2019 Legislative Session Review
The Alabama Legislature had not yet adjourned its 2019 regular session when our ARSEA/APEAL Update was distributed last week, so we are devoting this issue to a final review of the bills affecting current and future retirees that our association introduced and supported over the course of the past three months.
PASSED
Fiscal Year 2020 General Fund Budget - The House and Senate also approved a $2.1 billion General Fund budget that fully funds the request of the State Employees Health Insurance Program, which provides health coverage to both active and retired state employees. The funding should allow SEHIP administrators to avoid placing premium increases or additional out-of-pocket costs on plan participants for the third consecutive year. The budget also fully-funded the Employees’ Retirement System’s annual required contribution, commonly known as the ARC, which is the amount that actuaries determine is necessary for the state to contribute to cover retirement costs for the fiscal year. Securing necessary funding for both ERS and SEHIP was among the top priorities in ARSEA/APEAL’s legislative agenda this year.
Local Government Retirement Fairness Act - The Alabama Legislature awarded final passage to the “Local Government Retirement Fairness Act,” which allows local governments participating in the Retirement Systems of Alabama to opt out of the Tier II benefit plan that was forced upon them seven years ago. ARSEA/APEAL led the effort to pass the legislation, which was sponsored by Sen. Jabo Waggoner (R - Vestavia), along with a coalition comprised of the Association of County Commissions of Alabama, Alabama League of Municipalities, and the Professional Firefighters of Alabama. The two-tiered retirement system was passed by the Legislature in an effort to reduce the retirement cost of state and education departments. Local government entities were unnecessarily included in that legislation despite the fact they provide the funding for their individual pension plans. ACT 2019-132
Partial Lump Sum Option Legislation - Lawmakers also approved legislation that provides future state retirees with the option of taking up to 24 months of their monthly retirement allowance as a single, lump-sum payment upon separation from the workforce. The remaining retirement allowance would be distributed per the option chosen by the member. Under the provisions of the measure, which was sponsored by State Rep. Alan Baker (R - Brewton), the payment is calculated using the current - not long-term - value of the individual’s pension benefit, and federal taxes will have to be paid on the full amount that is claimed. The partial lump-sum option, known in government lingo as PLOP, is already available in 29 other states. ACT 2019-316
Special Needs Trust Allowance - The Legislature enacted a bill by Senator Cam Ward (R - Alabaster) that allows the retirement allowance of a member of the Judicial Retirement System, the Employees’ Retirement System, or the Teachers’ Retirement System to be paid into a special needs trust. A special needs trust allows a disabled beneficiary to utilize assets left to them without losing eligibility for SSI or Medicaid benefits. ACT 2019-221
DID NOT PASS
Retiree Longevity Bonus - Lawmakers failed to pass a longevity bonus that ARSEA/APEAL had requested for state and local government retirees participating in the Retirement Systems of Alabama. A similar bonus requested by the association representing retired teachers also died with last week’s adjournment.
Alabama Lottery - The Senate approved a proposed constitutional amendment that would have established an Alabama Lottery with proceeds earmarked for the General Fund budget after debt owed to the Alabama Trust Fund was repaid. The proposal would allow for only paper ticket lottery sales, and strictly forbade electronic lottery terminals. A House amendment adjusted the earmarking formula to 75% of the proceeds for the General Fund and 25% for the Education Trust Fund, but the constitutional amendment ultimately failed to achieve the three-fifths supermajority vote necessary for final passage.
ERS Tier II Benefit Revision - The House approved but the Senate failed to pass legislation that would establish a new retirement plan for state employees hired on or after October 1, 2020, or any Tier II plan member who elects to join the new plan.
Retiree Return to Work Earning Limit - The Legislature did not pass a bill to increase compensation that a retiree can earn while receiving an ERS or TRS retirement and performing duties with an employer participating in the retirement system. The measure would have increased the limit to $42,000 beginning in the 2020 calendar year and provided regular Consumer Price Index adjustments after 2025. It was sponsored by State Rep. Rex Reynolds (R - Huntsville), who is a retired police chief and a dues-paying member of ARSEA/APEAL.