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House | June 21, 2016 | Chamber | House Retirement

Full MP3 Audio File

Your name if will you'll stand, John Wallace, John tell us a little bit about yourself? >> My name is John Wallace and I am from Wake County. >> All right, and Representative Simon who is your sponsor? >> [INAUDIBLE] >> Okay, well sorry this is wrong on the thing here. All right, Ryan Nagin, did I slaughter that? >> [LAUGH] >> Okay, all right. >> I am Marilyn from Mecklenburg and my Representative is [INAUDIBLE] >> All right, thank you. Abry/g Rodgers, that's a little easier to pronounce. >> 'm Abry/g I'm from [INAUDIBLE] County and [INAUDIBLE] >> All right, thank you for being with us today, and Alison Whitmire. >> I'm Ali, I'm from [INAUDIBLE] County and I'm paging for [INAUDIBLE] All right, would [INAUDIBLE] your daughter? >> Yeah. >> [LAUGH] >> Even I can figure that out. >> Thank you, and our sergeant-at-arms today are David [INAUDIBLE], Jonas Cherry, Bill Riley, and Mary Moore. All right. Thank you. All right. We have two bills for the committee today. The first one will be a senate bill 1135. And representative Horn is here to present that. [BLANK_AUDIO] >> Thank you Mr. Chairman and I want to compliment Barry on his well trimmed beard this morning. I didn't notice that the other day and I don't remember when you trimmed that back like that. Yeah- >> [COUGH] >> It'd take me about 37 years to grow one of those. [LAUGH] This morning I'm here to present the house bill 1135, retirement's credit for peace corps service. And very simply as you all know. You're here, you're public service. Public service is in fact a high calling. And it's a tough job. We need to be able to retract and retain high quality people that are committed to the concept of public service. When I was a kid and even Representative Michelle/g you were probably, >> Be careful [LAUGH] >> The peace corp was a big deal and I can remember that very well as a high school kid in a presentation of the peace corp so what we're trying to do is the same thing that's being done with a postal service and other organizations in the States, is to allow credit for peace corp to be purchased at no cost to the state of North Carolina, to be purchased for participation in the, I'm trying to read as fast as I'm talking here in the state employees retirement system, it allows our teachers to participate and it allows our local government employees to also participate so I would humbly ask for your support of house bill 1135. I do have here and if you have some questions about Peace Corps Service and its efficacy we have someone here, I'm just looking, oh there he is they've served in the Peace Corps and although I don't always defer to the army I still have a great respect for my comrade Representative Martin. Happy to take any questions. >> Mr. Chairman I'm ready for a motion when you are. >> All right, I'll entertain any questions from the committee first and then I think we have one person that did sign up from the public and wants to speak. So Mr. Bishop you are recognized. >> Thank you Mr. Chairman, I'd like to ask the question or two of staff to understand better what we're talking about. This matter of course went to the floor came back and Representative Corn's/g comments are long lines of what that devolved into as the question of the relative work the Peace Corps Service versus other kinds of service, and my understanding of this as I've dug into it a little bit more, is that all that may really be besides the point so let me see if I can ask Mr. [INAUDIBLE] can you explain fro a moment what this service purchase benefit does? >> Wherever you select you can best answer from. >> Okay. So the service purchase and you can purchase service for a variety of reasons, service to other states or local government, the federal government along with other reasons. But service purchase might do several things, If you're already eligible to retire,

that service purchase would increase your benefit so the benefit is based on, the formula for the benefit is 1.82% times your service times your average pay at retirement and so the more service you have, the larger that formula is and that's the larger your invented in. The other reason. That's so on my purchase service is to change their retirement date. So for instance you can retire with 30 years of service at any age and so you currently have 28 years of services and you are relatively young you purchase two additional years of service. In order to eligible to retire and get two more years of benefit and two more years of retiree medical benefits and all those other things. >> Mr. chairman may I follow up a couple of questions >> Follow up. >> If this would be an expansion of what already exists in terms of who is eligible, to exercise a purchase to purchase a service is that right. >> That is correct this would give another reason on top of that long list of existing reason that you want to purchase service under this if when it's heard in the Peace Corp and like purchase the number of years up to five that want it served as volunteer in the peace cord. >> Follow up Mr. chair. >> Follow up. >> What is the transfer benefit and how does that compare to the service purchase benefit. >> The transfer benefit is an option available to everyone in the system regardless any past service they may have had for any other entity. And to that benefit you can take any other retirement assets in a Kplan, a port 57 plan, an IRA, Qualified retirement plan and transfer those over to the the North Carolina teachers and state employees retirement system and increase your benefits. That transfer benefit is based on current market interest rates, and current expected life span, so it's based on, Market pricing unlike the service purchase that is based on a fixed assumption of seven a quarter interest four percent call line sort of salary assumption. In addition the transfer benefit does not change your service amount so it's doesn't change your retirement date and therefore doesn't increase the amount, The number of years that retiree medical that the state might have to pay for. >> So that last point you made, if you change your years of service by virtual of a purchase benefit, does that increase the cost of retiree medical to the state? >> It can if that changes your retirement date. So for instance you already have 30 years of service, it would not be changing your retirement date, it would not increase the number of years of retiree medical the state is paying, but in my previous example, if you had 28 years of service, this made you eligible, then it would be increasing the years of retiree medical the state has to pay for. >> What would be the reason, if someone, someone's got benefits from a previous employment, including fiscal or any other category that's currently not eligible but oral category that he is eligible to purchase a service, why would someone purchase more service rather than simply transferring their [INAUDIBLE] exercising the transfer befit. >> The reason someone might purchase more service is to change their retirement date and therefore retire earlier and get retiree benefits or other benefits longer, and the other reason is if the financial basis for the service purchase 7.25% return and the other assumptions resulted in a lower cost to purchase purchase than the transfer benefit, a lower than market price for the additional benefit purchase. >> One last question. Why would we design the plan in a way to allow someone to purchase service and thereby You said that the transfer benefited is based on current market rates and life expectancy but if they exercise the service purchase benefit instead they get the benefit of an assumed 7.25% return and the like. Why would we permit someone to purchase service or purchase credit under the retirement system in a way that would not be based on current market rates and life expectancy. >> The service purchases were created back a long time ago in the 70's or 80's or sometime back then. The transfer benefit was only created in 2010 or 2011. [BLANK AUDIO]. Then I'll I'll stop questions, further or do, I'm gonna comment before you finish this. >> Okay, any other members that have questions?

Representative Amor. >> Could you be a little more specific on those list of folks that are eligible to do the transfer benefit, aren't most of them Governmental oriented >> Is that question. >> free STIF >> Free STIF all right. >> Yes, thank you Mr. Chair. I have a left ear so out of state service or has been other states, service to another state temporary service, temporary employee do not participate in the retirement system, if you were Work temporarily, if you work at temporary position for the state, you go back and purchase that, educational leave, probational or waiting period service, workers compensation leave, part time local and state service,service with the local government, service with the federal government, federal Federal funded community service in North Carolina, and inferential leave, involuntary spool well, extended illness, and all of these if it wasn't explicit were related somehow to governmental service, because federal law requires service to be for a government Entity and a governmental plan in general. >> That includes service in our forces too. >> In military service as well, yes. >> Thank you. Representative Harley. >> Thank you Mr. Chair, and this is for staff. Since this volunteer, can you give us a number Number figure how this could be. Like an approximate amount that would be right now if you did it? [BLANK_AUDIO]. >> Staff. >> Sorry, an approximate amount of the cost of the purchase, the number of years. >> How much would I have to pay you? The person we'd have to pay in Right. So for one example I had was someone purchasing an extra two years if they were age 60 with 23 years of service and $55,000 of pay, they would have to pay roughly 37 $37,000 to purchase it. [BLANK_AUDIO] >> Alright, any other questions to the committee, Representative Michaux >> Make a statement. I bought in twice, as military service one time and then my service as a United States Attorney and I bought in to the playing twice, which helped me when I, if I retire. >> [LAUGH] >> I'm glad you qualified that statement. >> [LAUGH] >> Any other questions from the committee? >> I've got a comment but I'm not sure. >> Let's I believe we have one Lauren Hintsts that has signed up to speak, on this bill. >> Thank you and good morning. My name is Lauren Hints. I've taught in Northampton Halifax, Gran dual in Orange county. I was a peace corp volunteer in and a member of the North Carolina Peace Corps Association. I hope will support the option for purchasing retirement for peace corp service. Peace corp volunteer serve our country for a minimum of two years, they receive available training and community development and coach relations besides their technical training. Upon retiring they often work in in hard to serve areas in North Carolina, because of their overstay service it's harder for them to work long enough to earn a full pension, this bill will help people who served our nation do so and also not in panic for liabilities of the retirement systems. Thank you thank you. Any other questions from the committee if not representative Bishop is recognized for a statement. >> Thank you Mr. chairman, I haven't dug into this, I think the issue is not really what type of service is good enough, or not to get a purchase benefit but rather the availability of the transfer benefit makes the purchase benefit not something that we should expand. It's essentially a bet that if you got credit under any other retirement system you can transfer in, have it market priced and get credit for that in your future benefits. Someone who would opt for the search of purchase service which is this, Mr [INAUDIBLE] said the older version of this as opposed to transferring benefits in is making a bet that the 7.25% assumed return rate is too high which means that over the course of time to the extent we expand that benefit we would be

worsening the under funding on assistant, all things considered and it increases our retiree medical cost to the state and provides that even they've not been serviced to the state. So that obligation from what the other prior employer who are service becomes essentially the responsibility of the state to the extend that increment cost of retiree healthcare occur. So just seems to me that this four members if they become participants in the system anybody else regardless of the nature of their service that they are protestants in the system, they can use the transfer benefits. And it's unlimited and it's correctly priced, it doesn't put the employee on position being allowed to arbitrage essentially decide whether our 7.25% are soon return rates is excessive and so it seems to me that's the way we should go. We ought not further expand regardless of the nature of the service, we ought not further expand the purchase benefit opportunity so I'll be voting no on this. >> Any other comments? All right, Representative Linden I believe you raised your hand earlier, you said you had a motion? >> Yeah, I move for a favorable report on house bill 35. >> All right committee you've heard the motion before you for a favorable report for house bill 35, all those in favor say aye. >> Aye. >> Opposed no? >> No. >> In the opinion of the chair, the ayes have it, the ayes do have it. House bill 1135 is given a favorable report. >> Thank you Mr. Chairman, thank you ladies and gentlemen. >> All right, next before you committee is house bill 1088, Representative Frailey you're recognized to make your comments. >> Thank you Mr. Chairman, this bill is designed to allow retired law enforcement officers to work polls on election day without losing any special separation allowance benefits that are provided to them by local governments until the officer reaches age 62. The reason for the bill is to help provide more qualified individuals to help county election boards on election day. The current law is that a retired law enforcement officer with 30 or more years of credible years where those 55 years of age or older, with five or more years of credible service, who had not reach social security age of 62, are eligible are eligible to receive a local government special separation allowance, to help tie them over before social security kicks in. The current law says that the retired LEOs cannot work for any local government employer without losing the special separation allowance except in the capacity as a school safety officer. The proposed bill adds election day service to this exemption category. I have vetted this with the league of municipalities, the metropolitan mayors, the county commissioners organization and North Carolina treasurer's office and there were not any objections to the proposed bill. I wanna ask for your support and answer any questions. >> All right, are there any questions from the committee? [BLANK_AUDIO] Seeing none, do we have a motion? Okay, do you have a question? >> Move for a favorable report. >> All right. The committee, here's the motion before you from representative Bishop for a favorable report to House Bill 1088. All those in favors will say aye. >> Aye. >> Opposed no. In the opinion of the chair the ayes have it, the ayes do have it. House Bill 1088 is given a favorable report and we are adjourned. [SOUND] [BLANK_AUDIO