01/26/2026 01:30 PM Senate LABOR & COMMERCE

        HB  78-RETIREMENT SYSTEMS; DEFINED BENEFIT OPT.                                                                     
1:33:08 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."                                                                                                             
1:33:43 PM                                                                                                                    
REPRESENTATIVE   CHUCK   KOPP,    District   10,   Alaska   State                                                               
Legislature, Juneau,  Alaska, summarized HB  78 on behalf  of the                                                               
sponsor. He  stated that HB  78 addresses three issues:  the loss                                                               
of mid-level  and senior talent,  rising costs under  the current                                                               
system,  and  the  need  for  a modern  retirement  plan.  HB  78                                                               
proposes   an   affordable,   predictable   system   to   improve                                                               
recruitment  and retention  while  staying on  track  to pay  off                                                               
existing legacy obligations by 2039.                                                                                            
1:36:04 PM                                                                                                                    
CHAIR BJORKMAN solicited a motion.                                                                                              
1:36:06 PM                                                                                                                    
SENATOR MERRICK moved to adopt  the committee substitute (CS) for                                                               
HB 78, work order 34-LS-0493\G, as the working document.                                                                        
1:36:16 PM                                                                                                                    
CHAIR BJORKMAN objected for purposes of discussion.                                                                             
1:36:31 PM                                                                                                                    
KONRAD  JACKSON,  Staff,  Senator Jesse  Bjorkman,  Alaska  State                                                               
Legislature,  Juneau, Alaska,  presented the  summary of  changes                                                               
from version I.A to version G for HB 78.                                                                                        
[Original punctuation provided.]                                                                                                
            Summary of Changes  ver. I.A to ver. \G                                                                           
     Page 1, Line 4: Title change.                                                                                            
     Section  38: Pg  22,  line3-9, Insert  new section,  AS                                                                  
     14.25.540(a)  providing  a  non-vested  member  of  the                                                                    
     teachers'  retirement system,  first hired  before July                                                                    
     1,  2026,  may  elect  to participate  in  the  defined                                                                    
     contribution  retirement plan.  Following sections  are                                                                    
     renumbered accordingly.                                                                                                    
     Section 96: Pg 51, lines 27  to page 52, line 2, Insert                                                                  
     new  section, AS  39.35.940(a)  providing a  non-vested                                                                    
     member  of  the  public employees'  retirement  system,                                                                    
     first  hired   before  July  1,  2026,   may  elect  to                                                                    
     participate  in  the  defined  contribution  retirement                                                                    
     plan.                                                                                                                      
     Following sections are renumbered accordingly.                                                                             
     Sections 100 and 101: Conforming changes.                                                                                
1:38:04 PM                                                                                                                    
CHAIR BJORKMAN removed his objection;  found no further objection                                                               
and CSHB 78 was adopted as the working document.                                                                                
1:39:02 PM                                                                                                                    
DAN DOONAN, Executive Director,  National Institute on Retirement                                                               
Security, Arlington,  Virginia, provided a presentation  on HB 78                                                               
and moved to slide 2, Change  in AK Teacher Turnover from 2009 to                                                               
2024: Percent  Quitting During  First Five  Years. He  said after                                                               
reviewing teacher  turnover in the  first five years  after hire,                                                               
the system actuary concluded that:                                                                                              
-2009  study:  Estimated 18  percent  turnover  in year  one,  15                                                             
percent in year two, and declining thereafter.                                                                                  
-2014 study: Found actual turnover was higher than projected.                                                                   
-2024 study  (two studies  later): Shows  25 percent  turnover in                                                               
year one  and 19  percent in  years two  and three,  with similar                                                               
increases in later years.                                                                                                       
The actuaries were not wrong;  they analyze full census data each                                                               
time. The  key takeaway  is that  employee behavior  has changed,                                                               
with more teachers leaving earlier in their careers.                                                                            
1:40:50 PM                                                                                                                    
MR. DOWNING moved to slide 3,  AK Teacher Turnover: 2009 to 2024,                                                               
Ultimate Assumptions, and stated  that early defined contribution                                                               
(DC) plan  assumptions (dark blue bars)  projected turnover about                                                               
10  percent higher  than the  defined  benefit (DB)  plan due  to                                                               
limited  history. In  2014,  actuaries  raised those  assumptions                                                               
after  finding  higher than  expected  departures,  and by  2024,                                                               
turnover among experienced workers ages 30  to 50 reached 8 to 10                                                               
percent.  He said  turnover has  gradually  increased across  all                                                               
plans,  not  just  teachers.   Meanwhile,  about  one-quarter  of                                                               
teachers remain  in the  legacy DB tier,  where turnover  is much                                                               
lower, around 3 to 4  percent, despite working alongside those in                                                               
the DC plan.                                                                                                                    
1:42:32 PM                                                                                                                    
MR. DOWNING  moved to  slide 4, High  Turnover Invites  Even More                                                               
Turnover, and read the following:                                                                                               
[Original punctuation provided.]                                                                                                
       -When you are losing a lot of employees, a higher                                                                        
     share of your workforce is new (i.e. first 5 years).                                                                       
     -Newly hired workers are almost always more likely to                                                                      
     quit.                                                                                                                      
       -13 to 30 percent quit in early years, as opposed to                                                                     
       9 percent afterward                                                                                                      
       -Double-Whammy: It is both the share of experienced                                                                      
       workers and the retention rates that drive turnover                                                                      
       and impact services.                                                                                                     
     -Hiring managers need to be less selective.                                                                                
MR. DOWNING noted if a  school receives 40 applications and needs                                                               
10  teachers,  the  school  can   hire  its  top  25  percent  of                                                               
candidates. If  the school needs 30,  it may have to  hire nearly                                                               
all viable applicants. He said  when candidates are a strong fit,                                                               
they are more likely to stay and perform well.                                                                                  
1:43:42 PM                                                                                                                    
MR. DOWNING moved to slide  5, Percent of Teachers Quitting: 15th                                                               
Year of Service,  and stated that losing  experienced teachers is                                                               
highly unusual.  He said based  on system experience at  the 15th                                                               
year of service,  combined turnover for males and  females in the                                                               
DC plan is about 9 percent.                                                                                                     
1:45:35 PM                                                                                                                    
CHAIR BJORKMAN held HB 78 in committee.