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Senate OK's traditional retirement plan for public employees

Bill has little chance to pass through House in session's final day

Posted: April 15, 2012 - 12:10am
Sen. Dennis Egan, D-Juneau, gives Sen. Lesil McGuire, R-Anchorage, left, a thumbs up after the Senate passed CSSB 121 at the Capitol on Saturday. The bill would provide certain employees an opportunity to choose between the defined benefit and defined contribution plans of the public employees' and the teachers' retirement system. Sen. Settye Davis, D-Anchorage, is at right.  Michael Penn/Juneau Empire
Michael Penn/Juneau Empire
Sen. Dennis Egan, D-Juneau, gives Sen. Lesil McGuire, R-Anchorage, left, a thumbs up after the Senate passed CSSB 121 at the Capitol on Saturday. The bill would provide certain employees an opportunity to choose between the defined benefit and defined contribution plans of the public employees' and the teachers' retirement system. Sen. Settye Davis, D-Anchorage, is at right.

The Alaska Senate Saturday passed a bill allowing public employees the opportunity for a traditional retirement plan, but the late action leaves it unlikely to be able to pass the Legislature.

The Parnell administration has also opposed reopening the option of a defined-benefit retirement plan. Employees, rather than the state, should bear the risk of retirement funding shortfalls, it said.

The Senate Saturday by a 14-6 vote passed Senate Bill 121, sponsored by Sen. Dennis Egan, D-Juneau.

“It will let teachers, troopers, firefighters and other public employees chose one of two state retirement systems,” Egan said.

Current and new employees can chose the 401(k)-style defied-contribution plan state and local employees have had to use for he last several years, or a new option of a defined-benefit, traditional-style retirement plan.

Some, including employees who don’t plan to stay in Alaska or who have other retirement plans, may chose the define contribution plan, but many are likely to want the traditional plan, Egan said.

“Defined benefit takes time to earn, but rewards dedicated public servants,” he said.

The plan has been designed to not cost the state anything beyond he cost of current retirement plans, and to do that leaves the employees with risks not shared by others.

“It shares the risk of rising health care costs between employees and employers,” Egan said.

Current employees could switch to the new defined-benefit plan, but that might come as a cost to them.

Sen. John Coghill, R-North Pole, said he wasn’t convinced there would be no risk to the state. The estimate of no additional cost, he said, is based on a projection that the state’s retirement trust funds will earn an average rate of 8 percent a year.

“I don’t know that this is going to be the case, maybe a six percent return would be better, he said.

Sen. Linda Menard, R-Wasilla, said that offering such a plan would help those who “want more incentive to stay in Alaska and their beloved jobs,” she said.

Sen. Bert Stedman, R-Sitka, a driving force behind the switch to a defined-contribution system several years ago, said he wasn’t ready to support the bill.

Still, he praised the ongoing debate; saying that the polarized pension arguments of recent years has abated.

The projections of 8 percent earnings may not be reached he warned, but said the new plan’s risk were far less than the current plan’s $10-11 billion unfunded liability.

“If we don’t make 8 percent, we create another unfunded liability,” he said.

Stedman, who is also co-chair of the powerful Senate Finance Committee, voted against the bill on the floor, but had earlier agreed to allow it to leave the committee and reach the Senate floor.

The bill now goes to the House of Representatives, where, on the final day of the 90-day legislative session, it is considered to have no chance of passage.

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

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