HCS HB 1305 -- PUBLIC EMPLOYEE RETIREMENT SYSTEMS

SPONSOR:  Smith (118)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Retirement
by a vote of 10 to zero.

This substitute changes the laws regarding several public
employee retirement systems.

LOCAL GOVERNMENT EMPLOYEES' RETIREMENT SYSTEM (LAGERS)

Currently, a political subdivision cannot create a pension plan
similar to LAGERS for its employees who are not police officers
or firefighters unless it has an assessed valuation of $100
million or more.  The substitute specifies that a political
subdivision cannot create a pension plan similar to LAGERS for
any employees unless it has an assessed valuation of $500 million
or more.

After January 1, 2007, volunteer fire protection associations and
fire protection districts must establish new pension plans under
the provisions of Chapter 70, RSMo, unless the new plan is the
result of consolidating the plans of two or more fire protection
districts existing prior to January 1, 2006.

MISSOURI DEPARTMENT OF TRANSPORTATION AND HIGHWAY PATROL
EMPLOYEES' RETIREMENT SYSTEM (MPERS)

If the actuary for MPERS determines that the funded ratio of the
system is below 50% for three consecutive years, the plan will
close to new members effective January 1 of the following year.

GENERAL PROVISIONS

The substitute:

(1)  Defines "defined benefit plan," "defined contribution plan,"
"funded ratio," and "lump sum benefit plan";

(2)  Changes the contribution period, from 40 to 30 years, for
which plans may not exceed unfunded accrued liabilities;

(3)  Requires retirement systems to establish mandatory board
member education programs regarding responsibilities, ethics,
governance, plan design, administration of benefits, investments,
legal liability, and actuarial principles.  Board members will be
required to attend at least two continuing education programs
each year;

(4)  Prohibits appointing authorities, board members, or
employees from receiving a gain or profit from funds or
transactions of the plan except benefits which are common to all
members of the plan.  If political contributions or compensation
are accepted to influence the investment of system funds, the
person will forfeit his or her office and be subject to penalties
prescribed for bribery;

(5)  Specifies that any trustee, employee, or plan participant
convicted of a plan-related felony directly connected with his or
her duties will be ineligible for retirement benefits;

(6)  Prohibits, after August 28, 2006, plans with a fund ratio of
less than 80% from providing additional benefits.  Plans with a
fund ratio greater than 80% can adopt benefit enhancements if the
ratio does not decrease more than 10% or below 75%.  The unfunded
actuarial accrued liabilities associated with these benefit
changes will be amortized over a period not to exceed 15 years;
and

(7)  Requires plans with a ratio of less than 60% to have an
actuary prepare an accelerated contribution schedule based on a
descending amortization period.  If a plan's actuary determines
that the ratio is below 50% for three consecutive years or the
ratio is below 60% and the plan is not meeting 100% of the
actuarially required contribution payment, the plan will be
closed to new members effective January 1 of the following year.

FISCAL NOTE:  No impact on state funds in FY 2007, FY 2008, and
FY 2009.

PROPONENTS:  Supporters say that the bill is needed to ensure
that public pension plans remain viable.  Plans should be
encouraged to act responsibly.  It is also important that the
board members of plans attend educational programs so that they
can better understand the workings of a retirement plan.

Testifying for the bill was Representative Smith (118).

OPPONENTS:  Those who oppose the bill say they understand the
interest in safeguarding the assets of Missouri's public
retirement plans and agree that education is particularly
relevant given the turnover of public boards; however, while the
MPERS board believes a sound funding policy is basic to ensuring
the interests of plan participants, they oppose any legislation
that removes responsibility for funding decisions from the hands
of the plan fiduciaries.

Testifying against the bill was Missouri Department of
Transportation and Highway Patrol Employees' Retirement System.

OTHERS:  Others testifying on the bill say they agree with most
of the bill; however, they would like the funding ratio
requirement for new plan benefits to be at 70% or 75% instead of
80%.  It would be better if the unfunded actuarial accrued
liabilities associated with benefit changes could be amortized
over a period of 20 years instead of 15 years.

Others testifying on the bill were the Missouri State Council of
Firefighters; Black Jack Fire Protection District; and Florissant
Fire Protection District.

Marc Webb, Legislative Analyst

Missouri House of Representatives
93rd General Assembly, 2nd Regular Session
Last Updated November 29, 2006 at 9:42 am