Egan’s retirement choice bill on the move

A state Senate panel has advanced a bill giving Alaska’s public employees a choice of retirement systems.

Senate Bill 121 lets state and municipal workers choose either a defined benefit plan – also known as a traditional pension – or a defined contribution plan, like a 401(k) retirement savings account.

During the Murkowski administration the legislature did away with the state’s defined benefit program for all new hires since July 2006. The Parnell administration opposes the current bill.

Casey Kelly has more.


Senate Bill 121’s primary sponsor, Juneau Democrat Dennis Egan says public employees deserve a choice of retirement plans.

“Personal accounts are great for recruiting researchers, military spouses, or corporate retirees to state and local government,” Egan said. “And pensions are great for keeping those who spend their lives teaching our children, patrolling our prisons and managing our fisheries.”

The Alaska Public Employees Retirement System currently has an unfunded liability estimated at $11-billion due to several factors, including the stock market crash, rising health care costs, retirees’ longer lifespans, and accounting mistakes made by the state’s actuaries.

Egan says his goal is to make sure the legislation does not increase state spending or the unfunded liability. He believes that was accomplished last week with an amendment making employees who choose a defined benefit share the risk of increased health care costs in the future.

“It shares the risk between employees and employers,” said Egan. “And it adds nothing – not one red cent – to the unfunded liabilities from the past.”

In fact, an actuary’s analysis shows Senate Bill 121 would save the state 49-million dollars in the first five years. But Deputy Administration Commissioner Mike Barnhill testified to the Senate State Affairs Committee Thursday that there’s no way to guarantee cost savings with a defined benefit system over time.

“Put a 20-year-old in in 2013, they will retire in the 2050s, 2060s. Over that time period we can have investment loss, over that time period we can have health care cost growth that is out of line with our projections, over that time we can have mistakes, other things – people could end up living longer,” said Barnhill. “It is for these reasons that the administration strongly opposes enactment of this bill.”

State Affairs Committee Chairman Bill Wielechowski – an Anchorage Democrat – accused the administration of purposely trying to inflate the bill’s costs over the long term, and dragging its feet on the new cost estimate – or fiscal note – accounting for last week’s health care amendment.

Barnhill said the state’s actuary only had a week to review the new version of the bill, leading to a testy exchange between the two.

“I would further submit, Mr. Chair, that the people of Alaska, who are going to bear the brunt of the promises that this bill makes, that successive generation of Alaskans – our children and grandchildren – are entitled to full actuarial vetting,” Barnhill said.

Wielechowski responded: “Thank you, Mr. Barnhill. You’ve had one year to get this fully actuarial vetted. And we get fiscal notes turned around in days in this building. We get fiscal notes on oil tax bills that are billions and billions of dollars, projected over decades, turned around in days. You have an outside company at your disposal, whose expertise is in this area.”

Anchorage Republican Kevin Meyer voted to advance the bill. But said he hoped it would get a thorough vetting in the Finance Committee, where it goes next.

“I truly think letting the employees have a choice between a defined benefit and a defined contribution is the best policy, and it’s the best way to attract employees, the best way to retain our employees. Now whether or not we can afford that, I think that’s a question for the Finance Committee,” said Meyer.

Anchorage Republican Cathy Giessel also voted to advance the bill.

Besides Egan, SB 121 has nine co-sponsors, including Republicans Linda Menard and Lesil McGuire.

Alaska is the only state in the union that offers only a defined contribution plan to public employees. Most states have a hybrid system, similar to the one offered in Egan’s bill.