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Nevada Bills Would Affect Public Sector Plans

The Nevada State Assembly is considering legislation that would establish a new retirement plan for new public sector employees and expand all public employees’ choices regarding how their retirement plan funds are invested. The bills, AB 190 and AB 360, both are wending their way through committee consideration.
AB 190
Assemblyman Randy Kirner (R-Reno) introduced the bill on Feb. 23. It rovides for the establishment of a hybrid retirement program for new employees who become members of the Public Employees’ Retirement System (PERS) on or after July 1, 2016.
The bill says that the program would include a defined benefit plan and a defined contribution plan, and must be part of PERS. It also says that the DB plan would include:
1. a cap on annual benefits;
2. a prohibition on the purchase of additional service credit;
3. a maximum public employer contribution rate equal to 6% of an employee’s compensation;
4. an employee contribution rate equal to the contribution rate that is actuarially determined for the plan less the public employer contribution rate;
5. a monthly service retirement allowance that is determined by multiplying a member’s average compensation by 1% for each year of service earned by regular members, and by 1.5% for each year of service earned by police officers and firefighters; and
6. a minimum retirement age to receive an unreduced benefit that is tied to the full retirement age of the member under the Social Security Act.
The bill calls for a DC plan that would include:
1. accumulation by members of retirement savings in individual trust accounts;
2. compliance with federal law in order for the plan to be recognized as a qualified governmental retirement plan;
3. compliance with federal law concerning limitations on benefits, distributions and maximum compensation;
4. the selection of a third-party administrator;
5. a lifetime annuity option for the payment of benefits during retirement;
6. the prohibition of loans to members;
7. equal contributions by employees and public employers;
8. supplemental contributions by employees; and
9. the vesting of amounts in members’ accounts.
The Assembly Government Affairs Committee held two hearings on the bill in March, the latest of which was on March 11. AB 190 is now before the Assembly’s Committee on Ways and Means and Commerce and Labor.
According to the Las Vegas Review-Journal, PERS estimates that AB 190 would cost just under $800 million in its first two years, and $750 million per year after that. Add to that another $18 million to implement.
NPERS Executive Officer Tina Leiss told the Review-Journal that the estimates, which were prepared by the system’s independent actuary, reflects the fact that as employees retired and new employees were covered by the new plan, the current DB plan would shrink.

  1. The cost of the system and the current DB plan’s $12.5 billion unfunded liability would result in higher contribution rates for public employers and employees. Leiss says that the contribution rate would have to increase by just over 50%, from 28% to 43%, for the next two-year budget. Leiss also says that the system may save money, but if it does, that will not happen any time soon.
    According to the Review-Journal, PERS officials testified before the committee against the bill.
    AB 360
    Assemblyman David Gardner (R-Clark) introduced the bill on March 17. The measure provides that:
    1. a program for deferred compensation be made available by the state or the Board of Regents to offer an employee at least five investment options;
    2. any plan authorized by Internal Revenue Code Sections 403(b) or 457 must offer at least two investment options consisting of fixed or fixed index annuities and at least two securities investment options offered by different investment management companies; and
    3. a third-party administrator of a program for deferred compensation must use an open and competitive request for proposals process when selecting investment options for the program.
    The Assembly Government Affairs Committee held hearings on AB 360 on March 26 and 27.