Today (January 22, 2013) Senator Dennis Egan, D-Juneau, introduced Senate Bill 30, which allows teachers, firefighters, troopers and other public servants to choose between two Alaska retirement systems: paying into the current 401(k)-style defined contribution accounts or earning a defined benefit pension. The legislation creates a new, more predictable pension tier for public employees.
“This bill is cost-neutral, and it gives people a choice,” said Senator Egan. ”Teachers and public employees will put more of their pay into the system than the old pension tiers. Also, most employees will have to be eligible for Medicare before the system helps pay for retiree health care and they’ll always pay a share of those insurance premiums.”
Senator Egan expects the law to save the state $40 million in the first five years and be cost-neutral over the long term because it splits the risk of rising health care costs between the employer and the employee so the new tier never costs more than the current defined contribution system. Additionally, since most Alaska teachers and public employees can’t earn the defined benefit of Social Security, it gives them a chance to choose a safety net similar to the private sector.