Legislature(2025 - 2026)BELTZ 105 (TSBldg)
01/23/2026 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 78 | TELECONFERENCED | |
HB 78-RETIREMENT SYSTEMS; DEFINED BENEFIT OPT.
1:33:46 PM
CHAIR BJORKMAN announced the consideration of CS FOR HOUSE BILL
NO. 78(FIN) am (efd fld) "An Act relating to the public
employees' retirement system and the teachers' retirement
system; and providing certain employees an opportunity to choose
between the defined benefit and defined contribution plans of
the public employees' retirement system and the teachers'
retirement system."
1:34:29 PM
REPRESENTATIVE CHUCK KOPP, District 10, Alaska State
Legislature, Juneau, Alaska, introduced HB 78 on behalf of the
House Finance Committee. He described the proposal as an
emergency fiscal response to statewide conditions that are
threatening Alaska's ability to deliver critical public
services. He emphasized that state agencies must be competitive
and reliable. He argued that this requires transformative,
structural reform of the retirement systembeyond adjustments to
pay and benefitsto prevent agencies from being hollowed out.
1:35:48 PM
REPRESENTATIVE KOPP moved to slide 2, Ongoing State Headlines,
and stated that the current system is driving persistent
statewide service-delivery problems across public safety,
education, and emergency services. State commissioners
consistently identify recruitment and retention as their top
concern, describing the issue as systemic and marked by an
inability to retain experienced staff. He said after adding
funding and positions, high turnover continues and has
contributed to costly compliance failures in public-assistance
programs.
1:37:08 PM
REPRESENTATIVE KOPP moved to slide 3, Public Service Agencies,
and highlighted the breadth of state agencies responsible for
service delivery statewide. He emphasized pride in the public
workforce, which supports critical functions from infrastructure
to natural resource permitting. A recent state audit shows a
sharp increase in significant financial and compliance errors.
The number of errors rose from 3035 historically to 80 to 90.
The audit attributed the errors to hundreds of millions of
dollars in losses, including a missed federal reimbursement of
nearly $280 million. The state auditor, Kris Curtis, attributes
these failures to high staff turnover, lack of experienced
personnel, and constant retraining, creating serious compliance
risks and financial liabilities for the state.
1:39:47 PM
REPRESENTATIVE KOPP moved to slide 4, How Did We Get Here, and
stated that Alaska's defined benefit (DB) pension system was
well funded prior to 2006, but flawed actuarial advice from
Mercer led the state to significantly under-contribute. Mercer's
failure to disclose created billions of dollars in long-term
liability causing the state to shift to a defined contribution-
only system. He said in response, the state shifted to a defined
contributiononly system He asserted the change to a defined-
contribution system was due to bad advice and not an inherently
unsustainable pension model. Since then, Alaska has strengthened
actuarial oversight, and fear of past errors should not prevent
adoption of a modern, shared-risk retirement system that
actuaries say would not generate new unfunded liabilities.
1:42:33 PM
REPRESENTATIVE KOPP moved to slide 5, Legacy DB System PERS and
TRS Funded Ratio, and read the following:
[Original punctuation provided.]
Legacy DB System PERS & TRS Funded Ratio
Gallagher Actuarial Valuation Report (June 2025)
- 2025 Legacy DB Funding
TRS- funded at 80 percent
PERS- funded at 70 percent
REPRESENTATIVE KOPP noted that in 2014, TRS was at 48 percent
and PERS was at 54 percent. The decisions made by the state
within the legacy system, which is past service cost, is on
track to be 100 percent funded by 2039.
Dept. of Revenue Treasury Investment Result Summary
Alaska Retirement Management Board Fund Returns (Dec.
2025)
-11 percent market return & 9 percent actuarial return
for FY25 exceeded benchmark of 7.25 percent expected
return
-Resulting in $2b in excess returns over the past ten
years.
-Total nominal gains for 2025 were $1.2b.
1:45:00 PM
REPRESENTATIVE KOPP moved to slides 6-7, The Cost of Doing
Nothing, and referenced the chart. He stated that service
disruptions impose major costs on the state through premium pay,
errors, training expenses, and high employee turnover. Premium
pay rose from $83 million in FY20 to nearly $150 million in FY25
and is on pace to exceed $200 million this year. He said these
costs exceed the projected investment in a new pension plan
designed to improve retention and reduce staffing instability.
1:47:18 PM
REPRESENTATIVE KOPP moved to slide 8, Alaska Workforce Profile
2025, and referenced the pie chart. He said the workforce
profile shows severe turnover. He stated that about half of the
employees are in the one-to-four-year tenure range with far
fewer staying long-term and filling senior positions.
1:47:44 PM
REPRESENTATIVE KOPP moved to slide 9, Alaska Retirement
Management Board and read the following:
[Original punctuation provided.]
PERS & TRS Comprehensive Financial Report for the
twelve months ending June 30, 2025
-TOTAL DC PERS AND TRS WITHDRAWALS exceeded $160
million
-TOTAL DC PERS AND TRS WITHDRAWALS including the
Supplemental Annuity and the Deferred Compensation
Plan was nearly $500 million
-90 percent of these withdrawals came after 5 years of
service or 100 percent vested
REPRESENTATIVE KOPP noted that after five years, employees can
cash out both contributions and leave public service, often
permanently. This creates a "cash-and-go" system that
discourages long-term commitment, community investment, and
workforce stability.
1:48:56 PM
REPRESENTATIVE KOPP moved to slide 10, Decline in Full-Time
State Agency positions, and explained the line graph. He said
the graph shows a long-term decline in full-time state
positions. He said short-term gains from bonuses were
unsustainable, and staffing fell again. DOT is especially
impacted, with a 24.5 percent vacancy rate and difficulty
competing for engineers, limiting road and bridge delivery.
1:50:19 PM
REPRESENTATIVE KOPP moved to slide 11, Do We Want Alaska to be
Competitive Again, and stated that the question is whether
Alaska wants to be competitive again in attracting and retaining
talent. State jobs are no longer competitive nationally,
especially as Alaska lacks pensions for teachers and public
safety and does not offer Social Security. He said this creates
strong disincentives for long-term service. HB 78 is presented
as an emergency fiscal response that would be revenue positive,
stabilize the workforce, and prevent further loss of talent and
service capacity.
1:51:53 PM
REPRESENTATIVE KOPP moved to slide 12, A Proposed Solution, and
read the following:
[Original punctuation provided.]
-A NEW Competitive and Responsible Retirement Plan
-Shared Risk with safeguards to prevent underfunding
-A Strategic Investment in Alaska's workforce
-Builds on Best Practices of other states
-Ensures system will Remain Solvent
1:52:28 PM
REPRESENTATIVE KOPP moved to slide 13, HB 78 Structure: Employee
Contribution, and paraphrased the following:
[Original punctuation provided.]
EMPLOYEE CONTRIBUTION
PERS & TRS
8-12 percent adjustable by ARM Board based on
90 Percent trust fund valuation
Employees share the risk contributing more during poor
market returns
1:53:24 PM
REPRESENTATIVE KOPP moved to slide 14, HB 78 Structure: Employee
Contribution, and shared a slide that lists the states that have
8-10 percent employee contribution. He said this proposal
suggests up to 12 percent. These states average over 80 percent
funded status, about 85 percent, with some exceeding 100
percent, including Wisconsin. These practices are proven to
work.
1:53:59 PM
REPRESENTATIVE KOPP moved to slide 15, HB 78 Structure: Employer
Contribution and stated that PERS employers are capped at 22
percent of payroll, about $440 million statewide, while TRS is
capped at 12.56 percent, with each 1 percent equal to about $20
million. HB 78 does not raise these caps. It sets a 12 percent
floor, based on actuarial costs after legacy debt is paid off in
2039: 10.05 percent for PERS and 9.5 percent for TRS. He said
this would provide immediate relief to local governments and
long-term savings of $300$400 million per year, making action
now far less costly than waiting until 2039.
1:56:25 PM
REPRESENTATIVE KOPP moved to slide 16, HB 78 Structure: Vesting
and read the following:
[Original punctuation provided.]
5 years for PERS and TRS
PERS consistent with prior DB Tier 3
Aligns PERS and TRS
REPRESENTATIVE KOPP stated that previously, teachers vested
after eight years. This proposal aligns TRS with PERS by setting
vesting at five years, improving fairness and consistency across
systems.
1:56:58 PM
REPRESENTATIVE KOPP moved to slide 17, HB 78 Structure:
Qualification for Retirement, paraphrased the following:
[Original punctuation provided.]
TRS & PERS (non-public safety)
Age 60 w/5 years of service
or
30 years of service
PERS Public Safety
Age 50 w/25 years of service
or
Age 55 w/20 years of service
1:58:06 PM
REPRESENTATIVE KOPP moved to slide 18, HB 78 Structure: Retirees
"Skin in the Game," and stated that this plan does not restore
the old cost-of-living allowance, which provided a 10 percent
pension increase at age 65. That benefit was eliminated because
it was costly, and its removal saved the plan hundreds of
millions of dollars.
1:58:35 PM
REPRESENTATIVE KOPP moved to slide 19, HB 78 Structure: Post
Retirement Pension Adjustments (PRPA), and stated that inflation
protection is now tied to market performance; if funding falls
below 90 percent, inflation adjustments may be reduced or
eliminated to maintain plan solvency, a practice used by well-
funded states.
1:59:14 PM
At ease.
1:59:54 PM
CHAIR BJORKMAN reconvened the meeting.
2:00:04 PM
REPRESENTATIVE KOPP continued with slide 19 and stated that
inflation adjustments for retirees can be reduced or removed,
keeping the plan flat funded. The shared-risk approach, endorsed
by actuaries, strengthens the plan, and states that use it
maintain well-funded, robust retirement systems.
2:00:48 PM
CHAIR BJORKMAN asked whether there are there states using
similar plans that are not having success.
2:01:19 PM
REPRESENTATIVE KOPP replied that since 2016, he hasn't seen any
shared-risk plan like Alaska's in trouble, most similar plans
are 85100 percent funded. Alaska's plan is unique, with
multiple funding triggers, inflation-proofing, and a 90 percent
funding lever that adjusts employee and employer contributions
to maintain solvency. He said Alaska's actuary, Mr. Kirschner,
confirms that these conservative measures make future unfunded
liability highly unlikely, making Alaska's plan exceptionally
strong and virtually unmatched.
2:03:30 PM
REPRESENTATIVE KOPP moved to slide 20, Retirement Medical
Coverage, and stated that HB 78 removes the requirement to
retire directly from the plan to access state supplemental
health benefits at 65, making healthcare eligibility more
flexible for employees who don't work continuously. Employees
with 10 years of service now qualify for health coverage, while
longer service reduces premiums. Public safety employees can
access full healthcare after 20 years, with pensions still
requiring 25 years. Overfunded health trusts support this
approach, and contributions to individual health retirement
accounts ensure equity. He said a 3 percent contribution of the
average payroll for specific job classes is used to build up
individual health retirement accounts for PERS and TRS
employees. For public safety employees the contribution is 4
percent.
2:07:53 PM
SENATOR YUNDT gave an example of a police officer and asked what
retirement benefits a police officer receives if they qualify
for health insurance after 23 years but do not meet the service
requirement for a pension, specifically, whether they leave with
only their own contributions and how partial qualification
affects the police officer's retirement benefits.
2:08:26 PM
REPRESENTATIVE KOPP replied that each year of service earns a
percentage of base pay, so it is not lost. For example, at 22
years of service, an employee would have accrued roughly 40
percent of their base salary and could draw a pension at age 55
with at least 20 years of service or retire earlier with 25
years. Even if the employee must wait until age 60 to collect,
none of the accrued service time is forfeited.
2:09:45 PM
SENATOR YUNDT stated his understanding that if a person became a
trooper at the age of 22 and left service after 20 years the
trooper would qualify for full health benefits but would have to
wait to age 55 to collect a full pension. He asked how much of a
pension the trooper would receive if employed for 25 years.
REPRESENTATIVE KOPP replied that at age 22 and completing 25
years of service a trooper could retire at age 47 and receive a
reduced pension. However, the trooper must wait until reaching
eligibility, at age 50 or 55, to collect a pension. In this
instance there is a wait period between the trooper receiving
health benefits and a pension. He said the structure makes HB 78
more affordable. While it would be ideal to allow immediate
collection based on accrued benefits, fiscal conservatism
requires a minimum waiting period unless the full service
requirement is met. For public safety employees, 20 years of
service allows collection at 55, and 25 years allows collection
at 50.
2:11:40 PM
CHAIR BJORKMAN asked since the 2021 Metcalf decision, have large
numbers of former state employees sought to reclaim Tier I or
Tier II pension benefits and would HB 78 have any impact on
claims arising from that decision.
2:12:21 PM
REPRESENTATIVE KOPP replied that HB 78 is entirely separate from
the Metcalf decision and has no impact on legacy Tier I or II
pensions. The bill creates a new, independent pension and health
trust, unconnected to prior liabilities, and actuarial modeling
shows no added risk or effect on the 2039 legacy payoff date.
CHAIR BJORKMAN stated that it has been five years since Metcalf
and he was curious whether the predicted influx of former
employees occurred.
2:14:16 PM
REPRESENTATIVE KOPP moved to slide 21, Current DC Employee
Choice and New Employees, and stated that current defined
contribution employees have 180 days to choose to remain in DC
or move to the defined benefit plan. During that period, the ARM
Board will provide actuarial analyses showing how much DB
service their DC account can purchase, aiming for a one-to-one
conversion where possible. He said defined benefit plans cost
more because they offer lifetime pensions, stronger death and
disability benefits, and inflation protection, with conversion
value depending on market performance. He stated that new
employees are automatically enrolled in the defined benefit plan
but may opt into the defined contribution plan. They can make or
change that choice at any time during the five-year vesting
period.
2:16:50 PM
SENATOR YUNDT stated his belief that the prior plan failed due
to poor funding decisions, not the defined benefit concept
itself. He asked whether employees would continue to have the
option to choose between DB and DC plans during the five-year
vesting period or will everyone be required to use defined
benefit plan.
2:18:03 PM
REPRESENTATIVE KOPP said keeping a permanent choice helps
recruit short-term or technical employees who may prefer a
defined contribution plan. Others contend that strengthening the
defined benefit pool improves long-term stability. He stated
that currently, employees have up to five years to choose, after
which they are locked into their selected plana policy decision
the committee could revisit.
SENATOR YUNDT stated that a five-year choice period is
reasonable, especially in a state where many people arrive for
short-term opportunities and later choose to stay. He said
removing that option could deter talent from coming initially,
so maintaining the choice supports recruitment and long-term
retention.
2:20:32 PM
REPRESENTATIVE KOPP moved to slide 22, What are the Actuaries
Saying: Additional State Contributions, and explained the last
column of the chart. He said over 13 fiscal years, the state
would contribute $467 million above the 22 percent cap for local
governments, about $36 million annually, to support the pension
option.
2:21:18 PM
REPRESENTATIVE KOPP moved to slide 23, What are the Actuaries
Saying: PERS State as an Employer Contributions, and stated that
for state employees, the total cost is $687 million over 13
years, about $53 million annually, bringing the combined annual
cost to just over $80 million. However, the state is already on
track to spend over $200 million this year due to workforce
shortages, fines, missed reimbursements, and lost savings
estimated at $76 million annually. Viewed in that context, this
is an investment in stabilizing services, and by 2039, when the
legacy unfunded liability is paid off, Alaska will be in a much
stronger fiscal position.
2:22:45 PM
REPRESENTATIVE KOPP moved to slides 24 and 25, When Surveyed,
and stated that a statewide Patinkin survey of all districts and
sectors found nearly 70 percent support for a structured,
shared-risk retirement plan, with about 15 percent undecided.
The results show broad recognition that the current system needs
improvement, particularly given concerns about workforce
turnover across Alaska communities.
2:23:53 PM
REPRESENTATIVE KOPP moved to slide 26, DPS Internal Retirement
Survey-March 2024, and stated that an internal Department of
Public Safety survey of 458 employees found that 82.6 percent
prefer a defined benefit plan. Among current DB members, 97
percent want to remain in DB, and 75.7 percent of DC members
would prefer to switch to DBindicating strong overall support
for defined benefits. He referenced slide 23 and said the
actuarial cost estimates assume 100 percent of employees switch
to the defined benefit plan, the most expensive scenario.
However, actuaries project a more likely 7580 percent
participation rate, meaning actual costs should be lower; the
higher figure is provided for full transparency.
2:25:40 PM
REPRESENTATIVE KOPP moved to slides 27 and 28, The Economic
Benefits of HB 78, and stated that this proposal invests in
Alaska's economy by reducing turnover, training costs, premium
pay, and service disruptionsstrengthening essential public
services amid increasing demands. An economist, Dr. Teresa
Ghilarducci, estimates at least $76 million annually in savings
from improved workforce stability alone.
2:27:01 PM
REPRESENTATIVE KOPP moved to slide 29, A New Competitive and
Responsible Retirement Plan, and stated that the proposed plan
is expected to reduce turnover, retain skilled and technical
employees, and improve agency performance. Actuaries project it
will incentivize retention and help the state meet its workforce
and service goals.
2:28:05 PM
REPRESENTATIVE KOPP stated that HB 78 clarifies two distinct
issues: Alaska's legacy pension liability and the cost of future
service. The legacy debt stems from tiers closed 20 years ago,
is on a fixed amortization schedule, and is projected to be
fully paid by 2039regardless of HB 78. The bill does not add to
that debt; it addresses future retirement costs. He said
according to the state's actuary, the normal cost under HB 78
would be about 10 percent of payroll for PERS and 9.55 percent
for TRS, well below current effective contribution rates. Once
the legacy liability is paid off, Alaska would move to a more
predictable, lower-cost system. He said maintaining the status
quo does not eliminate costs; it prolongs legacy payments while
workforce instability, vacancies, and premium pay continue. HB
78 aims to establish an affordable, stable retirement structure
that supports long-term workforce retention.
2:30:23 PM
SENATOR YUNDT stated that life expectancy is rising, which is
positive. He appreciated the shared-risk feature, especially
since the previous plan did not include it.
2:30:50 PM
REPRESENTATIVE KOPP replied that all the risk was on the
employers.
SENATOR YUNDT said this is a significant improvement, especially
as artificial intelligence may extend life expectancy. If
funding falls to 90 percent, employee contributions increase
from 8 percent to 12 percent; he asked whether any adjustment
occurs before reaching 90 percent.
REPRESENTATIVE KOPP replied that the trigger is set at 90
percent because actuaries consider that the gold standard for
long-term pension fundingassets covering at least 90 percent of
projected liabilities. There is no earlier mechanism; the
adjustment activates only when funding falls to 90 percent.
SENATOR YUNDT commented that he encourages reviewing the
trigger: dropping to 90 percent would raise employee
contributions from 8 percent to 12 percent, a 50 percent
increase and a significant hit to paychecks. A gradual increase
might preserve the time value of money and avoid sudden
adjustments.
2:32:48 PM
REPRESENTATIVE KOPP mentioned that the state actuary, David
Kirschner, said each 0.1 percent increase generates tens of
millions of dollars, so any adjustment would likely be small,
such as 8 percent to 8.1 percent. He said modeling past market
downturns showed the plan never fell to 90 percent, and reaching
that level would require a catastrophic event not seen in our
lifetimes.
SENATOR YUNDT asked who is reviewing this independently, without
a vested interest, and which third-party companies are involved.
REPRESENTATIVE KOPP replied that the state's fiduciary oversight
is handled by actuaries, including David Kirschner of Gallagher
& Associates, the ARM Board's actuary, and a state-hired third-
party pension finance CPA firm.
SENATOR YUNDT asked that information about the actuaries and
their work history be given to the committee before the next
hearing of the bill to ensure the state is engaging qualified
professionals.
2:35:12 PM
CHAIR BJORKMAN commented that allowing choice for new employees
can attract short-term workers, but it weakens the plan's
financial strength. Money leaves Alaska instead of staying
invested to grow and fund pensions, reducing long-term benefits
for employees and overall savings for the state.
2:38:55 PM
CHAIR BJORKMAN held HB 78 in committee.