Senate Bill 121 gives public servants a choice of retirement plans while saving the state money

JUNEAU-The Senate State Affairs Committee movedSenate Bill 121 out of committee this morning. SB121 lets teachers, firefighters, troopers and other public servants choose from two state retirement systems: putting money in an individual defined contribution retirement account or earning a defined benefit pension.

“A defined benefit pension takes time to earn, but rewards a record of public service by paying a guaranteed monthly benefit,” said committee chair Senator Bill Wielechowski. “A defined contribution account is more like a 401k, which means it is portable from one employer to another, and is better suited for employees who aren’t envisioning a long career in public service.”

Defined benefit pensions are a proven tool for recruiting and retaining accomplished professionals because those systems typically earn higher investment returns than defined contributions plans and tend to be far more stable. Additionally, most of Alaska’s teachers and public employees can’t earn the defined benefit of Social Security, which means they don’t have the safety net the private sector does.

“Without the retirement incentive to stay and build a life in Alaska, we’re losing our best and brightest to the Lower 48, where public servants earn pensions,” said Senator Egan. “For example, the average cost to recruit and train a trooper or a firefighter in Alaska is around $150,000. We can’t afford to become a training ground for the lower 48.”

The legislation creates a new, more predictable defined benefits tier for public employees that saves the State money in the short term and is cost neutral over the long term because it splits the risk of rising health care costs between the employer and the employee.

“Senate Bill 121 is a win-win situation,” said Senator Egan. “The State saves money, while creating incentives for talented teachers, troopers, firefighters and other public servants to stay and keep their talents right here in Alaska.”

For more information, please contact Jesse Kiehl in Senator Egan’s office at (907) 465-4947.