability benefits, retiree medical benefits
and DC matching contributions for transferred members.
3
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 CSHB 55(FIN) - Fiscal Note 2
Mr. Jim Puckett April 28, 2021
State of Alaska
The excess of the 22% of pay employer contribution over the sum of (i) the employer
contribution to the HB 55 trust, and (ii) the 3% HRA contribution will be deposited to the
PERS DB trust each year4.
D. Assets to be Transferred to the HB 55 Trust
In performing our analysis, we assumed various amounts will be transferred to the HB 55 trust as
described below:
a. The ac