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Traditional pension plan gets worker, actuary support

Interim legislative hearing looks at returning to defined-benefit retirements for public employees

Posted: September 15, 2011 - 11:06pm

Public employee advocates are continuing to push for going back to a traditional pension plan for Alaska’s state, municipal and school employees.

They’re continuing to face opposition from the Parnell administration and an uphill battle in the Legislature, however.

At an Anchorage hearing Thursday, Sen. Dennis Egan’s Senate Bill 121, which would put those workers back on a defined-benefit plan, got strong support from some public employees and a pension expert, but pushback as well.

The bill, said Egan staffer Jesse Kiehl, would allow the state’s newest employees to return to the traditional defined benefit pension plan, instead of the 401K-style defined-contribution plans into which new employees have been forced since 2006.

For the Public Employee Retirement System that’s known as Tier IV; for the Teacher Retirement System it is Tier III.

“This bill allows those employees who have been hired into the defined contribution system one shot to choose the new tier,” Kiehl said.

They would also have the option of staying with the defined contribution plan, which Kiehl called “pretty well built” and “well managed.”

Thursday at the hearing Anchorage Police Officer Brian Wilson said he was born and raised in Alaska and wants to stay. The state’s current retirement system may encourage young officers to leave for other states with more secure retirements, he said. And the portable nature of the 401K-style plan may even encourage that, he said.

Wilson said in his four years as a police officer he’s seen half his academy class leave the state, and encouraged the legislators to help his experienced fellow officers remain in Alaska.

“Help them build their lives here in Alaska and stay through retirement,” he said.

And schoolteacher Daniel Griswold of East Anchorage High said despite also being born and raised in Alaska, the state’s retirement plan made him and all young teachers look at leaving Alaska.

“There are still states that really want to make sure their teachers stay and want to take care of them,” he said.

Sen. Cathy Giessel, R-Anchorage, said other states may be forced to change their retirement plans as Alaska did, to shift more retirement cost or risk to employees.

“Five years ago we didn’t hear about states filing for bankruptcy,” she said.

Consulting actuary Flick Fornia reviewed Senate Bill 121 for advocates of a defined benefit plan, and said it would provide a more secure retirement for state employees than what is now offered, and at no more cost.

“This should be something that’s relatively cost neutral, and it might even save some money,” he said.

The big benefit of a defined benefit plan to employees, Fornia said, was the “longevity risk pooling” to make sure every retiree has a comfortable retirement and those who live longest don’t run out of money.

“You are always worried as a single individual of outliving your savings,” Fornia said.

Deputy Commissioner of the Department of Administration Mike Barnhill said the Parnell administration opposed going back to a defined benefit plan because that would mean the state, instead of employees, would take the risk of investment returns failing to meet expectations. The current defined contribution plan provides at least an adequate retirement for employees, he said.

“Is it as good as a defined benefit plan? No, but it will be enough,” he said.

No formal action is taken at hearings between legislative sessions. Another hearing is slated for Senate Bill 121 next month in Fairbanks.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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