Bill: Pay 7.5% for 2-for-1 credit

Proposal is for elected officials

Future county and city elected officials who are members of the Arkansas Public Employees Retirement System would pay 7.5 percent of their salary to the system to get credit for two years for each year they work under a bill that cleared a legislative committee Monday.

The counties and cities that employ these future elected officials would pay an amount equal to an additional 2.5 percent of these officials’ salaries to the system under House Bill 1123, sponsored by Rep. Allen Kerr, R-Little Rock.

The legislation would become effective for paid city and county elected officials who begin serving in an elected office, in which they pay into the system, for the first time on or after Jan. 1, 2014, actuary Jody Carreiro said in a report to the Legislature’s Joint Committee on Public Retirement and Social Security Programs.

Kerr said the goal is to raise enough money to cover the cost of the extra year’s credit.

Carreiro estimated that the bill would increase contributions to the system by about $50,000 a year during the first few years after it becomes effective. He estimated that about $1 million of new payroll would be subjected to the 5 percent surcharge on elected officials and their employers based on the system’s membership information.

Act 563 of 2011 already requires some local officials serving in elected office for the first time on or after July 2, 2011, to pay 2.5 percent of their salary to the system; local governments must match that amount for elected officials receiving the two-years-for-one credit.

As a result of a drafting error, the 2011 law only applied to a small number of elected officials, who weren’t contributing anything to the system, said Gail Stone, executive director for the public employees retirement system.

Kerr told lawmakers that his bill is “a clean-up bill.” System employers currently pay the equivalent 14.24 percent of their employees’ pay to the system and that rate is scheduled to increase to 14.88 percent, effective July 1, 2013. Thus, these future elected officials’ employers would pay the equivalent of 17.38 percent of their pay to the system, starting Jan. 1, 2014.

Existing law limits the two-for-one bonus to a maximum of 20 years’ credit for 10 years of work for local government officials elected after July 1, 1999, or those participating in the system’s contributory plan, Carreiro said.

In other business, the committee also approved a bill that would allow the state’s retirement system to have contracts with investment managers for longer than seven years. Contracts of this length are currently prohibited under state law said George Hopkins, executive director for the Arkansas Teacher Retirement System.

Hopkins said Senate Bill 111, sponsored by Sen. Robert Thompson, D-Paragould, would allow the system toavoid having to pay millions of dollars in increased fees for well-performing investment managers because the system wouldn’t be required to enter into new contracts with the managers after seven years under state law. The system has terminated several investment managers over the past few years as a result of poor investment performance, he noted.

Northwest Arkansas, Pages 7 on 02/26/2013

Upcoming Events