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| SPONSOR: | Marquardt | DATE TYPED: | 02/14/00 | HB | 247 | ||
| SHORT TITLE: | Educational Contribution/Retirement Benefits | SB | |||||
| ANALYST: | Eaton | ||||||
| Recurring
or Non-Rec |
Fund
Affected | ||||
| FY00 | FY01 | FY00 | FY01 | ||
| Educational Retirement | |||||
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates/Conflicts with/Companion to/Relates to
SOURCES OF INFORMATION
State Department of Education
Educational Retirement Board (ERB)
Watson Wyatt & Company
SUMMARY
Synopsis of Bill
This bill seeks to amend the Educational Retirement Act to allow new members, hired after July 1, 2000 to elect either the current ERA plan or two alternative plans established by the bill. The election would be irrevocable during the member's career with an ERA employer(s).
The first option to the regular ERA plan would allow the new member to choose a reduced employee contribution from 7.6% to 3.6% of salary. If a member elects this option, upon retirement the benefit would be 1.77% of the Final Average Salary (FAS), not the 2.35% of the regular ERA plan.
The second option allows the new member to elect to have no employee contributions. This option would provide a retirement benefit of 1.25% of FAS.
Employer contributions for both options would remain the same as the regular ERA plan at 8.65%.
Significant Issues
The ERA actuarial (Watson Wyatt & Company) is concerned that although the total member-plus -employer contribution rates are proportional to the different possible formula multipliers, the result may still not be actuarially sound. The believe that it will be necessary to carry out a significant actuarial study of the bill.
FISCAL IMPLICATIONS
The Educational Retirement Board (ERB) report that the fiscal impact on the ERA fund would be negative. Exact impacts would require an actuarial study.
ADMINISTRATIVE IMPLICATIONS
The Educational Retirement Board (ERB) report that additional staff and programming time will be required to implement the two new retirement plans.
POSSIBLE QUESTIONS
While these two new plans would reduce employee contributions, and thus increase employee take home pay, would employees understand that their retirement annuity will be significantly smaller as well?
JBE/gm