Tuesday, November 11 -- Interim --- Employees Benefits Committee of the State of North Dakota

NORTH DAKOTA LEGISLATIVE COUNCIL
Minutes of the
EMPLOYEE BENEFITS PROGRAMS COMMITTEE
Tuesday, October 21, 2008
Harvest Room, State Capitol
Bismarck, North Dakota
Representative Bette Grande, Chairman, called the
meeting to order at 9:00 a.m.
Members present: Representatives Bette
Grande, Eliot Glassheim, Matthew M. Klein, Joe
Kroeber; Senators Karen K. Krebsbach, Curtis
Olafson
Members absent: Representative Jim Kasper;
Senators Ralph L. Kilzer, Harvey D. Tallackson
Others present: Senator David O'Connell,
member of the Legislative Council, was also in
attendance.
See Appendix A for additional persons present.
At the request of Chairman Grande, committee
counsel distributed a copy of the October 2008 edition
of Your Vested Interest published by the State
Investment Board. A copy of the newsletter is on file
in the Legislative Council office.
Chairman Grande recognized Mr. Steve Cochrane,
Executive Director, Retirement and Investment Office.
He presented an overview of the current investment
climate and investment outlook. A copy of the charts
(Appendix B) used by Mr. Cochrane in his
presentation and a letter (Appendix C) from Callan
Associates are attached. Since his last report to the
committee last spring, he said, market conditions and
equity markets have continued to deteriorate. He said
there is a great deal of uncertainty in the market going
forward and these uncertainties are reflected in
market conditions. He reviewed the allocation of the
pension trust as of August 31, 2008. He said the
pension trust is a combination of the trust funds
managed by the State Investment Board, the
two largest of which are the Teachers' Fund for
Retirement (TFFR) and the Public Employees
Retirement System (PERS) fund. He said each fund
sets its own asset allocation and maintains its own
consultants. He said TFFR and PERS participate in
the same 10 asset allocations but are weighted
slightly different. As of August 31, 2008, he said,
TFFR was slightly more exposed to equities and that
is reflected in the market return of TFFR. Thus, he
said, when equities do well TFFR performs slightly
better than the PERS fund, and when equities do not
perform as well the PERS fund slightly outperforms
TFFR. He said the State Investment Board does not
have reconciled information for September and
October, but based upon asset allocation and market
return the pension trust is probably in the negative mid
to upper teens for the year.
TEACHERS' FUND FOR RETIREMENT
Chairman Grande recognized Mr. Chris Conradi,
Enrolled Actuary and Senior Consultant, Gabriel
Roeder Smith and Company, Dallas, Texas, who
reviewed the July 1, 2008, actuarial valuation of
TFFR. Mr. Conradi's PowerPoint presentation
(Appendix D) is attached and a copy of the actuarial
valuation is on file in the Legislative Council office. He
said the actuarial valuation of TFFR was prepared as
of July 1, 2008. He said this date is important
because none of the economic events occurring after
July 1, 2008, are reflected in the valuation. He said
the actuarial valuation is prepared using member
data, financial data, benefit and contribution
provisions, and actuarial assumptions and methods.
He said the purposes of an actuarial valuation are to
measure the actuarial liabilities of the system,
determine the adequacy of current statutory
contributions, provide information for reporting such
as for Governmental Accounting Standards Board
No. 25 and comprehensive annual financial reporting
information, to explain changes in the actuarial
condition of the fund, to track changes over time, and
to warn about possible future problems and issues.
He said the actuarial valuation reflects legislation
enacted in 2007. He said the employer contribution
was increased from 7.75 percent to 8.25 percent
effective July 1, 2008. He said this provision is to
sunset and the employer contribution return to
7.75 percent when the fund is 90 percent funded.
Based upon the current valuation, he said, this is
unlikely to occur anytime soon.
Concerning membership, Mr. Conradi said the
number of active members decreased by 38, from
9,599 to 9,561. He said this was a decrease of
.4 percent but noted that the decrease included the
effect of 16 career and technical education employees
transferring from TFFR to PERS. Over the last
10 years, he said, active membership has decreased
an average of .3 percent per year. He noted that
earlier census projections showed school-age
population decreasing over the next 15 years to
20 years. He said the payroll for active members
increased 4.1 percent, from $401.3 million to
$417.7 million. He said payroll has increased an
average of 3.4 percent per year over the last 10 years.
The average pay for active members, he said,
increased 4.5 percent, from $41,810 to $43,684. The
average age of active members is 44.6 years. He
Employee Benefits Programs 2 October 21, 2008
said this compares to 44.7 years last year and to
43.5 years 10 years ago. He said the average years
of service is 14.4, compared to 14.5 years last year
and to 14.0 years 10 years ago. He said there are
1,459 inactive vested members and 229 inactive
nonvested members. He said the number of
annuitants increased by 240, from 6,077 to 6,317, an
increase of 3.9 percent. He said annuitants include
service retirees, disabled retirees, and beneficiaries
receiving benefits. Over the last 10 years, he said,
the number of retirees has grown an average of
3.3 percent per year. The average annual retiree
benefit is $17,700.28. He said there are 1.5 active
members for each retiree and the ratio is decreasing
as it was 2.2 active members for each retiree 10 years
ago.
Concerning assets, Mr. Conradi said the fair
market value of assets of TFFR decreased from
$2,030 million on June 30, 2007, to $1,846 million on
June 30, 2008. He said member contributions for
fiscal year 2008 were $36.9 million, which includes
service purchases, and employer contributions were
$33.7 million. He said the total contributions of
$70.6 million compares to $66.4 million in fiscal year
2007. He noted that the employer contribution rate
was 7.75 percent for fiscal year 2008 and will increase
to 8.25 percent for fiscal year 2009. He said total
distributions, benefit payments, refunds, and
administrative expenses totaled $113.6 million.
Therefore, he said, there is a net external cashflow--
contributions less benefits and refunds--of $43 million
or 2.3 percent of the market value of assets at the end
of the year. At the present time, he said, this is not a
problem. He said the return on the market value of
assets was approximately -7.0 percent in fiscal year
2008. He said this return compares to 20.4 percent
for fiscal year 2007. He said the average return for
the last 10 years was 6.4 percent. This is below the
actuarial assumed investment rate of return of
8.0 percent. The 15-year average investment rate of
return was 8.3 percent. He said the market return for
fiscal year 2008 was below expected market return
after four strong years. For the previous 10 years, he
said, 6 years had returns greater than the actuarial
assumed rate of 8.0 percent and 4 years had returns
less than 8.0 percent. He said the best year was
2007 with a return of 20.4 percent or 12.4 percent
over 8.0 percent. The worst year, he said, was 2002
with a return of -8.6 percent or 16.6 percent below the
8.0 percent assumed rate of return. He said all
actuarial calculations are based on the actuarial value
of assets not market value. He said the actuarial
value of assets reflects 20 percent of the difference
between last year's expected return on market value
and the actual return. The actuarial value of assets is
now $1,909 million versus $1,750 million last year.
The actuarial return was 11.6 percent in fiscal year
2008 compared to -7.0 percent on a market value
basis. He said the average return on actuarial value
over the last 10 years has been 7.7 percent. He said
the actuarial value of assets is 103 percent of the fair
market value as compared to 86 percent last year. He
said the fund has $63.4 million in deferred losses,
which are not yet recognized.
Concerning the July 1, 2008, actuarial results,
Mr. Conradi said the unfunded actuarial accrued
liability decreased from $459.2 million to
$421.2 million. He said the funded ratio--the actuarial
assets divided by the actuarial accrued liability--
increased from 79.2 percent to 81.9 percent. He said
the funded ratio using market value is 79.2 percent,
down from 91.9 percent. He said the unfunded
actuarial accrued liability is 100.8 percent of covered
payroll, compared to 114.4 percent last year. He said
the negative margin or shortfall improved from
-2.40 percent to -0.99 percent.
Concerning projections for TFFR, Mr. Conradi said
the 8.25 percent employer contribution rate continues
for at least the next 30 years. He said the margin
never becomes positive, the unfunded actuarial
accrued liability continues to grow into the future, and
the system will experience decreasing funded ratios
over the long term.
Employee Benefits Programs Committee
Bill No. 109
At the request of Chairman Grande, Mr. Conradi
reviewed Employee Benefits Programs Committee Bill
No. 109 [90109.0200] and the actuarial analysis
(Appendix E) for the bill draft. Under the bill draft, he
said, each annuitant of TFFR, retiree, disabled retiree,
or beneficiary receiving a benefit, who retired before
January 1, 2009, and who is still receiving benefits as
of December 1, 2009, would receive a special onetime
payment equal to the sum of $24 times the
member's years of service, and $18 times the number
of years the member has been retired. However, he
said, the payment would be limited to no more than
10 percent of the member's annual retirement benefit
or $750, whichever is larger. He said the payment
would be made in December 2009. He said the bill
also provides for a second payment, determined
under the same formula and with the same maximum,
to be made in December 2010 to members who
retired before January 1, 2009, and who are still
receiving payments as of December 1, 2010. He said
the payment made in 2010 will usually be slightly
larger than the one made in 2009 because the
member will have been retired for one more year. He
noted that the eligibility requirement to receive one of
these special payments, being retired before
January 1, 2009, is the same for both payments. He
said the bill draft also provides for a transfer from the
general fund of up to $11 million to TFFR, which is
intended to pay for the two special payments.
Concerning the actuarial analysis of the proposal,
Mr. Conradi said TFFR would pay approximately
$5.4 million in December 2009 and approximately
$5.5 million in December 2010. Therefore, he said,
payments should be no more than approximately
$10.9 million for the two years combined, making the
$11 million appropriation sufficient. He said there
Employee Benefits Programs 3 October 21, 2008
would be no effect on the unfunded actuarial accrued
liability of TFFR and no effect on the funded ratio or
margin since the special payments would be covered
by the appropriation.
In response to a question from Representative
Grande, Mr. Conradi said all federal issues have been
resolved in the revised version of the bill draft.
Chairman Grande recognized Senator O'Connell.
He said in the fight for increased teacher pay, retired
teachers have been left behind. He said the bill draft
before the committee addresses this inequity.
Representative Klein said as much as he
supported the bill draft's merits, in light of the state's
uncertain financial future and the measures to be
voted on by the electorate in the upcoming general
election, as well as other legislative priorities, the bill
draft should be forwarded without recommendation.
Representative Glassheim said even with passage
of the measures on the general election ballot, the
state should have sufficient revenues to fund the
benefit contained in the bill draft.
In response to Representative Glassheim's
comment, Senator Olafson said market conditions
have changed dramatically over the past several
weeks, and the Legislative Assembly will give the bill
draft consideration when the 61st Legislative Assembly
convenes. He said that allowing the bill draft to go
forward without recommendation is the prudent thing
for the committee to do at this point.
It was moved by Representative Klein,
seconded by Senator Olafson, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 109 no
recommendation. Representatives Grande and
Klein and Senators Krebsbach and Olafson voted
"aye." Representative Glassheim and Senator
Kroeber voted "nay."
Employee Benefits Programs Committee
Bill No. 100
At the request of Chairman Grande, Mr. Conradi
reviewed Employee Benefits Programs Committee Bill
No. 100 [90100.0100] and the actuarial analysis
(Appendix F) for the bill draft. He said the bill draft
includes technical and administrative changes to the
TFFR program relating to incorporation of federal law
changes, procedures relating to benefit limitations,
annual hour limit for retiree reemployment, and
disclosure of confidential records. He said there is no
cost to the bill draft. He said the bill draft does not
increase the plan's liabilities; does not change the
plan's funded status, funding, or the contribution
margin; and does not have any material administrative
implications.
It was moved by Senator Krebsbach, seconded
by Representative Glassheim, and carried on a roll
call vote that the committee give Employee
Benefits Programs Committee Bill No. 100 a
favorable recommendation. Representatives
Grande, Glassheim, Klein, and Kroeber and Senators
Krebsbach and Olafson voted "aye." No negative
votes were cast.
FIREFIGHTERS RELIEF ASSOCIATIONS
Employee Benefits Programs Committee
Bill No. 144
Chairman Grande recognized Mr. Chris Dietz,
Fargo Firefighters Relief Association, Fargo. He
reviewed Employee Benefits Programs Committee Bill
No. 144 [90144.0100]. He said the bill draft
incorporates recent changes made in the Fargo
Firefighters Relief Association plan. He said the
changes update service, disability, and survivor
pensions. He also distributed a history (Appendix G)
of the Fargo Firefighters Relief Association. He said
the Fargo Firefighters Relief Association was
organized in 1909. He said the association currently
has 97 active members, 58 retirees, and 21 widows.
He said firefighters contribute 8.4 percent of salary
and the city of Fargo contributes 12.2 percent and
13.65 percent of payroll. He said the proposal
contains several optional forms of benefit payment.
The normal form of benefit, he said, is a traditional
joint and survivor 50 percent benefit. He said optional
forms of benefits include a life-only benefit, certain
and life, joint and survivor 75 percent, and joint and
survivor 100 percent. He said the proposal also
contains two alternative retirement death benefits for a
surviving spouse and children.
Chairman Grande recognized Mr. Mark D. Meyer,
Consulting Actuary, Van Iwaarden Associates,
Minneapolis, Minnesota. He said he is the consulting
actuary for the Fargo Firefighters Relief Association.
He said the benefit enhancements included in the bill
draft are actuarially sound.
In response to a question from Representative
Klein, Mr. Meyer said the plan is 63 percent funded
and amortized over a 29-year period.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a roll call vote that the committee give
Employee Benefits Programs Committee Bill
No. 144 a favorable recommendation.
Representatives Grande, Glassheim, Klein, and
Kroeber and Senators Krebsbach and Olafson voted
"aye." No negative votes were cast.
PUBLIC EMPLOYEES
RETIREMENT SYSTEM
Chairman Grande recognized Mr. Brad Ramirez,
FSA, MAAA, EA, Consulting Actuary, The Segal
Company, Denver, Colorado. He reviewed the July 1,
2008, actuarial valuations (Appendix H) of the PERS
main system, judges' retirement fund, National Guard
retirement fund, Highway Patrolmen's retirement fund,
and the retiree health benefits fund. A copy of the
actuarial report is on file in the Legislative Council
office. He said the judges', National Guard, Highway
Patrolmen's, and retiree health insurance credit funds
have positive contribution margins. He said the main
Employee Benefits Programs 4 October 21, 2008
system, law enforcement with prior main service, and
law enforcement without prior main service funds
have negative contribution margins. He said the
funded ratio is above 100 percent for the judges',
National Guard, and Job Service North Dakota
retirement plans but below 100 percent for the main
system, retiree health insurance credit, law
enforcement with prior main service, law enforcement
without prior main service, and the Highway
Patrolmen's funds. He said the ratio of the actuarial
value of assets to the market value of assets for
PERS and the Highway Patrolmen's retirement
system combined has increased from 80 percent to
91 percent. He said the market value exceeds the
actuarial value by $156 million.
On an actuarial value basis, Mr. Ramirez said
there was a small investment gain due to recognition
of larger-than-expected appreciation from prior years.
He said salary increases varied by plan but were
generally larger than expected. He said the salary
increases resulted in actuarial losses for most of the
plans. For the main system and judges' plans, he
said, the employer normal cost is in excess of the
statutory contribution rate. He said the judges' plan
benefits from an actuarial surplus, which causes an
amortization credit resulting in a positive margin. He
said the main system plan, however, has an unfunded
actuarial accrued liability so contributions are not
sufficient to pay down the unfunded actuarial accrued
liability or even pay interest on it. He said the
unfunded actuarial accrued liability is expected to
grow under the current funding policy. Finally, he
said, there were no changes in the actuarial
assumptions.
Concerning the 2008 actuarial valuation for PERS
and the Highway Patrolmen's retirement system,
Mr. Ramirez said assets, at market value, totaled
$1.82 billion. He said the rate of return last year was
-5.20 percent. He said the assets, at actuarial value,
total $1.66 billion or 91 percent of market value. He
said the rate of return on actuarial value was
8.50 percent, which is .50 percent higher than the
8.00 percent actuarial assumed rate of return. He
said the 10-year average rate of return on an actuarial
value basis is 8.25 percent. He said the employer
cost rate for the main system is 6.23 percent and,
thus, the contribution margin is -2.11 percent or
4.12 percent (the statutory contribution rate) -
6.23 percent (the employer cost rate) = -2.11 percent.
He said the contribution margin for the judges' plan is
5.53 percent or 14.52 percent - 8.99 percent =
5.53 percent. He said the contribution margin for the
National Guard plan is 3.06 percent or 6.50 percent -
3.44 percent = 3.06 percent. He said the contribution
margin for the law enforcement with prior main service
plan is -.73 percent and -.72 percent for the law
enforcement without prior main service plan.
Concerning the retiree health insurance credit
fund, Mr. Ramirez said the assets of the fund, at
market value, total $40.4 million. He said the assets,
at actuarial value, total $42.5 million, which is
105.2 percent of market value. He said the market
value rate of return for the past year was
-14.04 percent while the actuarial value rate of return
was 5.16 percent, which is 2.84 percent less than the
8.00 percent actuarially assumed investment rate of
return. He said the contribution margin for the retiree
health insurance credit fund is .12 percent or
1.00 percent (the statutory contribution rate) -
.88 percent (the employer cost rate) = .12 percent.
Concerning the Highway Patrolmen's retirement
system, Mr. Ramirez said the statutory contribution
rate is 16.70 percent while the employer cost rate is
15.76 percent. Thus, he said, the contribution margin
is .94 percent or 16.70 percent (the statutory
contribution rate) - 15.76 percent (the employer cost
rate) = .94 percent.
Mr. Ramirez also reviewed the 2008 projections
(Appendix I) for PERS.
In response to a question from Representative
Klein, Mr. Sparb Collins, Executive Director, Public
Employees Retirement System, said the increase in
the total number of employees in the main system is a
result of political subdivisions joining PERS.
Employee Benefits Programs Committee
Bill No. 118
Chairman Grande recognized Mr. Collins. He said
Employee Benefits Programs Committee Bill No. 118
[90118.0300] had been substantially revised since the
committee's last meeting. He said the bill draft
establishes a new supplemental defined contribution
retirement plan for peace officers and correctional
officers employed by the state. He reviewed PERS
comments and recommendations, proposed
amendments, and the actuarial report prepared by
The Segal Company (Appendix J). Under the bill
draft, he said, employer contributions become
100 percent vested upon completion of four years of
service, or upon attainment of age 60 or a combined
total of years of service and years of age equal to 85.
He said the PERS Board is concerned this provision
may violate the federal Age Discrimination in
Employment Act. He said this Act generally prohibits
cessation of contributions to an employee's account in
a defined contribution plan, or other discrimination in
benefits, because the employee has attained a certain
age. He noted that one exception to this general rule
is for governmental employers who impose mandatory
retirement ages for public safety officers under a bona
fide law enforcement retirement plan. He said PERS
does not know whether eligible employees under the
new plan are subject to a mandatory retirement age
rule from their employers and thus the plan may not
be a bona fide law enforcement plan under the Act.
He said the bill draft does not contain an appropriation
and the PERS Board recommends that it be funded.
He said the vesting and forfeiture provisions should be
reworked to address board concerns. Also, he said,
the defined contribution plan does not coordinate well
with the defined benefit plan, and these coordination
issues should be addressed.
Employee Benefits Programs 5 October 21, 2008
Chairman Grande recognized Ms. Shelley
Seeberg, Area Director, American Federation of State,
County, and Municipal Employees. She discussed
(Appendix K) the association's objections to the bill
draft.
Chairman Grande recognized Ms. Teresa Shaffer.
She said she supports enhanced retirement benefits
for correctional officers, but as a single mother she
would be unable to afford an additional employee
contribution to a defined contribution retirement plan.
It was moved by Representative Glassheim and
failed for lack of a second that the committee give
Employee Benefits Programs Committee Bill
No. 118 a favorable recommendation.
It was moved by Representative Klein,
seconded by Senator Krebsbach, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 118 no
recommendation. Representatives Grande,
Glassheim, Klein, and Kroeber and Senators
Krebsbach and Olafson voted "aye." No negative
votes were cast.
Employee Benefits Programs Committee
Bill No. 111
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 111 [90111.0200] as well as the actuarial report,
PERS comments and recommendations, and
proposed amendments (Appendix L) for the bill draft.
He said the bill draft proposes numerous
administrative and technical changes to PERS as well
as additional options for the PERS and Highway
Patrolmen's retirement system plans and uniform
group health insurance program. He said the PERS
Board is proposing to withdraw the provision allowing
members in the Highway Patrolmen's retirement
system and PERS to purchase an additional five
years of service credit in addition to the five years
presently authorized. He said the board is
withdrawing the provision allowing a member to
designate someone other than the member's spouse
as the beneficiary with the consent of the spouse and
a provision allowing a member to choose a new joint
and survivor beneficiary if the existing beneficiary
passes away.
It was moved by Representative Klein,
seconded by Representative Kroeber, and carried
on a roll call vote that the committee give
Employee Benefits Programs Committee Bill
No. 111, as amended, a favorable
recommendation. Representatives Grande,
Glassheim, Klein, and Kroeber and Senators
Krebsbach and Olafson voted "aye." No negative
votes were cast.
Employee Benefits Programs Committee
Bill No. 112
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 112 [90112.0200]. He also distributed the
actuarial comments, PERS observations and
recommendations, and proposed amendments
(Appendix M) for the bill draft. He said the bill draft
proposes to increase the employer contributions to
PERS and the Highway Patrolmen's retirement
system plan to fund a 2 percent increase for retirees.
He said the proposed increase is a one-time, two-year
only increase that would pay the increase in that time
period instead of amortizing it over 20 years. Based
upon the updated actuarial information, he said, the
PERS Board is proposing to amend the bill draft to
reflect the appropriate required contribution. He said
the bill draft increases the joint and survivor benefit to
100 percent for the Highway Patrolmen's retirement
system plan. Based upon the actuarial costs of this
provision, he said, the board is proposing to withdraw
the provision. He said the bill draft authorizes a
2 percent increase for PERS and Highway
Patrolmen's retirement system retirees in January
2011. He said the board is requesting to amend the
bill draft to more clearly define who is eligible for the
increase. He said the change would make any retiree
eligible who has at least three years of service with a
participating employer. He said the bill draft expands
the incentive provision for members to engage in
supplemental retirement savings in the 457 deferred
compensation plan to allow a member to buy up to
two years of service credit in PERS at termination of
employment at 9.12 percent instead of the actuarial
cost. Based upon the actuarial cost, he said, the
board is proposing to withdraw this provision. Finally,
he said, the bill draft allows participating political
subdivisions to elect if they wish to provide the
2 percent retiree increase to their retirees. He said
the board is proposing to amend the bill draft to
provide a late election opportunity for political
subdivisions.
It was moved by Representative Klein,
seconded by Senator Olafson, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 112, as
amended, no recommendation. Representatives
Grande and Klein and Senators Krebsbach and
Olafson voted "aye." Representatives Glassheim and
Kroeber voted "nay."
Employee Benefits Programs Committee
Bill No. 206
Chairman Grande recognized Mr. Collins.
Mr. Collins reviewed Employee Benefits Programs
Committee Bill No. 206 [90206.0100], the actuarial
and technical comments, and PERS Board comments
and recommendations (Appendix N) for the bill draft.
He said the bill draft creates a health care savings
plan for all Supreme Court and district court judges.
He said the bill draft appears to meet Internal
Revenue Service requirements and the PERS Board
is neutral on the bill draft.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
Employee Benefits Programs 6 October 21, 2008
carried on a roll call vote that the committee give
Employee Benefits Programs Committee Bill
No. 206 a favorable recommendation.
Representatives Grande, Glassheim, Klein, and
Kroeber and Senators Krebsbach and Olafson voted
"aye." No negative votes were cast.
UNIFORM GROUP
INSURANCE PROGRAM
Chairman Grande recognized Mr. Collins. He
reviewed 2009-11 uniform group health insurance
plan renewal procedures (Appendix O) and distributed
information concerning the renewal rate for active
employees (Appendix P). He said the PERS Board
expected the renewal rate to be between $794.61 and
$831.21. He said the renewal bid received from Blue
Cross Blue Shield of North Dakota was $846.64, a
$188.56 or 28.65 percent increase over the present
rate of $658.08. He said Blue Cross Blue Shield of
North Dakota is projecting that it will lose between
$6 million and $12 million on the state contract for the
uniform group insurance program this biennium.
Employee Benefits Programs Committee
Bill No. 113
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 113 [90113.0100] and discussed the actuarial
comments, PERS Board comments, and a proposed
amendment (Appendix Q) for the bill draft. He said
the bill draft provides that the insurance rate for a non-
Medicare retiree choosing single coverage is
125 percent of the active member single plan rate.
Currently, he said, the non-Medicare retiree rate is
150 percent of the active member single plan rate. He
said the PERS Board is proposing to fund this bill draft
from reserves, and the amount available is $2 million.
In order to balance the provisions of the bill draft with
the available funding, he said, the board is proposing
to change the ratio from the proposed 125 percent to
130 percent of the active single plan rate.
It was moved by Representative Klein,
seconded by Senator Krebsbach, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 113, as
amended, a favorable recommendation.
Representatives Grande, Glassheim, Klein, and
Kroeber and Senators Krebsbach and Olafson voted
"aye." No negative votes were cast.
Employee Benefits Programs Committee
Bill No. 114
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 114 [90114.0100] and discussed the actuarial
comments, PERS Board recommendations, and
proposed amendments (Appendix R) for the bill draft.
He said the bill draft would increase the retiree health
credit from $4.50 per year of service to $5.00 per year
of service and fund the benefit enhancement by
increasing the employer contribution from 1 percent to
1.15 percent. He said the actuarial consultant
determined that the required employer contribution to
fund the benefit enhancement is .14 percent and,
thus, the PERS Board is proposing to reduce the
increase accordingly. He said the PERS Board is not
requesting an appropriation at this time. However, he
said, if the increased employer contribution is not
included in the executive budget, an appropriation will
be requested during the upcoming legislative session.
It was moved by Senator Krebsbach, seconded
by Representative Kroeber, and carried on a roll
call vote that the committee give Employee
Benefits Programs Committee Bill No. 114, as
amended, a favorable recommendation.
Representatives Grande, Glassheim, Klein, and
Kroeber and Senators Krebsbach and Olafson voted
"aye." No negative votes were cast.
Employee Benefits Programs Committee
Bill No. 33
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 33 [90033.0300] and the actuarial report
(Appendix S) prepared by Gallagher Benefit Services,
Inc., for the bill draft. He said Gallagher Benefit
Services, Inc., had reviewed the bill draft but limited its
scope to only the potential financial, administrative,
and technical compliance impacts to PERS. He said
Gallagher Benefit Services, Inc., did not assess the
impact of the bill draft on the state, private insurers,
employers, individuals, or medical providers. He said
the bill draft would add a new subgroup under the
uniform group insurance program for Healthy North
Dakota health insurance coverage. He said the bill
draft would establish a Healthy North Dakota
authority, board, and executive director. He said the
Healthy North Dakota authority would offer coverage
to every eligible individual in North Dakota under the
age of 65, with some very limited exceptions, and
would establish a funding mechanism from employers,
employees, the self-employed, and all other eligible
individuals. He said the bill draft would establish a
standard Healthy North Dakota health benefit plan
design, including prescription drugs, for all covered
plan participants and establish mandated individual
health care provider and network selection and
reimbursement methodologies. Finally, he said, the
bill draft would establish an office of outreach,
enrollment, and advocacy under the authority.
It was moved by Representative Klein,
seconded by Senator Olafson, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 33 an
unfavorable recommendation. Representatives
Grande, Glassheim, and Klein and Senators
Krebsbach and Olafson voted "aye." Representative
Kroeber voted "nay."
Employee Benefits Programs 7 October 21, 2008
Employee Benefits Programs Committee
Bill No. 84
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 84 [90084.0200]. He also reviewed the actuarial
report (Appendix T) prepared by Blue Cross Blue
Shield of North Dakota for the bill draft. He said the
bill draft requires that all health insurance policies,
including the uniform group health insurance plan,
include prosthetic coverage which is at least equal to
the coverage provided by Medicare. He said Blue
Cross Blue Shield of North Dakota estimates the cost
at 90 cents per contract per month for the 2009-11
biennium. He said the bill draft contains an
appropriation to fund the enhanced benefit.
Mr. Collins noted the bill draft states that the
coverage must provide for the most appropriate
prosthetic model that adequately meets the medical
needs of the covered individual as determined by the
covered individual's treating physician. He said the
PERS Board is recommending that this language be
changed or eliminated.
Chairman Grande recognized Mr. Rod St. Aubyn,
Blue Cross Blue Shield of North Dakota, Fargo. He
said Blue Cross Blue Shield has developed a medical
management policy whereby criteria is established to
determine what is appropriate in a particular situation.
Thus, he said, continuity is maintained and the same
medical policy criteria is used rather than allowing a
treating physician to determine medical needs on an
individual basis.
It was moved by Representative Klein,
seconded by Senator Olafson, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 184 no
recommendation. Representatives Grande, Klein,
and Kroeber and Senators Krebsbach and Olafson
voted "aye." Representative Glassheim voted "nay."
Employee Benefits Programs Committee
Bill No. 124
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 124 [90124.0200] as well as the actuarial report
(Appendix U) for the bill draft. He said the bill draft
requires that PERS health insurance policies include
colorectal cancer screening examinations and
laboratory tests of asymptomatic individuals in
accordance with guidelines established by the
American Cancer Society or the American College of
Gastroenterology. He said Blue Cross Blue Shield of
North Dakota estimates the cost of the proposal at
$4.04 per contract per month which has been included
in the appropriation attached to the bill draft.
Chairman Grande recognized Mr. St. Aubyn. He
said the provision that screening will be done in
accordance with guidelines established by the
American Cancer Society or the American College of
Gastroenterology is an unconstitutional delegation of
legislative authority and the bill draft is likely
unconstitutional.
It was moved by Representative Klein,
seconded by Senator Krebsbach, and carried on a
roll call vote that the committee give Employee
Benefits Programs Committee Bill No. 124 an
unfavorable recommendation. Representatives
Grande and Klein and Senators Krebsbach and
Olafson voted "aye." Representatives Glassheim and
Kroeber voted "nay."
Employee Benefits Programs Committee
Bill No. 125
Chairman Grande recognized Mr. Collins. He
reviewed Employee Benefits Programs Committee Bill
No. 125 [90125.0100] as well as the actuarial
information (Appendix V) prepared by Gallagher
Benefit Services, Inc. He said the bill draft would
expand the uniform group insurance program to allow
participation by permanent and temporary employees
of private sector employers and other individuals as
well as allowing agents to sell the group insurance
program and receive commissions.
Representative Kroeber said health insurance is a
very important issue both nationally and at the state
level. He said this bill draft provides a mechanism or
vehicle for the discussion to be carried forward into
the 61st Legislative Assembly. Thus, he said, this bill
draft should be given a favorable recommendation so
the issue of health care access and affordability may
be discussed during the upcoming legislative session.
In response to Representative Kroeber's
comments, Senator Krebsbach said she does not see
this bill draft as a solution to the health care problem.
It was moved by Senator Krebsbach, seconded
by Senator Olafson, and carried on a roll call vote
that the committee give Employee Benefits
Programs Committee Bill No. 125 an unfavorable
recommendation. Representatives Grande and
Klein and Senators Krebsbach and Olafson voted
"aye." Representatives Glassheim and Kroeber voted
"nay."
RECRUITMENT AND RETENTION
BONUS REPORT
Chairman Grande called on Mr. Ken Purdy,
Manager, Classification and Compensation, Human
Resource Management Services, Office of
Management and Budget. He reviewed a report
(Appendix W) on the implementation, progress, and
bonuses provided by state agency programs to
provide bonuses to recruit and retain employees in
hard-to-fill positions. He said eight agencies have
provided 404 recruitment bonuses totaling $379,263
from July 1, 2007, through October 31, 2008. He said
agencies utilizing recruitment bonuses include the
Information Technology Department, the Commission
on Legal Counsel for Indigents, the Department of
Human Services, the Department of Mineral
Resources of the Industrial Commission, the Bank of
Employee Benefits Programs 8 October 21, 2008
North Dakota, the Highway Patrol, the Department of
Corrections and Rehabilitation, and the Department of
Transportation. He said that five agencies have
issued 195 retention bonuses totaling $419,471 during
the same period. Agencies utilizing the retention
bonus program, he said, include the State Auditor,
Department of Human Services, Mineral Resources
Division of the Industrial Commission, Bank of North
Dakota, and the Department of Transportation.
STATE EMPLOYEE
COMPENSATION STUDY
Chairman Grande called on Mr. Gordy L. Smith,
Audit Manager, State Auditor's office. He discussed
information on the types of expenditures the
committee may wish to address in bill drafts relating to
state employee service awards, employer-paid tuition,
and employer-paid professional organization
membership and service club dues (Appendix X). He
said based upon work conducted by the State
Auditor's office, it appears that most state entities feel
that the current guidance in place provides sufficient
direction regarding expenditures and no further
clarification is necessary. He said it appears agencies
feel that if additional guidance is necessary they are
able to obtain that guidance from the Office of
Management and Budget. However, he said, specific
types of expenditures for which the committee may
wish to consider providing additional clarification
include membership dues to service clubs,
membership dues to local and state chambers of
commerce, employee memberships in professional
organizations, and individual state entity awards to
employees for accomplishments established by the
state entity.
At the request of Chairman Grande, committee
counsel reviewed two bill drafts [90242.0200] and
[90243.0200] relating to state employee service
awards, employer-paid tuition, and employer-paid
professional organization membership and service
club dues. He said one bill draft is specific and details
the type of service awards that will be allowed upon
the completion of a certain number of years of service
while the other bill draft is more general in nature.
Representative Glassheim said the bill draft should
require each agency to submit its rules to the Office of
Management and Budget for review. He said if the
Office of Management and Budget approves the rules,
the expenditure made pursuant to the rules should be
decriminalized. He said nonclassified agencies
should submit their rules to the Office of Management
and Budget for review and the Office of Management
and Budget note any concerns and report them to the
Legislative Audit and Fiscal Review Committee.
In response to a question from Representative
Grande, Representative Glassheim said the
Administrative Rules Committee may be a more
appropriate committee to review the rules.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a voice vote that the bill draft relating to
state employee service awards, employer-paid
tuition, and employer-paid professional
organization membership and service club dues
generally be amended to provide that,
notwithstanding any other provision of law, all
agencies, whether classified or nonclassified,
shall submit their rules or policies to the Office of
Management and Budget for review and comment
and then submit them to the Administrative Rules
Committee for review.
Chairman Grande recognized Ms. Laurie Sterioti
Hammeren, Director, Human Resource Management
Services, Office of Management and Budget. She
discussed the bill drafts relating to state employee
service awards, employer-paid tuition, and employerpaid
professional organization membership and
service club dues (Appendix Y). She said Human
Resource Management Services believes that
nonclassified agencies should report directly to the
Legislative Council rather than the Office of
Management and Budget. Concerning employer-paid
tuition assistance, she said, if repayment is required at
all, it should be prorated.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a voice vote that the bill draft relating to
state employee service awards, employer-paid
tuition, and employer-paid professional
organization membership and service club dues
generally be amended to provide that employees
who receive employer-paid tuition who leave
employment within two years of receiving the
tuition must repay the tuition on a prorated basis.
Ms. Sterioti Hammeren emphasized that rather
than requiring agencies to report to the Office of
Management and Budget, agencies, if required to
report, should report to the Legislative Council.
Representative Kroeber said with all of the
reporting requirements contained in the bill, Section 4,
providing that an expenditure made pursuant to a rule
or policy adopted pursuant to the Act is not a criminal
offense, should be removed.
It was moved by Representative Kroeber and
failed for lack of a second that Section 4 of the bill
draft be removed.
Representative Glassheim presented a bill draft
[90259.0100] to provide an appropriation for a state
employee tuition reimbursement program pool. He
said this appropriation should be added to the bill draft
relating to state employee service awards, employerpaid
tuition, and employer-paid professional
organization membership and service club dues.
It was moved by Representative Glassheim,
seconded by Representative Kroeber, and failed
on a voice vote that the bill draft be amended to
include an appropriation of $1 million from the
general fund to provide a state employee tuition
reimbursement program pool.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
Employee Benefits Programs 9 October 21, 2008
carried on a roll call vote that the amended bill
draft relating to state employee service awards,
employer-paid tuition, and employer-paid
professional organization membership and
service club dues generally be approved and
recommended to the Legislative Council.
Representatives Grande, Glassheim, and Klein and
Senators Krebsbach and Olafson voted "aye."
Representative Kroeber voted "nay."
At the request of Chairman Grande, committee
counsel reviewed a bill draft relating to the state
employee performance bonus program [90244.0100].
Chairman Grande recognized Ms. Sterioti
Hammeren. She said the exception authority
contained in the bill draft may be problematic in that
the statute applies to all agencies and institutions,
including agencies and institutions expressly excluded
from Human Resource Management Services
jurisdiction. She said evaluating exceptions in cases
in which Human Resource Management Services has
no overall authority or involvement would be very
difficult. She said Human Resource Management
Services does not have full understanding or base
information for making these decisions. An
alternative, she said, might be to have those entities
not under Human Resource Management Services
jurisdiction report their exceptions to the Legislative
Council or an assigned legislative committee.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a roll call vote that the bill draft relating
to the state employee performance bonus
program be approved and recommended to the
Legislative Council. Representatives Grande,
Glassheim, and Klein and Senators Krebsbach and
Olafson voted "aye." Representative Kroeber voted
"nay."
At the request of Chairman Grande, committee
counsel reviewed a bill draft relating to state
recruitment and retention bonus programs
[90245.0100].
Chairman Grande recognized Ms. Sterioti
Hammeren. She said the proposed language does
mirror the rationale agencies have been using to
consider their recruiting and retention bonuses under
this section. However, she said, if another reason is
later identified and is not listed in statute, the detail
could be counterproductive. She said Human
Resource Management Services proposes that
permissive language such as "or other unique
recruitment or retention issues identified and
documented by the appointing authority" could be
added to the section. She said the state is in very
difficult times regarding recruitment and retention of
staff and if detail is to be identified, Human Resource
Management Services prefers broad permissive
language.
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a voice vote that the bill draft relating to
state recruitment and retention bonus programs
be amended to add "or other unique recruitment
or retention issues identified and documented by
the appointed authority" at the end of North
Dakota Century Code Section 54-06-31(5).
It was moved by Representative Klein,
seconded by Representative Glassheim, and
carried on a roll call vote that the amended bill
draft relating to state recruitment and retention
bonus programs be approved and recommended
to the Legislative Council. Representatives Grande,
Glassheim, Klein, and Kroeber and Senators
Krebsbach and Olafson voted "aye." No negative
votes were cast.
It was moved by Representative Klein,
seconded by Senator Krebsbach, and carried on a
roll call vote that the chairman and the staff of the
Legislative Council be requested to prepare a
report and the bill drafts recommended by the
committee and to present the report and
recommended bill drafts to the Legislative
Council. Representatives Grande, Glassheim, Klein,
and Kroeber and Senators Krebsbach and Olafson
voted "aye." No negative votes were cast.
Chairman Grande announced the committee may
meet during the organizational session to consider
amendments to Employee Benefits Programs
Committee Bill No. 118.
No further business appearing, Chairman Grande
adjourned the meeting at 4:00 p.m.
___________________________________________
Jeffrey N. Nelson
Committee Counsel
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