Administration November 6, 2007

Labor Unions Protest Alaska's New Pension System

June 23, 2006 (PLANSPONSOR.com) - Labor unions representing state employees are protesting the state's new pension plan that is scheduled to go into effect July 1, saying that it may not qualify for tax exempt status with the Internal Revenue Service.

Reported by

Leslie Ziober

The Alaska Public Employee’s Association/AFT union, the Alaska State Employees Association/AFSCME and the Alaska Correctional Officer Association filed an injunction against the state this week to stop the plan from going into effect.

Bruce Ludwig, business manager for the Alaska Public Employees Association, said in a prepared statement that he thinks it is appalling that the state would put into place the “questionable” retirement system when there is any doubt whether the plan will meet with IRS approval, the Anchorage Daily News reported.

However, Department of Administration Commissioner Scott Nordstrand said the plan can be revised as long as the Legislature approves the changes by the end of January 2008. The IRS will evaluate the application for the new plan and, if it does not meet the requirements for tax exemption, will explain the steps the state must go through to meet the requirements, he said in the news report.

In May 2005, Alaska Governor Frank Murkowski signed a bill that would switch the Alaska Public Employees Retirement System and Teachers Retirement System to 401(k)-type defined contribution plans. At the time of the report, the systems had shortfalls of between $5.7 billion and $6.2 billion, according to the Associated Press. The new plan will be enacted for public employees and teachers hired after July 1 (See Alaska Public Pension Plans Switching From DB to DC ).

In September 2005 an Alaska state representative called for a legislative audit of the state’s systems to rule out criminal misconduct in connection with their shortfall (See State Representative Asks for Alaska Pension Systems Audit ).

In April 2006 the Alaska House of Representatives voted 24 to 16 to delay implementing the new retirement plan to make sure it would meet IRS approval for tax exemption (See Alaska House Votes to Delay Retirement System Overhaul ).

The state Senate passed the bill in May without including the one-year delay (See Alaska Senate Refused Delay in Retirement Plan Overhaul ). S ome senators argued that further delay would only stall fixing the system’s problems.

On behalf of the unions, one state representative who is also an attorney filed a restraining order in Juneau Superior Court.