State senators introduce new pension plan for public employees

A proposed overhaul of Alaska’s public employees retirement system would provide a new pension plan for state and municipal workers, intended by supporters to address the ongoing inability to recruit and retain enough employees.

Half of the 20-member state Senate have signed onto the bill, sponsored by Senate Majority Leader Cathy Giessel, an Anchorage Republican. The measure was outlined in a news conference March 1 by members of the bipartisan coalition that controls the Senate.

Coalition members said the 2006 legislation that moved Alaska from a traditional retirement benefits plan to a 401(k)-style savings plan has contributed to difficulties recruiting state workers. Lawmakers have heard about worker shortages and how a revamped retirement offering could improve Alaska’s competitiveness in seeking employees, the Anchorage Daily News reported.

Almost one in six state government jobs were vacant in December, according to the governor’s Office of Management and Budget.

Alaska is the only state where all newly hired public employees have only a 401(k)-style plan as their primary retirement benefit, Keith Brainard, research director with National Association of State Retirement Administrators, said in an email to The Associated Press.

Under the previous plan for public employees, their retirement benefits were based on their years of service and average salary. For employees hired after July 1, 2006, their retirement income depends on their contributions, the employer match and investment earnings on their account.

Those wary of a return to so-called defined-benefit pensions, including legislators who have not signed on to the Senate proposal, point to the billions of dollars in unfunded liabilities for the prior retirement plans the state and municipalities are paying off.

However, supporters of the new plan say it has provisions meant to prevent the state from taking on greater obligations than it can afford.

The proposal would create a new defined-benefit tier and allow public workers on the current defined-contribution plan to switch over. The new tier would not include health insurance upon retirement, as does the old plan for employees hired before 2006, but workers could contribute to a health reimbursement account while they work and could then use that to cover costs of health insurance premiums until they become eligible for Medicare.

To further protect the retirement system from underfunding, the new legislation would allow the state board that manages the retirement plan to withhold inflation raises to retiree payments if the plan is less than 90% funded.

Chuck Kopp, a former legislator who leads a group that brings together public employee groups and unions to advocate on retirement issues, said the proposal “provides a minimum safety net, and as long as the employees still engage in active savings and personal investment, they can be far better prepared than what they are now.”

While retirement issues are a priority for the Senate majority, the proposal’s prospects are unclear. Senate President Gary Stevens, a Kodiak Republican, said he can’t guarantee “this is something that we can do this year. In fact, I can say it’s going to be very hard to get it through this year.”

If it manages to win Senate approval, the measure would face a tougher challenge in the more conservative House.

Jeff Turner, a spokesman for Republican Gov. Mike Dunleavy, said Dunleavy understands the “very competitive world” for recruiting state workers. But the governor “wants more data that demonstrates how well a defined-benefit plan will attract the most highly qualified candidates without increasing the unfunded liability created under the previous defined-benefit plan phased out in 2006.”


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