Alaska Public Pension Coalition

Fact Sheet: Health Care Impact of the Defined Contribution Plan for Alaska’s Retirees

A defined benefit (DB) retirement plan (also known as a traditional pension plan) provides monthly pension checks -- a predictable, stable income that retirees cannot outlive.

 

A defined contribution (DC) retirement plan is similar to a 401(k) savings account. It provides no established monthly pension, and it provides nothing to fall back on when the “savings account” is depleted.

• Under the DC plan, the retirement savings invested by our teachers and state employees can be wiped out by medical bills if they have an accident or illness strikes in retirement.  If this happens, most of Alaska’s public employee retirees do not have the Social Security safety net provided in most other states.  [1]

Fact Sheet: Defined Contribution Plans Negatively Impact Public Employee Recruitment, Training, and Retention

A defined benefit (DB) retirement plan (also known as a traditional pension plan) provides monthly pension checks -- a predictable, stable income that retirees cannot outlive.

 

A defined contribution (DC) retirement plan is similar to a 401(k) savings account. It provides no established monthly pension, and it provides nothing to fall back on when the “savings account” is depleted.

• High Turnover: Because Alaska no longer offers a traditional pension retirement plan, the public sector is beginning to see high turnover in critical positions and ever increasing job vacancies: 40% in public safety alone.[1]

• Recruiting Difficulties: Federal government and private sector wages are surpassing Alaska public sector wages, and those other entities typically offer better benefits.

Fact Sheet: Economic Impact of Alaska’s Retirees

A defined benefit (DB) retirement plan (also known as a traditional pension plan) provides monthly pension checks -- a predictable, stable income that retirees cannot outlive.

 

A defined contribution (DC) retirement plan is similar to a 401(k) savings account. It provides no established monthly pension, and it provides nothing to fall back on when the “savings account” is depleted.

• In 2006, the average pension benefit received by DB retirees was $1,953 per month or $23,440 per year, hardly an extravagant amount. Under the new DC retirement plan, retirees will average only about half that amount [4].

Fact Sheet: Truth About Retirement Plans…Often Contrary To Popular Belief

A defined benefit (DB) retirement plan (also known as a traditional pension plan) provides monthly pension checks -- a predictable, stable income that retirees cannot outlive.

 

A defined contribution (DC) retirement plan is similar to a 401(k) savings account. It provides no established monthly pension, and it provides nothing to fall back on when the “savings account” is depleted.

The DC retirement plan DOES NOT SAVE the state money.

There is no significant cost saving in moving from the previous DB retirement plan, a traditional pension plan like Social Security, to the newer DC retirement plan. An analysis done by Buck, the state of Alaska’s current retirement consultants, showed that the former DB retirement plan for teachers actually costs three percent (3%) less than the newer DC retirement plan for these same employees.  

Fact Sheet: "Defined Contribution" and "Defined Benefit" Retirement Plans

A defined benefit (DB) retirement plan (also known as a traditional pension plan) provides monthly pension checks -- a predictable, stable income that retirees cannot outlive.

 

A defined contribution (DC) retirement plan is similar to a 401(k) savings account. It provides no established monthly pension, and it provides nothing to fall back on when the “savings account” is depleted.

In May 2005, the Alaska Legislature made a hasty decision that destroyed the fiscally responsible public employee DB retirement system that had long helped to build Alaska’s economic vitality and social stability.  The Legislature replaced it with a woefully inadequate DC plan.

• Overnight, Alaska went from having one of the best public retirement systems in the country to having the absolute worst. Alaska downgraded from a stable retirement brick house with prudent, long-term investors and earnings to a straw house with great individual risk and little financial security over the long haul, stifling the retirement readiness of Alaska’s public employees.

About pension reform

Four years ago, the Alaska Legislature dismantled the public employee retirement system.  Overnight, Alaska went from having one of the best retirement systems in the country to having the absolute worst.

Under the current system, most newly hired public employees will only have a risky stock market account when they retire — and no affordable health care.

Alaskans who make it to age 65 often have to prepare financially for a long time in retirement. Twenty-nine percent of women who reach age 65 will also reach 90. Eighteen percent of men who reach 65 will make it to 90.

Retirees who only have defined contribution plans could outlive their contributions.

It is true that many private companies have switched from defined benefit to defined contribution pension plans in recent years. But every employee of a private company participates in Social Security which is, by design, a form of defined benefit pension.

Alaska’s teachers, municipal employees, and state employees, however, do not have Social Security. You cannot outlive Social Security. You can, and many older Alaskans will, outlive the new defined contribution plan for our municipal and state employees and teachers.

What will Alaska do with retired teachers and police officers who outlive their contributions and have no other pension or Social Security?

An update on APPC's legislative efforts

With the legislative session about to end on April 19, it looks like the Alaska Public Pension Coalition needs to prepare for Round Two next legislative session (January 2010). We will need your continued support and your voice.

HB30, introduced by Representatives Harris, Hawker, and Munoz, is co-sponsored by Representatives Kawasaki, Guttenberg, Gara, Lynn, Dahlstrom, Kerttula, Herron, Tuck, Edgmon, Gruenberg, Buch, Gardner, Crawford and Petersen. As of April 10, 2009, the legislation is stuck in House Labor & Commerce.

HB54, introduced by Representatives Tuck, Crawford, Buch, Cissna, Gara, Holmes, and Peterson, is co-sponsored by Representatives Kerttula, Gruenberg, Harris, Dahlstrom and Gardner. The legislation never moved out of House Labor & Commerce after it was assigned to that committee on January 20, 2009.

SB23, introduced by former Sen. Kim Elton, is co-sponsored by Senators Ellis, French, Wielechowski, Menard, Paskvan, McGuire, Thomas and Davis. The bill made it through both Labor & Commerce and State Affairs but has been stuck in Finance since March 25, 2009.

We encourage you to check back as we post updates on forums to be scheduled throughout the state this fall and winter.  We will continue to work to collect testimony from individuals who want to share their story about how the change in the state's retirement system has affected their lives and their careers. We want to return to Juneau in January 2010 and get this legislation PASSED!

Recruitment and retention of police officers in Alaska: AACOP's position

Across the country, the law enforcement profession has experienced ever-increasing difficulties in attracting and retaining qualified personnel to serve as police officers in our communities. Unfortunately, this nationwide trend is being strongly felt in Alaska as well.

To read the entire position paper issued by the Alaska Association of Chiefs of Police, click here.

Study reveals errors in anti-pension arguments

On March 17, 2008, the Donnell-Kay and Piton Foundations released a report on the Denver Public Schools Retirement System. A review by the National Institute  on Retirement Security uncovered a number of factual errors. Many of these echo arguments used by defined-benefit pension opponents in other states and locales.

Six major errors were identified, including the assertion that "pension plans such as DPS' only work because - like Social Security - younger workers are paying for the pension benefits of retiring workers." The NIRS analysis correctly points out that this statement is incorrect: "Pensions are pre-funded, meaning that the employer and the employee set aside money in the pension fund each year, as work is performed by the employee. These funds are invested and grow over time. The accumulated assets are then used to pay benefits in retirement.

"Nationally, investment earnings account for about threequarters of the funds available to pay for retirement benefits in state and local pension plans. In contrast, Social Security is a pay-as-you-go system where contributions from the current generation of workers pay benefits for the current generation of retirees."

Click here to read the full report.

Proven ways to retain quality teachers

One of the pressing policy priorities of our time is recruiting and retaining qualified educators to teach our nation’s children.  Traditional pensions have been proven highly effective at this task – that is, transforming new teachers into veteran teachers. 

The National Council on Teacher Quality’s 2008 State Teacher Policy Yearbook identifies a laudable goal – to identify ways to retain effective teachers.  However, their recommendations in the area of retirement plans are out-of-step with established research findings and the consensus of expert opinion.  This is particularly true of the NCTQ’s embrace of defined contribution (DC) plans and condemnation of defined benefit (DB) plans.  Read the full Fact Check in PDF here.