Pensions or 401k plans? Debate re-ignited

Juneau lawmaker says state's retirement program scares off potential workers

Posted: Friday, April 27, 2007

The state Legislature this week rejected an attempt by Rep. Andrea Doll to reopen the state's traditional pension plan to new employees.

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The attempt led to floor debate Wednesday and Thursday. Doll, D-Juneau, said the state was shortchanging new employees and failing to hire and keep good workers.

"It is absolutely essential that Alaska be able to attract and retain qualified public employees," she said. "The benefits package adopted by the Legislature two years ago is simply not attractive to prospective workers."

Two years ago the Legislature became aware of rising liability associated with state retirement programs and passed a bill converting the state from a traditional defined-benefit program to a 401k contribution plan.

State officials estimate that they have $10 billion less saved than they'll need over the next 25 years due to longer life spans, rising medical costs and underfunding.

Two years ago the state tried to deal with that by switching the retirement plans, but Doll and others said it hasn't helped with the debt and has made it more difficult for the state to hire police officers and other in-demand employees.



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Previously, new public employees were enrolled in a program called Tier III, a defined-benefit plan. The Legislature changed that to Tier IV, a contribution plan.

That new plan needed a number of technical fixes, both advocates and enemies agreed. When a bill to make those corrections came up, Doll introduced an amendment to allow employees to choose between Tier III and Tier IV.

Rep. Mike Kelly, R-Fairbanks, said Tier IV actually helped the state attract employees because they knew they could take their 401k savings with them if they left.

He called Doll's amendment "a backdoor attempt to do away with Tier IV."

Rep. Bill Thomas, R-Haines, said he had been contributing into a 401k plan for years, and he has more than most state retirees have.

"Quit beating up on 401ks," he said.

The plans shift responsibility for retirement to the workers, he said.

"If you're a poor manager, maybe that's the problem you have with it," he said.

State records show Thomas with income last year of $119,000 as a fisherman and another $68,000 as a legislator.

State Rep. Bob Buch, D-Anchorage, said 401ks were great for people who make enough extra money to put into them.

"They're don't work unless you're wealthy," he said.

They also shift risk of mismanaged investments from the state to workers, he said. And Alaska public employees do not participate in Social Security, so that safety net is not there, he pointed out.

Doll's amendment failed Wednesday 21-15 but attracted some Republican support as well. The full bill passed 29-9 Thursday.

• Pat Forgey can be reached at

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