JUNEAU – Wednesday, Senator Cathy Giessel (R-Anchorage) introduced Senate Bill 88 to establish a new retirement system for public employees and teachers. Upon introduction, the bill received 9 co-sponsors. The legislation would create a new defined benefit system for public employees and teachers and provide an option for current Tier IV employees to convert their defined compensation plan to the new retirement system.
“As we see with every industry in Alaska, the state is also having trouble recruiting and retaining experienced workers,” said Sen. Cathy Giessel. “We are at a point where we cannot provide basic government services to the most vulnerable Alaskans, as well as our business community. We need to take steps to become competitive in the labor market, and this legislation could be a major step forward to solve many of the workforce shortages the state is facing.”
Many components of this new tier are similar to PERS Tier III and TRS Tier II. But, through analysis, revisions, and compromises, components that caused concerns about past retirement systems are addressed. For example, this proposal increases the employee contribution rate from prior pension retirement systems and makes it adjustable from 8-10% to have employees share in the system’s financial solvency risk. It also maintains the current system’s retiree medical coverage plan in place to keep the state’s liability toward medical costs as low as possible.
“Becoming more competitive in the workforce will help bring stability to our economy and families back to Alaska, and to do that, we need to get this policy right,” said Senate President Gary Stevens (R-Kodiak). “Our current system shows we are not competitive, and it’s bleeding into the private sector because of the alarming amount of public employee vacancies which is leading to the absence of basic state services and functions.”
When the state transitioned to a defined contribution plan in 2006, it was believed that retirees would earn the same level of retirement as the prior defined benefits system. An initial analysis by the Division of Retirement and Benefits concluded that if a state worker who has spent 20 years under the defined contribution plan were to retire today, the employee would only receive 32% of their average earnings, compared to 40.3% under the prior defined benefits system – a difference of $8,000 a year. Even more so, a peace officer or firefighter would receive $16,000 less under the defined contribution plan after 20 years of service.
“If you’re going to recruit and retain good workers, we need to bring back defined benefits,” said Senator Click Bishop (R-Fairbanks). “Better pay and benefits will help attract good working people to Alaska and keep them here, especially at a time when labor shortages are hammering every sector and job class in the state. We need more nurses, police, firefighters, teachers, snow-plow drivers, heavy-equipment operators, ferry workers, and more. Offering them defined benefits will give them the incentive to come and stay here.”
Senate Bill 88 was referred to the Senate Labor & Commerce Committee and the Senate Finance Committee.