BILL SUMMARY for SB09-066
SENATE COMMITTEE ON FINANCE
|Adopt Amendment L.001 (Attachment C). The motion
Refer SB 09-066 as amended to the Committee on App
|Pass Without Objection
The meeting was called to order. A quorum was present.
09:45 AM -- Senate Bill 09-066
Senator Tochtrop, prime sponsor, explained the provisions of SB 09-066. The bill transfers the administration of two state employee retirement plans from the Colorado Department of Personnel and Administration (DPA) to the Public Employees' Retirement Association (PERA), effective date of July 1, 2009. These plans include the two state defined contribution plans and the state's optional deferred compensation (457) plan. The bill also abolishes the State Deferred Compensation Committee.
Senator Tochtrop provided background about and reasons for the proposed legislation. She stated that the proposal was originally recommended by the Legislative Audit Committee after an audit conducted last summer recommended that all of the defined contribution plans be administered by the PERA. She also discussed the challenges facing the DPA and the agency's ability to fulfill its obligations to administer the current defined contribution plan. She further explained that the DPA has limited staff, which makes it difficult to meet current needs. According to Senator Tochtrop, the Legislative Audit Committee specifically recommended additional full time equivalent (FTE) staff to fulfill the obligations, but she recognizes the fiscal constraints facing Colorado make it difficult to increase DPA staff.
Senator Tochtrop indicated that the witness could answer questions about fees and costs.
The following witnesses testified on the bill:
09:49 AM -- Mr David Kaye, DPA, testified in support of the bill. Mr. Kaye described the current retirement options for state employees. First, he distributed an outline of these options (Attachment A) and a summary of SB 09-066 (Attachment B). He stated that employees currently have a choice between two defined contribution plans administered by the DPA and by the PERA and have access to a deferred compensation 457 plan. Mr. Kaye said that the existing state plan does not meet the current needs of employees, particularly newly hired employees. Mr. Kaye also stated that merging the two plans would allow any defined contribution plans to take better advantage of existing economies of scale, which has the benefit of reducing the costs of administering the plans. The current state defined contribution plan is too small to be cost-effective for the state, said Mr. Kaye.
09:54 AM -- Mr. Greg Smith, PERA, came to the table and responded to questions from the committee about PERA and the proposed bill. Discussion ensued about whether the bill would limit the amount of fees in the new plan. Mr. Smith stated the bill does not limit the amount because PERA can obtain the best share price for everyone due to the size of its holdings and assets by combining all mutual fund offerings into one plan. He said PERA wants to provide transparency about what costs are being paid by investors. The agency would like to demonstrate that it can lower investment costs rather than simply showing one monthly fee, he said. In response to questions, Mr. Smith noted that employees can still choose between a defined benefit and defined contribution plan and can switch in the first five years of employment.
The committee then discussed the role of the General Assembly, the PERA board, and services available to current employees.
Senator Tochtrop distributed a copy of Amendment L.001 to the committee (Attachment C). Mr. Smith returned to the table and explained that amendment L.001 makes several technical changes, allows PERA to grandfather any employer into the PERA administered plan, and grants authority to the PERA board to offer 403(b) plans to certain state employees.
Senator Sandoval closed public testimony.
| 10:08:06 AM
|Refer SB 09-066 as amended to the Committee on Appropriations. The motion passed 7-0.
Final YES: 7 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS