HB1160
To Amend The Law Concerning Permissive Service Credit For Gap Year Service Under The Arkansas Teacher Retirement System; And To Declare An Emergency.
AI-Generated Summary
This bill amends the Arkansas Teacher Retirement System (ATRS) law concerning "permissive service credit" for "gap year" periods. It redefines "gap year" to be a "gap period" lasting one-quarter of a fiscal year during which a member was inactive and either unemployed or did not provide qualified service. Members can purchase permissive service credit for these gap periods. To be eligible, a member must have five years of actual service, have left their classroom teacher position before the gap period, and return to their teaching position afterward. They must also accrue at least half a year of service credit after returning and be ineligible for free service credit for the gap period under other laws. Each gap period can provide up to one-quarter year of permissive service credit, with a maximum of five years of such credit purchasable. This credit cannot be purchased after retirement. Members must pay the actuarial equivalent of the benefits for each quarter-year credit purchased. Payments are refundable if the member ceases to be active before credit is established or if the credit isn't used for retirement eligibility. The bill declares an emergency to allow for immediate implementation by July 1, 2025, to align with the fiscal year and ensure orderly administration.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries of this bill would be current and former members of the Arkansas Teacher Retirement System who have experienced periods of inactivity in their teaching careers that meet the definition of a "gap period" as redefined by the bill. These individuals, if they meet the eligibility criteria such as having sufficient prior service and returning to teaching, will have the opportunity to purchase permissive service credit that can potentially increase their retirement benefits. The Arkansas Teacher Retirement System itself would also benefit from potentially increased contributions through the purchase of this service credit, which could help offset future liabilities or improve its financial standing.
Who Might Suffer?
The groups or entities most directly and negatively impacted by this bill are primarily the Arkansas Teacher Retirement System's actuarial soundness and potentially future retirees if the cost of this purchased service credit is not fully accounted for in the system's long-term financial projections. While the bill requires members to pay the "actuarial equivalent" for the credit, the exact calculation and its long-term impact on the system's funded status would depend on the accuracy of those actuarial assumptions and the number of members who choose to purchase this credit. Additionally, any current teachers who might have considered returning to the profession after a break but are not eligible under the specific requirements of this bill would not benefit. Conversely, employers participating in the ATRS would see clarified reporting and contribution requirements, which could be seen as a positive impact, though this bill primarily focuses on member benefits and system administration rather than employer contributions.