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(Parenthesis ( ) Indicate Revenue Decreases)

Companion to/Relates to SB 38 ERA Military Service Credit; HB117 ERA Service Credit

SOURCES OF INFORMATION

Education Retirement Board (ERB)

SUMMARY

Synopsis of HEC amendment

This amendment strikes language that changes the purchase of service credit from twenty four percent of average annual salary (24%) to twelve percent (12%) of the members current salary, or their salary in the last year of employment.

Fiscal Implications of HEC amendment

This change will have a negative impact on the educational retirement fund. The extent to which this impact will be is unknown at this time. However, a conversation with the Director of the Educational Retirement Board at the Legislative Finance Committee on March 10, 1999, revealed that this amendment would have a significant negative impact on the fund and would diminish the actuarial soundness of the fund.

Synopsis of Bill

This bill would increase the purchase cost of service credit from ten and one-half percent of the average annual salary at the time of military service to twenty-four percent.

FISCAL IMPLICATIONS

Fiscal Implications of HEC amendment

This change will have a negative impact on the educational retirement fund. The extent to which this impact will be is unknown at this time. However, a conversation with the Director of the Educational Retirement Board at the Legislative Finance Committee on March 10, 1999, revealed that this amendment would have a significant negative impact on the fund and would diminish the actuarial soundness of the fund.

COMPANIONSHIP/RELATIONSHIP

SB 38 (M.J. Garcia) ERA Military Service Credit would amend the Education Retirement Act -removing certain restrictions on the purchase of military service credit.

HB 117 (M.H. Garcia) ERA Service Credit would allow provisional members who previously exempted themselves, to purchase service credit in the retirement fund.

The purchase of military service has federal authority under Uniform Services Employment Reemployment and Retirement Act (USERRA). Possible conflict with this law has not been analyzed.

TECHNICAL ISSUES

ERB favors the actuarial valuation of the fund at the time of service plus interest as a method. This method more accurately reflects the contribution amount that would protect actuarial soundness of the fund. While ERB does not think twenty-four percent will significantly diminish the soundness of the fund, it does not favor this method.

JBE/gm