Committee: Finance and Taxation General FundSponsor: Ingram
Analyst: Daniel DavenportDate: 03/30/2022

FISCAL NOTE

House Bill 308 as passed the House of Representatives allows Tier II plan members of the Employees’ Retirement System (ERS) to: 1) convert accrued sick leave into creditable service and 2) withdraw from service after the completion of at least 30 years of creditable service. This bill also allows Tier II firefighters, law enforcement officers, and correctional officers to receive hazardous duty time.

In addition, for pay dates beginning October 1, 2022, the bill increases the member contribution rate for Tier II plan members from 6% currently to 6.5% per payroll period; and increases the member contribution rate for Tier II firefighters, law enforcement officers, or correctional officers from 7% currently to 7.5% per payroll period.

According to the actuary for the Retirement Systems of Alabama (RSA), this bill would increase total ERS employer contributions by an estimated $1.55 million for Fiscal Year 2024, with approximately $434,000 being paid from the State General Fund appropriation to agencies/entities, through the adjustment in the employer contribution rates for Tier I and Tier II, due to the $12.5 million increase in unfunded liability associated with the benefit adjustments.

As amended and reported by the Committee on Finance and Taxation General Fund, this bill (1) removes the provision allowing for the conversion of accrued sick leave into creditable service for Tier II members; (2) removes the provisions providing for hazard duty pay for firefighters, law enforcement officers, and correctional officers; and (3) removes provisions increasing the Tier II member certification rates. In addition, this bill would now reduce a Tier II member's retirement benefit by two percent for each year of the difference between age 62 and the age of retirement of the member.

According to the actuary for the RSA, this bill would increase the unfunded liability of ERS by an estimated $4.8 million. This liability may be offset by increasing the ERS employer contribution rates set by the Legislature for Tier II and Tier I by 0.24% and 0.03%, respectively. These rate increases would increase total ERS employer contributions by an estimated $1.3 million annually beginning in FY 2023, with approximately $395,000 being paid from SGF appropriation to agencies/entities.


 Greg Albritton, Chairperson
Finance and Taxation General Fund