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

SPONSOR Martinez, W. Ken

ORIGINAL DATE

LAST UPDATED

1-31-08

2-5-08 HB 469/aHHGAC

SHORT TITLE Legislative Retirement Time Period Change

SB

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08

FY09

FY10 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$.01 Minimal

See

narrative Legislative

Plan 2

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to House Bill 290.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Employees Retirement plan (PERA)

SUMMARY

Synopsis of HHGAC Amendment

The House Health and Government Affairs Committee Amendment requires that eligible

members pay interest on the contribution at a rate set by the PERA board.

Synopsis of Original Bill

House Bill 469 amends the PERA Act to provide a six-month window for legislators or the

lieutenant governor serving on July 1, 2008 to be eligible for State Legislator Member Coverage

Plan 2. HB 469 will allow those legislators and lieutenant governor to elect to become members

by paying a $500.00 contribution for each year of credited service, less the amount of prior

contributions made by the member for that service, on or before December 31, 2008.

FISCAL IMPLICATIONS

Legislative Retirement Plan 2 (“Plan") is unlike other PERA coverage plans in that it is not

funded based upon contributions from salary. Legislators are not salaried employees and their

“retirement benefits" do not derive from employment. State Legislator Member Coverage Plan 2

members are required to pay annual contributions of $500.00 per year for service. The State

contributes the amount sufficient to finance the membership of Legislators under State Legislator

House bill 469/aHHGAC – Page

2

Member Coverage Plan 2 on an actuarial reserve basis. See, NMSA 1978, Section 10-11-43.

The Legislature transfers $2.4 million annually, which applies to both the normal costs

associated with State Legislator Member Coverage Plans 1 and 2 and their respective unfunded

actuarial accrued liability (“UAAL").

The UAAL as of July 1, 2007 is $2.5 million. PERA did not provide an estimate on the impact of

enhancing benefits for this group on the UAAL, although the actuary notes that the funded status

of the plan improved from 70.4 percent to 87.5 percent due to accelerated employer contributions

and favorable experience of fewer retirements and deaths than anticipated. Assuming continued

positive contributors to the plan, the impact would most likely be minimal.

PERA does note that HB 469 excludes payment of interest on the contributions from the date of

first eligibility for State Legislator Member Coverage Plan 2 to the date of payment. PERA

maintains that compounded interest at the rate set by the PERA’s board would be appropriate.

SIGNIFICANT ISSUES

PERA states that the key policy issue is whether state legislators and the lieutenant governor,

who did not exercise their right to join State Legislator Member Coverage Plan 2 members by a

previous statutory deadline, should be given the opportunity to do so by making contributions

totaling $500 for each year of service credit earned on or before December 31, 2008.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to House Bill 290, which proposes to provide a time period for those eligible to make

payments to Legislative Plan 1.

OTHER SUBSTANTIVE ISSUES

PERA provides the following background information regarding Plan 2:

State Legislator Member Coverage Plan 2 is applicable to state legislators and lieutenant

governors who served terms of offices that ended on or after December 31, 2002. To be

covered under State Legislator Member Coverage Plan 2, a legislator or lieutenant

governor must elect to be a member no later than 180 days after first taking office, or for

those eligible members serving on July 1, 2003.

In 2003, State Legislator Member Coverage Plan 2 was enacted to provide for optional

increased pension benefits for legislators who served terms ending on or after January 1,

2003. Eligible legislators who had previously enrolled in Legislator Member Coverage

Plan 1 were eligible to purchase prior service credit by making contributions totaling

$500.00 for each year of earned service credit to enhance benefits on or before December

31, 2003. If a contribution totaling $500.00 per year of service was made, State

Legislator Member Coverage Plan 2 members would receive an annual pension benefit of

11% of the per diem rate in effect on December 31

st

of the calendar year the member

retires multiplied by 60 and further multiplied by their years of credited legislative

service.

The per diem rate as of June 30, 2007 is $142.00.

House bill 469/aHHGAC – Page

3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Those current state legislators and lieutenant governor who did not make the election to be

members of State Legislator Member Coverage Plan 2 within prior statutory deadlines will

continue to be precluded from joining State Legislator Member Coverage Plan 2.

AMENDMENTS

Section 1. TEMPORARY PROVISION – TIME PERIOD FOR ELIGIBILITY FOR STATE

LEGISLATOR MEMBER COVERAGE PLAN 2. --

Notwithstanding the provisions of Section 10-11-13.1 and 10-11-43.6 NMSA 1978, a legislator

or lieutenant governor elects to become a member and makes a contribution in an amount that,

when added to previous contributions, totals five hundred dollars ($500) plus interest on the

amount paid from December 31, 2003 to the date of payment at a rate to be determined by the

retirement board created pursuant to the Public Employees Retirement Act

for each year of

credited service earned prior to December 31, 2008.

MA/mt