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.
Comments (8)
Add commentHypocrisy
"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."
This coming from the governor who wants to give his oil company buddies $2 billion annually while there's a $11 billion unfunded liability in the retirement system.
What he means is that State employees should take the risk for his corrupt tax plan.
State of Alaska
Let see, it was the State that hired the Mercer company to manage the pensions and then when it was found to have made mistakes that contributed to over an 8 billion shortfall,the State then sued them. Somehow they thought it was a great deal when they settled for 500 million. The employees had no say in who the State hired to manage the funds, and the State obviously practiced no oversight over this company. On top of that, the Legislature continues to ignore measures proposed that would reduce the liability. Tell me how, again, the State should bear no risk over retirement funding shortfalls, Governor?
Not even close Kiki.
Not even close Kiki.
@Feet
Pony up.
http://www.adn.com/2010/06/11/1319243/alaska-settles-pension-suit-for.html
Could be an argument
for a longer legislative session. These folks obviously need more time to get it done. I really feel for them working in the 'box' of a building we cram them into, then we add some 'steam' pressure of 90 days. It's kinda like shortening the baking time of your grandma's favorite recipes.
Good link Kiki but not
Good link Kiki but not evidence to your comments. Mercer is an actuary, not a manager of pension assets. An actuary presents assumptions including but not limited to plan asset performance, life expectancy, and compensation.
Employees in the defined contribution plans have a suite of options and amongst them are different managers. But, not the topic of your accusation. The risk of retirement benefit payments for the defined benefit plans lies with the employer and therefore the selection of manager is not relevent.
As far as the rest of your comment, it is opinion and as such I applaud your insight.
@Feet
I assumed when Parnell said "Employees, rather than the state, should bear the risk of retirement funding shortfalls" that he was also referencing the current unfunded pension liability from the defined benefit plan. The article doesnt specify otherwise. I stand corrected in saying Mercer actually managed the pensions, however the statistics, information and estimates they did compile which were used by public employers including the state for management of the pensions, was found to have errors which contributed to the pension liability. Thanks for adding to the conversation.
state employees don't get social security or health care
After the retire. Why would anyone stay? Is their pay so high that they can put away enough to cover retirement? The average seems to run $40-$70k. Looks like some long lines at the soup kitchen. I have friends that have quit and moved elsewhere because the retirement is so bad.