House Committee on Finance (03/01/2012)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON FINANCE

Date:	03/01/2012	ATTENDANCE

Time:	10:06 AM to 01:27 PM	Acree	X
		Beezley	X
Place:	LSB A	Conti	X
		Holbert	X
This Meeting was called to order by		Hullinghorst	X
	Representative DelGrosso	Kagan	X
		Kefalas	X
This Report was prepared by		Labuda	X
	Ron Kirk	McCann	X
		Pabon	X
		Swalm	X
		Swerdfeger	X
		DelGrosso	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB12-1150 HB12-1142		Amended, Referred to the Committee of the Whole Amended, Referred to Appropriations

10:07 AM -- House Bill 12-1150 - Concerning PERA's Highest Average Salary Calculation (For Action Only)

(The House Finance Committee initially heard testimony and discussed this bill on February 23, 2012.)
Representative Priola, prime sponsor, explained that House Bill 12-1150 changes the manner in which the benefit amount payable to most members in the Public Employees' Retirement Association (PERA) is calculated. He noted that for members who are not eligible for retirement as of January 1, 2013, benefits will be calculated using seven periods of the member's highest average salary (HAS) rather than three. Representative Priola noted that the bill applies to all members, except those in the Judicial division who did not transfer from the Denver Public Schools (DPS) division.

Representative Priola distributed Amendment L.001 (Attachment A) and explained that it would change the salary calculation in the bill so that it only applies to newly-hired state employees and those who have not vested their pension benefits. The committee discussed the fiscal note and the potential change in the impact of the bill on the unfunded liability of the pension fund.

The committee discussed whether there had been any research done on the potential change in the impact of the bill as amended. Representative Priola noted that at the time of the meeting, there was no formal analysis of the bill as amended. After a brief committee discussion, the following action was taken by the committee.


BILL:	HB12-1150
TIME:	10:07:33 AM
MOVED:	Conti
MOTION:	Moved Amendment L.001 (Attachment A). The motion passed on a vote of 9-4.
SECONDED:	Holbert
		VOTE
	Acree	Yes
	Beezley	Yes
	Conti	Yes
	Holbert	Yes
	Hullinghorst	No
	Kagan	Yes
	Kefalas	No
	Labuda	No
	McCann	Yes
	Pabon	No
	Swalm	Yes
	Swerdfeger	Yes
	DelGrosso	Yes

YES: 9 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:	HB12-1150
TIME:	10:44:36 AM
MOVED:	Swalm
MOTION:	Refer House Bill 12-1150, as amended, to the Committee of the Whole. The motion passed on a vote of 7-6.
SECONDED:	Holbert
		VOTE
	Acree	Yes
	Beezley	Yes
	Conti	Yes
	Holbert	Yes
	Hullinghorst	No
	Kagan	No
	Kefalas	No
	Labuda	No
	McCann	No
	Pabon	No
	Swalm	Yes
	Swerdfeger	Yes
	DelGrosso	Yes

Final YES: 7 NO: 6 EXC: 0 ABS: 0 FINAL ACTION: PASS

10:56 AM -- House Bill 12-1142 - Concerning Defined Contribution Plans

Representative DelGrosso, prime sponsor, explained that House Bill 12-1142 allows any eligible employee of an employer that belongs to the Public Employees' Retirement Association (PERA) to join the defined contribution plan. He continued by saying that existing employees must make a written election on or before December 31, 2012, in order to transfer from the defined benefit plan to the defined contribution plan. All new employees hired after the bill's effective date have the option to join either plan and are subject to existing state law concerning membership in the defined benefit and defined contribution plans. Representative DelGrosso distributed Amendment L.002 (Attachment B) and explained that the amendment would change the bill so that the option of the defined contribution plan would be targeted toward newly-hired and those state employees who are not vested in terms of PERA retirement.

The committee discussed the financial health of the PERA pension fund and the options that state workers have in terms of choosing either the defined benefit or defined contribution plans. The discussion continued on the retirement payment options of a PERA plan and a Social Security option.

The discussion shifted to the potential change in the fiscal note given the passage of Amendment L.002.

The following persons testified:

11:32 AM -- Mr. Walker Stapleton, State Treasurer, testified in support of the bill. He noted that this bill will give a choice to PERA members in terms of investing in their own retirement. Mr. Stapleton commented saying currently, about 1 percent of all state workers are on a defined contribution plan. He continued by saying that most members do not have the choice to participate in a defined contribution plan. Mr. Stapleton noted that choice of retirement plans can be advantageous for state workers.

The committee discussed whether House Bill 12-1142 has the potential to increase PERA's unfunded liabilities if more workers opt out of a defined benefit plan and choose a defined contribution plan.

12:00 PM -- Mr. Greg Smith, General Counsel for PERA, testified in opposition of the introduced bill. Mr. Smith noted that the costs of the bill will be reduced if the bill is amended to affect only new hires. Mr. Smith spoke about assumptions tied to the estimates in the fiscal note. He noted that the numbers in the fiscal note were based on the assumption that 15 percent of new hires would opt into a defined contribution plan. Mr. Smith noted that the defined benefit plan offers state employees adequate disability coverage. With the defined contribution plan, there is no disability coverage.

Mr. Smith continued saying that the introduced bill will increase the unfunded liability of the PERA pension plan. Mr. Smith pointed out that most state workers do not have the safety net of Social Security and therefore if they invest in a defined contribution plan, and the markets suffer, there is no safety net. Mr. Smith closed by discussing the changes to the pension system given the passage of Senate Bill 10-001.

12:35 PM -- Ms. Eileen Bond, representing the Colorado Senior Lobby, testified in opposition of the bill. Ms. Bond discussed the risk of 401 (k) plans as pension mechanisms in America and closed speaking about the advantages of defined benefit plans.

12:44 PM -- Mr. Don Schaefer, representing himself, and the Colorado Coalition of Retirement Security, testified in opposition of the bill. Mr. Schaefer began by discussing the history of the PERA pension plan and recommended that the legislature wait five years after the passage of SB 10-001 before making more changes to the pension plan. Mr. Schaefer closed by noting the costs of administering defined contribution plans.

01:02 PM -- Mr. John MacPherson, representing the Colorado Coalition for Retirement Security, testified in opposition of the bill. Mr. MacPherson discussed the proposed changes under House Bill 12-1142 and the options under a defined contribution plan. He closed by speaking about the risk associated with market investments.

01:07 PM -- Mr. Daniel Chapman, AARP, testified in opposition of the bill. He noted that the bill would undermine Senate Bill 10-001 and increase the unfunded liability of the pension fund. Mr. Chapman noted that the bill is unnecessary because it is not wanted by most members. He continued by saying that the defined benefit plan is one of the main incentives to work for the state of Colorado. Mr. Chapman closed by noting that the loss of disability benefits is not worth the risk of choosing a defined contribution plan over the defined benefit plan.

01:14 PM -- Mr. Charles Olmsted, testified in opposition of the bill. He closed by discussing the potential impacts of defined contribution plans.

01:17 PM -- Ms. Elizabeth Feldman, representing herself, testified in opposition of the bill.


BILL:	HB12-1142
TIME:	01:19:26 PM
MOVED:	DelGrosso
MOTION:	Moved Amendment L.002 (Attachment B). The motion passed on a vote of 9-4.
SECONDED:	Holbert
		VOTE
	Acree	Yes
	Beezley	Yes
	Conti	Yes
	Holbert	Yes
	Hullinghorst	No
	Kagan	Yes
	Kefalas	No
	Labuda	No
	McCann	Yes
	Pabon	No
	Swalm	Yes
	Swerdfeger	Yes
	DelGrosso	Yes

YES: 9 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:	HB12-1142
TIME:	01:21:07 PM
MOVED:	Beezley
MOTION:	Refer House Bill 12-1142, as amended, to the Committee on Appropriations. The motion passed on a vote of 7-6.
SECONDED:	Conti
		VOTE
	Acree	Yes
	Beezley	Yes
	Conti	Yes
	Holbert	Yes
	Hullinghorst	No
	Kagan	No
	Kefalas	No
	Labuda	No
	McCann	No
	Pabon	No
	Swalm	Yes
	Swerdfeger	Yes
	DelGrosso	Yes

Final YES: 7 NO: 6 EXC: 0 ABS: 0 FINAL ACTION: PASS

01:27 PM

The committee adjourned.