Retirement plan goes to floor
Measure includes no changes to death and disability benefits
A bill that would privatize retirement accounts for future employees was passed on Sunday to the Alaska House of Representatives floor for vote possibly later this week.
After being held up in the House Finance Committee, lawmakers made significant changes to SB 141 that concern new public employees or teachers who may be disabled or killed on the job.
The proposed plan for the public employee and teacher retirement systems, also known as PERS and TRS, switches workers hired after July 1 from a "defined benefit" to a "defined contribution" plan; instead of receiving monthly pension checks, an employee would get a lump-sum amount upon retiring.
The version passed by the Senate did not include a plan for employees who are severely disabled or killed while on duty.
In the finance committee it was proposed to give beneficiaries $500,000 in the event a peace officer or firefighter lost his or her life or might not be able to work again. Rep. Mike Kelly, R-Fairbanks, suggested other employees buy an outside life insurance policy.
Instead, the committee approved an amendment proposed by Rep. Bruce Weyhrauch, R-Juneau, that would switch a new employee's status to the defined benefit plan if they were to die or be disabled because of an accident on the job.
"People prefer the current system," Weyhrauch said.
Melanie Millhorn of the Alaska Division of Retirement and Benefits said that change to the plan would be problematic because it creates a benefit that has no present funding source.
Lawmakers believe it's necessary to reform Alaska's retirement plan because a $5.7 billion shortfall is growing inside the system. Supporters argue that a defined contribution plan would cut down on costs and risks of the system.
Municipalities and school districts have been paying a portion of that bill; some are contributing as much as 50 percent of a worker's salary to pay for retirement costs.
That amount may not be increased more than 5 percent annually. Weyhrauch introduced an amendment that would cap an employer's contribution at 2 percent, so the Alaska Legislature would be forced to find other funding. The amendment failed.
Rep. Hawker tried to allow individual employers to decide if they wanted to increase the amount of the employees' contributions as high as 1.5 percent. It also failed to pass.
Speaker of the House John Harris, R-Valdez, said the House may wait until the capital budget passes out of a conference committee to vote SB 141.
"I think it's going to be close, but it will probably pass," said Harris, adding that he had not made up his mind about the bill.
The Senate sent a clear message last Friday when they suspended all business and threatened to leave the session early if the House delayed movement on the bill.
Senate President Ben Stevens, R-Anchorage, said it was the most important legislation of the year.
• Andrew Petty can be reached at andrew.petty@juneauempire.com