Teachers and other public employees in Alaska will remain responsible for planning for their own retirements, as hopes for returning state employees to a traditional pension plan appears bottled up in the Legislature.
Key legislators who control the future of the bills that would bring all state workers back to a traditional defined-benefit pension plan haven't moved them from their committees, and don't appear likely to do so.
Rep. Kurt Olson, R-Soldotna, said he wishes that all state employees could have the kind of plans they used to.
"In a perfect world everybody would have a pension like that, but we don't live in a perfect world," he said.
Those pension plans left Alaska with a $7.5 billion debt it doesn't know how it is going to pay. That debt is what's known as the Teacher Retirement System and Public Employee Retirement System plans' "unfunded liability," the difference between what it expects to pay out in benefits over the next 25 years and the money it has set aside to pay it.
The most recent estimate, which is based on multi-year averages, was based on 2008 data. Stock market losses since then almost certainly increased the unfunded liability, state officials say.
A new report from the Pew Center on the States called "The Trillion Dollar Gap" said that some other states are considering following Alaska's lead in moving to defined contribution plans because of their own unfunded liabilities.
Public unions fight back
State employee unions, supported by members of the Juneau legislative delegation and others, have been hoping to abandon the 401(k)-style retirement plan the Legislature adopted in 2005, instead switching back to a defined benefit pension plan.
Bills to do that have been introduced in both the House and Senate. House Bill 30 remains in the House Labor and Commerce Committee, chaired by Olson, the first committee to which it was referred since being introduced before the 2009 session.
That's despite some important sponsors such as former House Speaker John Harris, R-Valdez, and House Finance Committee Co-chair Mike Hawker, R-Anchorage. Reps. Beth Kerttula, D-Juneau, and Cathy Munoz, R-Juneau, also are sponsors.
House Speaker Mike Chenault, R-Nikiski, backs Olson's view, however.
"I support the system we went to," he said.
Alaska switched retirement systems for new employees on July 1, 2006, after the 2005 Legislature made the change when it adopted Senate Bill 141.
While legislative advocates say a return to PERS Tier III and TRS Tier II will provide better retirement at no additional cost, the state's Department of Administration, which handles personnel issues, said that doesn't appear to be the case.
"Nothing that we've seen so far pencils out," said Annette Kreitzer, commissioner of the Department of Administration.
Former Juneau representative Jim Duncan, now business manager of the Alaska State Employees Association, said Alaska needs to go back to the old system for the good of both state employees and the state itself.
"The data shows that defined contribution is not serving the state well, it has hurt both recruitment and retention of employees," he said.
Olson said that's not the message the Legislature has been getting from state administrators at ongoing budget meetings with department heads.
Cindy Spanyers, legislative liaison with the Alaska Public Employees Association/AFT, said that's the message she's been getting reading through hundreds of exit interviews with departing state employees. They've frequently mentioned the retirement system as a reason for their departure, she said.
And a retiring petroleum lands manager said the state should return to a defined benefit plan to hire better people, she said.
"The advantage that state employment had over the private sector was lost when new hires were put on a 401(k) plan," the manager wrote. "It was tough to hire new talent."
Duncan said the Legislature should look into whether Olson or the employees are correct.
"They need to hold a hearing so those issues can be discussed in a committee," Duncan said.
Duncan acknowledged that Alaska had been spending too much on retirement, but said that issue was dealt with when the state moved from its original retirement plan, Tier I, to Tier II and Tier III for public employees and Tier II for teachers.
The 401(k) plan is known as Tier IV for public employees and Tier III for teachers. Half of state employees are now under those plans.
Tier I caused the high costs, but it has been closed since 1986, he said. The plans that SB 141 abandoned, TRS Tier II and PERS Tier III, had solved the growing liability problem, Duncan said.
A Senate bill stalls, too
In the Senate, a bill sponsored by then-Sen. Kim Elton, D-Juneau, did better than its house counterpart.
It won approval in the Senate's Labor and Commerce Committee, and then the State Affairs Committee, before stalling in Finance, chaired by Sen. Burt Stedman, R-Sitka.
Neither Elton nor new Sen. Dennis Egan, D-Juneau, have been able to persuade Stedman to schedule a vote on the bill.
"He was one of the major proponents of going to a defined contribution plan, and right now he's the major stumbling block on Senate Finance," Duncan said.
Stedman was unavailable for comment Friday.
Kreitzer said one of the reasons for staying with the new system was to make sure in the future the state wouldn't once again be surprised by a surge in unfunded liability. Any new system needs to penciled out in multiple ways, she said.
"Not just pencil out mathematically, but with regard to risk," she said.
The state needs to make sure that rising costs don't once again drive its retirement liability into more billions of dollars.
Spanyers, though, said that risk is now borne by individual state workers, who must make investment decisions for which many have little training. That's particularly important, she said, because Alaska public employees are not covered by Social Security.
The state Division of Retirement and Benefits said the new system did shift substantial responsibility to individuals.
"You really need to take a hands-on approach to your financial security in the future," Shier said.
The division is doing extensive education to help employees make financial decisions, he said.
"We have people traveling all over the state to meet with members, to do the best we can to help them reach retirement prepared," he said. "We are very committed to that."
Duncan and Spanyers said they remain committed to bringing the state back to a defined-benefit plan, even if those efforts die in the current Legislature. Next year may have different people in charge in the Legislature, she said.
"It's a new year next year," Spanyers said.
Contact reporter Pat Forgey at 586-4816 or firstname.lastname@example.org.