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F I S C A L I M P A C T R E P O R T
SPONSOR Fox-Young
ORIGINAL DATE
LAST UPDATED
02/13/06
HB 547
SHORT TITLE Legislative Retirement Coverage Plan Changes
SB
ANALYST Geisler
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
Indeterminate,
see fiscal impact
Recurring Public Employees
Retirement Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Responses Received From
Public Employees Retirement Association (PERA)
SUMMARY
Synopsis of Bill
House Bill 547 decreases legislative retirement benefits for current and future legislative mem-
bers whose terms of office end on or after January 1, 2006. Under HB 547, future and current
legislators will receive retirement benefits calculated under State Legislator Member Coverage
Plan 1 (Legislative Plan 1). The enhancement benefits provided under State Legislator Member
Coverage Plan 2 would no longer be available to previously enrolled active Legislator members;
all future pension benefits for affected Legislator members would be paid under Legislator Plan
1s enhanced benefits.
FISCAL IMPLICATIONS
By decreasing retirement benefits, PERA believes that HB 547 may have a favorable fiscal im-
pact on the PERA Fund. As a result of Legislative Retirement Plan changes in 2003, there has
been a substantial increase in participation by eligible legislators (retired membership increased
by 30%; inactive membership increased by 49%). For the year ending June 30, 2005, the Legis-
lative Retirement Fund has a funding ratio of accrued valuation assets to accrued liabilities of
61% (80% is the industry standard benchmark for fund solvency).
pg_0002
House Bill 547 Page
2
SIGNIFICANT ISSUES
HB 547 conflicts with Article XX, Section 22 of the New Mexico Constitution. Members of
Legislative Plan 2 have a constitutionally protected property interest in retirement benefits under
the plan (upon meeting the minimum service requirements of an applicable retirement plan a
member of a plan shall have a vested property right with due process protections).
ADMINISTRATIVE IMPLICATIONS
The administrative impact of HB 547 on PERA will be in administering another member cover-
age plan for Legislators. There will be a minimal administrative impact on PERA. PERA will
be required to amend its regulations to address the statutory changes to the PERA Act.
TECHNICAL ISSUES
In order to modify retirement coverage plans for future legislators, a new Legislative Plan 3 must
be created and apply to Legislators prospectively.
OTHER SUBSTANTIVE ISSUES
Background on Legislative Retirement
In 2003, the legislature amended the legislative retirement plans to provide optional increased
retirement benefits for certain legislators. Legislative Plan 1 was amended to provide for op-
tional increased pension benefits for Legislators who served terms prior to January 1, 2004. Leg-
islative Plan 1 closed to new members on December 31, 2003.
Currently, all current and future legislator members are covered under Legislative Plan 2, unless
they elected to be covered by Plan 1 prior to December 31, 2003. Under Legislative Plan 2, leg-
islator members will receive an amount equal to 11% of the of the per diem rate in effect, pursu-
ant to Section 2-1-8 NMSA 1978, on December 31 of the calendar year the legislator retires mul-
tiplied by 60 and further multiplied by credited service. Annual member contributions under
Legislative Plan 2 are $500.00 and members are eligible to retire at any age with 10 years of ser-
vice credit. The State contributes amounts sufficient to finance membership of members under
the new legislative coverage plan on an actuarial reserve basis from the Legislative Retirement
Fund in the State Treasury, which is independently invested to finance all legislative retirements.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
All current and future legislator members are covered under Legislative Plan 2, unless they
elected to be covered by Plan 1 prior to December 31, 2003. Under Plan 2, legislator members
are eligible to receive an amount equal to 11% of the of the per diem rate in effect, pursuant to
Section 2-1-8 NMSA 1978, on December 31 of the calendar year the legislator retires multiplied
by 60 and further multiplied by credited service. Annual member contributions under Legisla-
tive Plan 2 are $500.00 and members are eligible to retire at any age with 10 years of service
credit.
pg_0003
House Bill 547 Page
3
GG/nt