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A bill to overhaul Alaska's public employee and teacher retirement systems was approved Wednesday by the Senate Finance Committee.
The proposal would increase payroll contributions for existing employees by 0.5 percent and establish a 401(k)-style defined contribution plan for new employees.
The retirement system rewrite aims to fix a $5.6 billion hole in Alaska's $16.4 billion retirement system. The unfunded liability is a result of rising health care costs, poor performance in the stock market, missed estimates on investment returns and more employees retiring earlier and living longer.
Sen. Lyman Hoffman, D-Bethel, said the state must address the retirement and health care costs, but this plan would make it harder to attract and retain state employees and teachers.
"In the last couple of years, and this year included, we're making great strides to fund education at higher levels," Hoffman said, referring to a proposed $70 million increase in per-student spending. "But by moving this far and this fast I believe that we may negate many of the achievements we've been able to accomplish in the area of education."
Hoffman objected to the bill but did not vote against it when it passed out of the committee.
Sen. Gary Wilken, R-Fairbanks, said the proposal would put Alaska on par with many other states in terms of retirement age and years of service.
Currently, teachers who have worked eight years can retire at age 60. Those who have worked 20 years can retire at any age. Other state employees can retire at 60 after five years and at any age after 30 years.
The proposed new tier would increase the retirement age for teachers to 65 after 10 years on the job.
Most other public employees could retire at any age after 30 years. Employees now enrolled in the systems would not be affected by the retirement age changes.