New employees face retirement risks

Posted: Sunday, January 28, 2007

Teachers who start work in Alaska schools this year need to be highly qualified and able to master their subject matter. Each one also needs to be an investment expert.

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The Alaska Legislature recently ended the pension plan for new state employees and enrolled them all into a new plan in which the employees will be responsible for their own retirement.

Government employees in Alaska formerly had a traditional pension plan, known in the business as a "defined benefit" plan. During the past session, the Legislature passed SB 141, switching new state employees to a defined contribution plan, similar to a 401K.

The change was pushed by former Gov. Frank Murkowski, who called the new retirement plan a "generous and portable retirement benefit" while taking credit for it as one of the accomplishments of his administration.

He said it balanced the state's ability to attract and retain qualified workers and the state's need to be able to afford it.

At the National Education Association-Alaska, they dispute the claim of generosity, the ability to attract qualified employees and its financial sustainability.

Alaska teachers are not part of the federal Social Security system, so if they make bad choices with their retirement investments, there is no Social Security check to fall back on in their old age.

"There's no safety net for teachers," said Brian Bjork, president of the statewide union.

It will be difficult for Alaska to attract highly qualified teachers, as well as police officers, firefighters and nurses without offering a better retirement plan, he said.

Sen. Bert Stedman, R-Sitka, said the new retirement system has accomplished one of its most important goals.

"It's controlling the cost better than a defined benefit plan," he said.

That means SB 141 is working, Stedman said.

"I'd say the answer is yes, no doubt about it."



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