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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

2-24-07

HB

SHORT TITLE Elected Official Exemption From PERA

SB 947

ANALYST Aubel

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

Indeterminate

Recurring

Legislative

Retirement

Fund

(.01)

See narrative Recurring

PERA

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HB 280, HB 595, HB 765, HB 411, SB 576, HB 800, HB 1109, HB 1100, and SJM 6

SOURCES OF INFORMATION

LFC Files

Response From

Public Employees Retirement Fund (PERA)

SUMMARY

Synopsis of Bill

Senate Bill 947 amends the PERA exclusion provisions by adding former elected officials and

former legislators to the list of those who may apply for exemption from participating in the

PERA retirement plan when employed by an affiliated employer.

FISCAL IMPLICATIONS

It is unknown whether this provision would encourage legislators or elected officials to retire

earlier than actuarially anticipated. Therefore, the impact on the Legislative Retirement Fund is

indeterminable.

PERA does note that SB 947 will have a negative impact on the PERA fund because PERA will

not receive either employer or employee contributions for a position subject to SB 947’s

exemption. Under current statute, the employer must pay both portions for employees returning

to work.

Senate Bill 947 – Page

2

SIGNIFICANT ISSUES

Under current law, a few categories of personnel may exempt themselves from PERA: elected

officials in their elected capacity, seasonal or student employees, an employee who files within

30 days from when his or her employer becomes affiliated with PERA, and employees under

certain other conditions and restrictions. SB 947 would expand this list to allow former elected

officials and former legislators the exemption provision.

The Internal Revenue Code (IRC) and regulations restrict the ability of a tax-deferred

governmental plan such as PERA to offer elective membership. SB 947 will allow certain

former elected officials and certain former legislators, who are already employed on July 1,

2007, to exempt themselves from PERA membership if they file a written exemption from

membership on or before September 30, 2007. A 401(a) governmental plan, like PERA, may

allow one-time, irrevocable elections upon commencement of employment or upon initial

eligibility to receive accruals under the plan. Lengthening the exemption period for a period up

to 24 months is acceptable to the IRS so long as the legislation provides for membership during

the “decision" period

. PERA notes that SB 947 may allow certain former elected officials and

former legislators to exempt themselves from membership years after commencement of

employment.

Due to these IRC regulations, PERA notes the following concerns regarding HB 947:

•

Whether allowing certain former elected officials and former legislators who are employed

by a PERA-affiliated employer to exempt themselves from membership within 90 days of

taking office complies with Internal Revenue Code regulations concerning elective

membership.

•

Whether allowing certain former elected officials and former legislators who are employed

by a PERA-affiliated employer on July 1, 2007 to exempt themselves from membership on

or before September 30, 2007, regardless of the hire date, complies with Internal Revenue

Code regulations concerning elective membership.

PERA also expresses the concern that SB 947 is designed to benefit only a very limited category

of public PERA-affiliated employees and will treat other PERA members in very similar

situations differently. This is likely to lead to a succession of further requests by other special

interests for a similar benefit enhancement. No other fulltime employees are eligible to exempt

themselves out of PERA unless they fall within a statutory exemption from membership. For

example, the elected official exemption for members serves the limited purpose of encouraging

people who had accumulated experience and wisdom in their years of public service to run for

elected office.

ADMINISTRATIVE IMPLICATIONS

SB 947 will have a minimal administrative impact on PERA. PERA will be required to target

employer education regarding changes to the elected official exemption and to process the

applications.

Senate Bill 947 – Page

3

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to HB 280, which creates a 20-year retirement plan for statewide E-911

telecommunicator workers.

Relates to HB 595, which creates a 20-year retirement plan for statewide district attorney

members.

Relates to HB 765, which proposes to add probation and parole officer members to State Police

Member and Adult Correctional Officer Member Coverage Plan 1.

Relates to HB 411, which creates a new member coverage plan under the PERA Act allowing a

20-year retirement plan for Law Enforcement Academy Instructor members.

Relates to SB 576, which creates a 20-year retirement plan for statewide district attorney

members.

Relates to HB 800, which proposes to add motor transportation officers and special investigator

members to State Police Member and Adult Correctional Officer Member Coverage Plan 1.

Relates to HB 1109, which creates a retirement act for public safety volunteers modeled after the

volunteer firefighters retirement act.

Relates to HB 1100, which proposes to add juvenile correctional officers to State Police Member

and Adult Correctional Officer Member Coverage Plan 1.

Relates to SJM 6, which proposes a 2-year moratorium on benefit enhancement legislation

affecting the Public Employees Retirement Association

OTHER SUBSTANTIVE ISSUES

It is important to note that the elected official exemption serves the limited purpose of

encouraging people who have accumulated experience and wisdom in their years of public

service to run for elected office after retiring from their former positions. The Legislature did

not intend to encourage those who are already serving to simultaneously collect a salary and

retirement benefits earned in the same position. Rainaldi v. Public Employees Retirement Bd.

,

115 N.M. 650, 857 P.2d 761 (1993).

Because SB 947 specifies “former" elected official or legislator, this bill does not propose

simultaneous employment. Rather, it would effectively allow those retiring from those positions

to resume positions in some public service capacity without participating in PERA. While the

notion of the accumulated experience and wisdom being utilized remains valid, the potential

consequences for active employees of reduced upward mobility cannot be underestimated.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Former elected officials and former legislators would be required to become active members of

PERA upon employment with an affiliated employer unless statutorily excluded.

NMSA 1978,

Section 10-11-3 (2006).

Senate Bill 947 – Page

4

POSSIBLE QUESTIONS

1.

Would this bill exempt such employees from any return-to work provisions, such as the

90 day “wait-out" period.

MA/mt