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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

1-22-07

1-31-07 HB 222

SHORT TITLE Judicial Retirement Service Credit Purchase

SB

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$4.0

$4.0 Non-Rec Judicial

Retirement

Association

(Parenthesis ( ) Indicate Expenditure Decreases)

Companion to HB 224

SOURCES OF INFORMATION

LFC Files

Response Received From

Public Employee Retirement Association (PERA)

SUMMARY

Synopsis of Bill

House Bill 222 would amend Section 10-12B-5 NMSA 1978 to allow Judicial Retirement

Association (JRA) members that have five or more years of service credit to purchase up to one

year of additional service credit.

FISCAL IMPLICATIONS

PERA reported that since HB 222 requires the JRA member to pay the full actuarial present

value for the service credit purchased, it is properly funded as required by Article XX, Section 22

of the New Mexico Constitution and will not have a negative fiscal impact on the fund.

However, PERA stated that PERA’s actuaries will charge PERA a fee for creating an actuarial

table for the service credit calculation, which is estimated to equal the fee charged for similar

actuarial reports. Unless the underlying actuarial assumptions changed materially, this fee

would be non-recurring.

House Bill 222 – Page

2

SIGNIFICANT ISSUES

According to PERA, the primary policy issue raised by HB 222 is whether a JRA member

should be able to purchase one year of service credit for time not earned. Current law requires

that all other service credit in the judicial retirement system must be earned either through

service to a public employer, military or prisoner of war service. The service credit in HB 222 is

not tied to any service requirement. Currently PERA members are permitted to purchase

additional service credit in this manner under the PERA Act.

It is not known at this time how many of the approximately 110 active JRA members will

request to purchase this time. Currently, requests for the purchase of service credit are limited to

those who have served in the military or who meet very specific criteria. HB 222 expands the

group of persons eligible to purchase service credit.

PERFORMANCE IMPLICATIONS

HB 222 should not impact any PERA performance measures.

ADMINISTRATIVE IMPLICATIONS

PERA noted that the administrative impact on PERA will be in calculating the actuarial present

value and processing the added service credit. In addition, PERA will be required to amend its

regulations to address the statutory changes to the PERA Act.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

A companion bill, HB 224, proposes to allow Magistrate Retirement Association members that

have five or more years of service credit to purchase up to one year of additional credit.

OTHER SUBSTANTIVE ISSUES

PERA noted that on December 28, 2006, the PERA board voted to support legislation that would

allow JRA members that have five or more years of service credit to purchase up to one year of

additional service credit. The PERA Board believes that it is equitable to provide JRA members

with the same statutory ability to purchase additional service credit in this manner that is now

only available to PERA members.

Furthermore, PERA stated that the purchase of additional service credit proposed by HB 222 can

be particularly important to a JRA member who is initially appointed to fill an unexpired term.

Since terms of office generally end on December 31

st

of the calendar year, a JRA member’s term

of office may end within months of his or her becoming eligible to retire. A JRA member who

would like to retire has no choice but to run for reelection in order to accrue these few additional

months of service credit. Allowing JRA members to purchase up to one year of additional

service credit would remedy this problem.

House Bill 222 – Page

3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

According to PERA, JRA members will be required to meet the age and service requirements for

retirement. The JRA Act will continue to require that the purchase of optional service credit

must be earned either through personal service, military or prisoner of war service.

MA/nt