Effort to Return to DB Stalls in Alaska

March 1, 2010 (PLANSPONSOR.com) - Key legislators who control the future of the bills that would bring Alaska state workers back to a traditional defined benefit pension plan haven't moved them from their committees.

The Juneau Empire reports that State employee unions, supported by members of the Juneau legislative delegation and others, have been hoping to abandon the 401(k)-style retirement plan the Legislature adopted in 2005 and switch back to a defined benefit pension plan, and bills to do that have been introduced in both the House and Senate. However, House Bill 30 remains in the House Labor and Commerce Committee, the first committee to which it was referred since being introduced before the 2009 session, and the Senate bill won approval in the Senate’s Labor and Commerce Committee and the State Affairs Committee, before stalling in Finance.

While those in favor say a return to Public Employees Retirement System Tier III and Teachers Retirement System Tier II will provide better retirement at no additional cost, the state’s Department of Administration said that doesn’t appear to be the case, according to the news report. The pension plans left Alaska with a $7.5 billion debt it doesn’t know how it is going to pay.

Former Juneau representative Jim Duncan, now business manager of the Alaska State Employees Association, says the state’s Tier I plan caused the high costs, but it has been closed since 1986. The plans that were abandoned for the 401(k), TRS Tier II and PERS Tier III, had solved the growing liability problem, he contended.

The 401(k) plan is known as Tier IV for public employees and Tier III for teachers. Half of state employees are now under those plans, the news report said.

Duncan said Alaska needs to go back to the old system for the good of both state employees and the state itself. “The data shows that defined contribution is not serving the state well, it has hurt both recruitment and retention of employees,” he said.

Cindy Spanyers, legislative liaison with the Alaska Public Employees Association/AFT, said that’s the message she’s been getting reading through hundreds of exit interviews with departing state employees. They’ve frequently mentioned the retirement system as a reason for their departure, and a retiring petroleum lands manager said the state should return to a defined benefit plan to hire better people, she said, according to the news report.