HCS HB 543 & 605 -- STATE EMPLOYEE RETIREMENT

SPONSOR:  Hagan-Harrell (Skaggs)

COMMITTEE ACTION:  Voted "do pass" by the Committee on
Retirement by a vote of 8 to 2.

This substitute creates a new state employees' retirement plan,
the Year 2000 Plan, and makes changes to the existing Missouri
State Employees' Retirement System (MOSERS) plan.

YEAR 2000 PLAN.  The year 2000 plan will be applicable to new
employees who begin work on or after July 1, 2000; persons
currently covered by MOSERS and the Transportation Department
and Highway Patrol Retirement System (HEHPRS), both active
employees and those already retired, will be given comparison
information about the existing and new plans and will be allowed
to choose the Year 2000 Plan if they wish.  Among the plan's
major provisions are the following:

(1)  Eligibility when age plus years of service equals 80, or
age 62 with 5 years of service, as opposed to age 65 with 5
years of service under the current plan.

(2)  A multiplier of 1.7% of final average pay times years of
service, as opposed to the current 1.6%.

(3)  Eligibility for early retirement at age 57 with 5 years of
service, as opposed to the current age 55 with 10 years of
service.

(4)  A temporary annuity multiplier of .8% for persons retiring
early that raises benefits until early Social Security benefits
are available.

(5)  Four survivor benefit options that reduce the annuity
during the retiree's lifetime:

(a)  Option 1 will provide 50% benefits to the surviving spouse.

(b)  Option 2 will provide 100% benefits to the surviving spouse.

(c)  Option 3 will provide 120 monthly payments to a beneficiary.

(d)  Option 4 will provide 180 monthly payments to a beneficiary.

(6)  Death in service benefits to the surviving spouse of 100%
and to dependent children under certain circumstances for
members with 5 years of service, the same as the current plan.
If the death is duty-related, no minimum years of service are
required and the benefit is at least 50% of final pay.

(7)  Cost-of-living increases of 80% of the increase in the
consumer price index, a yearly maximum of 5%, also applicable to
surviving spouses, beneficiaries, and former spouses receiving
all or part of an annuity.  (The COLA calculation is the same as
for the current plan for members hired after August 28, 1997.)

(8)  Life insurance of $15,000 per employee and $5,000 per
retiree and voluntary additional insurance up to 6 times the
person's annual pay, the same as the current plan.

(9)  Long-term disability benefits that permit the accrual of
service until eligibility for normal retirement, as with the
current plan, with rate of pay for retirement being the member's
pay at the time of disability, indexed for inflation.

(10)  For members of the General Assembly having at least 4
years of service, benefits of 1/24 (4.17%) of monthly pay times
years of credited service, as opposed to the current requirement
of 6 years of service and a rate of $150 per month times the
number of general assemblies served.

The substitute specifies several sections of the existing MOSERS
and Transportation and Highway Patrol retirement plan statutes
as applicable to the Year 2000 Plan; defines the jurisdiction of
the boards of the system; provides for determination of credit
from multiple plans, previous city or county service, and other
sources; describes how annuities may be divided upon divorce;
and sets out several technical provisions for the administration
and investment of assets.

CURRENT PLAN.

(1)  UNREDUCED JOINT AND 50% SURVIVOR OPTION.  Several
categories of survivors, former deferred vested members, and
members who retired and then became reemployed, who were not
made eligible for the unreduced joint and 50% survivor option in
1997 are now eligible for that benefit.  In some instances, a
lump-sum payment is also provided.

(2)  DISABILITY.  The rate of pay for a person becoming disabled
on or after July 1, 2000, will be the pay rate at the time of
disability, increased for inflation by 80% of the increase in
the consumer price index.

(3)  DEATH BENEFIT.  For a duty-related death the spouse or in
the absence of a surviving spouse, dependent children will
receive a 50% benefit. No vesting is required for this benefit.

(4)  DEFINITIONS.  "Average compensation" is changed to add a
medical leave of absence for which the amount of compensation a
member would have received will be used.  Nonrecurring single--
sum payments paid after retirement are currently excluded from
the definition of compensation.  The substitute deletes the word
"retirement" and substitutes language describing such payments
paid after termination of employment unless such payments are a
final installment of salary.

(5)  GENERAL ASSEMBLY.  The substitute raises legislative
benefits from $150 to $200 per month times the number of
biennial assemblies and clarifies provisions relating to
legislative assistants who have retired and returned to work.

(6)  OTHER PROVISIONS.  Certain retirees may elect a survivor
option if they were married for at least a year before they make
the election and make such election within 6 months of
circumstances detailed in the substitute.  When amounts owing to
members remain unclaimed for 4 years, the amount reverts to the
system.  These amounts may be claimed later, but without
interest.

FISCAL NOTE:  Cost to General Revenue Fund of $5,108,992 in FY
2000, $6,130,791 in FY 2001, and $6,130,791 in FY 2002.  Net
Cost to State Highway Fund of $1,458,333 in FY 2000, $1,750,000
in FY 2001, and $1,750,000 in FY 2002.

PROPONENTS:  Supporters say that HB 543 is the product of a year
of intense study by a committee that was originally convened to
look at public safety retirement issues and found that several
assumptions that had been made concerning public safety
employees and general employees were incorrect, such as the
average length of service.  This discovery sparked proposed
changes that would make retirement policy more consistent with
the state's overall employment goals.  The bill was endorsed by
the Task Force on Total Compensation.  In particular, the death--
in-service benefit and more portability between local and state
service were considered important.

Supporters of HB 605 say that it picks up survivors of those who
retired after October 1, 1984, and died before September 1,
1997, to provide equal protection.  The bulk of the cost of this
bill relates to this benefit.  Another benefit is to index long--
term disability salaries for inflation.

Testifying for HB 543 were Representative Skaggs; Gary Findlay,
Executive Director of MOSERS; Steve Mahfood, Director of Natural
Resources and vice-chair of the Public Safety Retirement
Advisory Committee; and Dora Schriro, Director of Corrections.

Testifying for HB 605 were Representative Franklin; and Gary
Findlay, Executive Director of MOSERS.

OPPONENTS:  Those who oppose HB 543 say that it fragments the
retirement system, and the loss of the free survivor benefit in
the new plan provisions is troubling.

Testifying against HB 543 was John Hartman.

Becky DeNeve, Legislative Analyst

HB 543 -- State Employee Retirement Year 2000 Plan

Sponsor:  Skaggs

This bill creates a new state employees' retirement plan, the
Year 2000 Plan.  The plan will be applicable to new employees
who begin work on or after July 1, 2000.  Persons currently
covered by the Missouri State Employees' Retirement System
(MOSERS) and the Transportation Department and Highway Patrol
Retirement System (HEHPRS), both active employees and those
already retired, will be given comparison information about the
existing and new plans and will be allowed to choose the Year
2000 Plan if they wish.  Among the plan's major provisions are
the following:

(1)  Eligibility to retire when age plus years of service equals
80, or age 62 with 5 years of service, as opposed to age 65 with
5 years of service under the current plan;

(2)  A multiplier of 1.7% of final average pay times years of
service, as opposed to the current 1.6%;

(3)  Eligibility for early retirement at age 57 with 5 years of
service, as opposed to the current age 55 with 10 years of
service;

(4)  A temporary annuity multiplier of .8% for persons retiring
early that raises benefits until early Social Security benefits
are available;

(5) Four survivor benefit options that reduce the annuity during
the retiree's lifetime:

(a)  Option 1 will provide 50% benefits to the surviving spouse.

(b)  Option 2 will provide 100% benefits to the surviving spouse.

(c)  Option 3 will provide 120 monthly payments to a beneficiary.

(d)  Option 4 will provide 180 monthly payments to a beneficiary.

(6)  Death in service benefits to the surviving spouse of 100%
and to dependent children under certain circumstances for
members with 5 years of service, the same as the current plan.
If the death is duty-related, no minimum years of service are
required and the benefit is at least 50% of final pay;

(7)  Cost-of-living increases of 80% of the increase in the
consumer price index, a yearly maximum of 5%, also applicable to
surviving spouses, beneficiaries, and former spouses receiving
all or part of an annuity.  (The COLA calculation is the same as
for the current plan for members hired after August 28, 1997.);

(8)  Life insurance of $15,000 per employee and $5,000 per
retiree and voluntary additional insurance up to 6 times the
person's annual pay, the same as the current plan;

(9)  Long-term disability benefits that permit the accrual of
service until eligibility for normal retirement, as with the
current plan, with rate of pay for retirement being the member's
pay at the time of disability, indexed for inflation; and

(10)  For members of the General Assembly having at least 4
years of service, benefits of 1/24 (4.17%) of monthly pay times
years of credited service, not to exceed 16 years, as opposed to
the current requirement of 6 years of service and a rate of $150
per month times the number of general assemblies served.

The bill specifies several sections of the existing MOSERS and
Transportation and Highway Patrol retirement plan statutes as
applicable to the Year 2000 Plan; defines the jurisdiction of
the boards of the system; provides for determination of credit
from multiple plans, previous city or county service, and other
sources; describes how annuities may be divided upon divorce;
and sets out several technical provisions for the administration
and investment of assets.