Alaska Public Pension Coalition

Senate Bill 121: "Alaska Pensions"

Senator Dennis Egan

SB 121 - Alaska Pensions

Sponsor Statement

SB 121 lets teachers, Troopers, firefighters and other public employees choose one of two state retirement systems: an individual defined contribution retirement account, or earning a defined benefit pension.

A defined benefit pension takes time to earn, but rewards a record of public service by paying a guaranteed monthly benefit and, for long-term employees, health insurance. An individual defined contribution account is portable from one employer to another, and flexible in how it can be used, but makes no guarantees. SB 121 will let newly hired public servants in Alaska choose the one that fits best.

SB 121 creates a new more stable, more predictable defined benefit pension tier for teachers and public employees. A few years ago, Alaska beefed up oversight of the pension system. Now we have two actuaries analyzing the health of the pension trusts, there are more frequent experience studies and the law bars the practice of sometimes paying less than the cost of benefits. SB 121 keeps these smart reforms, making Alaska pensions stronger than ever.

And the defined benefit pensions for new employees under SB 121 will cost employers less than the pension tiers that came before, saving money for schools, cities, and the State of Alaska.

Alaska teachers and public employees don't earn Social Security, and many even lose Social Security benefits they earned in past jobs. So for most, a defined benefit pension makes sense. Other employees will choose individual defined contribution accounts because they prefer flexibility, portability, and control, or because their plans do not include long-term service in the public sector. SB 121 maintains their option to choose an individual account.

The teachers who educate our children, the police and firefighters who protect our families, and the public employees who serve our state and cities will be able to choose the benefit that best fits their service.

View Sponsor Statement for SB 121 at aksenate.org

New Research Highlights Value of Pension Investments for Communities

Pensions invest over $20 billion; 186 million jobs created from 1995-2010

As state and municipal governments seek to address serious budget challenges, pension critics are advancing misdirected proposals to cut or eliminate defined benefit retirement plans. Countering the critics’ claims that pensions impose only costs, American Rights at Work Education Fund released “Creating Good Jobs for Our Communities: Pension Dollars at Work,” a brief demonstrating how private and public pension funds help drive the economies of communities through investments that, in addition to producing solid returns, create good jobs.  

Download the brief here.

Beyond Normal: Raising the Retirement Age Is the Wrong Approach for Social Security

Social Security currently runs a healthy surplus, and despite conventional wisdom, the shortfall in Social Security projected to develop over the next 75 years is not primarily driven by an increase in life expectancy. The Economic Policy Institute (EPI) found that the projected shortfall is more the result of earnings inequality and weak wage growth, which account for more than half of the projected shortfall. Morrissey states that the increase in the normal retirement age from 65 to 67 that is currently underway already offsets gains in life expectancy for workers born before 1960, and that longevity gains for younger generations account for only a fifth of the projected Social Security shortfall.

The EPI briefing states that a higher retirement age would most negatively impact low-income workers, who have seen only modest gains in life expectancy and who can least afford a reduction in benefits. The briefing goes on to suggest that the best first step to restoring long-term solvency to Social Security is to raise or eliminate the taxable earnings cap, which is currently set at $106,800.

[The entire paper published on January 26, 2011 can be accessed at the Economic Policy Institute's website.] 

Critical New Document: Returning Alaska to a Defined Benefit System: A Benefit for Alaskans and a Savings for the State

Executive Summary

February 2010

The Alaskan Public Pension Coalition (APPC) with more than 30 members representing more than 70,000 working families and 97,000 individual Alaskans is proud to produce this white paper on a critical issue for Alaska: Retirement insecurity in the Great Land. The APPC was formed to review the impact of the 2005 changes and determine if the State of Alaska would be better served by a return to a Defined Benefit system for public employees.

The passage of Senate Bill 141, which eliminated the guaranteed Defined Benefit pension system, was conceived to address the so-called unfunded liability. Unfortunately for Alaska and her employees, the passage of Senate Bill 141 has not produced the desired results and has set in motion a different set of events that will impact the way all Alaskans will live in the future.

The Elimination of Defined Benefit Pensions

• Does not save the state any money
• Impacts recruitment and retention
• Does not address the unfunded liability
• Exposes employers to higher Defined Benefit funding costs in future years
• Will substantially reduce the amount of money future retirees will likely spend in Alaska—if they can afford to retire here
• Will introduce more volatility in Alaska during down markets
• Will result in less cash in the Alaskan economy because retirees will not have cost of living adjustments to help keep pace with inflation
• Will eliminate some of the high rates of return options in the retiree funds, resulting in a lower rate of return in the Defined Contribution plans
• Reduces the benefit of a more diversified, stable, and expanded Alaska economy
• Exposes the state to costs in the future through increased use of social services by retired public employees who have run out of money

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.