Legislature(2025 - 2026)BELTZ 105 (TSBldg)
03/31/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB137 | |
| SB21 | |
| SB28 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 137 | TELECONFERENCED | |
| *+ | SB 21 | TELECONFERENCED | |
| += | SB 28 | TELECONFERENCED | |
SB 28-RETIREMENT SYSTEMS; DEFINED BENEFIT OPT.
2:00:23 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 28 "An Act relating to the
Public Employees' Retirement System of Alaska and the teachers'
retirement system; providing certain employees an opportunity to
choose between the defined benefit and defined contribution
plans of the Public Employees' Retirement System of Alaska and
the teachers' retirement system; and providing for an effective
date."
2:00:56 PM
SENATOR CATHY GIESSEL, District E, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 28. She stated that the sectional
analysis is in a chart form and explained the chart defines how
[SB 28] would affect public safety employees, non-public safety
employees, and teachers. The other columns describe the
rationale for the policy choice and lists which section and page
to find specific policy language. [This chart can be found on
the Alaska State Legislature website under SB 28, in the
documents section].
SENATOR GIESSEL moved to page 1 and referenced the benefit
categories on the left column of the cart as Employee
Contribution, Employer Contribution and Employer Fee for Late
Payments Reduced to Normal Interest. She said all the entities,
public safety, non-public employees and teachers, used to pay
1.5 times the interest rate on late payments. SB 28 reduced late
payments to just interest.
2:03:40 PM
SENATOR GIESSEL continued with page 2 and explained the benefits
on the left column of the chart that vesting rules are the same
across all three groups, while retirement qualifications differ
for public safety, versus non-public safety and teachers. The
chart also outlines each group's benefit calculation formula,
with the last row, final average salary based on the five
highest non-consecutive payroll years.
2:04:19 PM
SENATOR GIESSEL moved to page 3 and explained the benefits on
the left column of the chart and said that SB 28 removes the
cost-of-living adjustment (COLA) for all entities but provides
post-retirement inflation protection for all employees.
Retirement medical coverage remains consistent with PERS Tier IV
and TRS Tier III.
2:05:09 PM
SENATOR GIESSEL moved to page 4 and explained the benefits on
the left column of the chart:
The columns on the left describe disability and death
benefits and the requirement of separate accounting.
So, these are going to have some new accounts,
separate from the Legacy Define Benefit, separate from
the Defined Contribution that we have right now. We
require these accounts to be accounted for separately.
2:05:36 PM
SENATOR GIESSEL moved to page 5, and addressed the benefit
categories on the left column of the chart:
The subject addressed on this page are requirements
for the sub-trusts, keeping these monies clearly
transparent. Teacher retirement members that have
Public Retirement Service may add that public service
compensation to their Teachers Retirement Service for
benefit calculations. So, it just shows a teacher,
during the summer, [working] part-time goes and counts
salmon at a weir, they're earning Public Employee
Retirement System (PERS) time. They can combine that
with their Teacher Retirement System, which is what
they do the rest of the year. Then the question at the
bottom of page five of seven, What happens to current
Defined Contribution employees hired after June 30,
2006 (that's when the defined benefit went away) if
this becomes law The chart answers that question for
each of those three employee entities.
2:06:40 PM
SENATOR GIESSEL moved to page 6, and referred to the column on
the [left] of the chart:
What happens to a Defined Contribution employees who
convert to the new Defined Benefit plan if their
Defined Benefit service time credit is different than
their service time under Defined Contribution So,
this describes the process that those employees can
use to move into a Defined Benefit. If they don't have
enough in their defined contribution to buy the amount
of time they can possibly pay for it themselves, they
can decide to have a deduction taken out of future
payrolls or maybe they just are fine with lesser
credit in a defined benefit than they would have had.
There's choices there. What it really boils down to is
working closely with the Division of Retirement and
Benefits individually. The last box on page, 6 of 7,
is hat happens to new employees, hired after the
bill goes into effect, if this became law The answer
for all three entities is the new employees would
automatically be enrolled in a Defined Benefit
retirement plan.
2:07:55 PM
SENATOR GIESSEL moved to page 7, and addressed the benefit
categories in the left column of the chart:
What happens to former Defined Contribution employees
who left their Defined Contribution accounts active
who are re-employed in service if this bill became
law? Well, they could reactivate that plan and again
use the hours in their Defined Contribution to
purchase time in Defined Benefit. Then the last [box
on the page]. hat happens to former Defined
Contribution employees who did not leave their Defined
Contribution accounts active who are re-employed in
service if the bill became law In that case
employees would not have kept their account open and
they could opt to convert to their [Defined
Contribution] plan into a new Defined Benefits plan.
2:09:12 PM
SENATOR YUNDT referenced page 1, Employee Contribution and that
contributions are adjustable between 8 and 12 percent, which is
good because it shares the risk. However, regarding the post-
retirement section on page 3, with inflation protection in place
but retirees no longer contributing. He asked if inflation were
to spike significantly, would the responsibility fall on current
employees to increase contributions above 8 percent to maintain
fund balance, or is there a mechanism for retirees to help cover
the shortfall when inflation exceeds returns.
2:10:04 PM
SENATOR GIESSEL replied that there is no provision for retirees
to contribute if inflation spikes above normal. Retirees who
leave Alaska receive only 50 percent of the inflation adjustment
to encourage staying in-state, meaning the fund's earnings must
cover any unusually high inflation.
2:11:09 PM
CHAIR BJORKMAN announced invited testimony on SB 28.
2:11:25 PM
KEITH BRAINARD, Research Director, National Association of State
Retirement Administrators (NASRA), Georgetown, Texas, testified
by invitation on SB 28:
[Original punctuation provided.]
NASRA members are the directors and administrators of
roughly 90 state and local public retirement systems.
In Alaska, our member is Kathy Lea, who is the
director of the division of retirement and benefits.
My opinions do not necessarily reflect those of Ms.
Lea or her office.
2:12:00 PM
MR. BRAINARD continued with his testimony:
Rather than speak to the particular details of this
bill, I want to focus my remarks on retirement plan
design in general. My overarching message is that it
is possible to design and implement a retirement
benefit for public employees in Alaska that meets the
legitimate needs of all stakeholder groups: public
employees, public employers, and taxpayers.
I have been in my present role since 2002, and I
remember when Alaska closed its defined benefit plans
to new hires. Since that closure, some in Alaska have
pointed to defined benefit plans as fundamentally and
irredeemably flawed. Critics of traditional pensions
have contended that defined benefit plans are, by
definition, unsustainable and inevitably will lead to
fiscal ruin for the plan sponsor. I have seen and
heard that message repeated countless times in Alaska,
that DB plans are inherently defective and
unaffordable and will surely lead the state and its
political subdivisions to a fiscal crisis.
I am here to tell you that that notion is simply
false. If the Alaska Legislature wishes to avoid
unfunded liabilities and to ensure retirement plan
costs remain stable, those objectives are reasonable
and attainable. There are retirement plans sponsored
by states and cities across the country that have
achieved these objectives, and that continue to do so
year in and year out.
Traditional pension plans remain the predominant type
of retirement plan for the nation's millions of
employees of state and local government. Most of these
plans are in actuarial and fiscal condition that
ranges from manageable to excellent, and overall, that
condition has been improving in recent years.
My organization annually measures the amount that
states and local governments spend on pension benefits
for their employees. Based on the latest available
data, for fiscal year 22 and projected for FY 23,
states and local governments will spend just above
five percent of everything they spend on pension
benefits for their employees. This number is higher
for some states and lower for others, but for the
nation as a whole, this rate of spending has remained
remarkably stable and helps to illustrate that public
pension costs can remain stable.
2:14:28 PM
MR. BRAINARD continued with his testimony:
NASRA does not endorse any one type of retirement
plan, such as a defined benefit or a defined
contribution plan. What NASRA does support is a
retirement plan that contains features that are known
to achieve key objectives for all plan stakeholders:
employers, employees, and taxpayers.
These key stakeholder objectives include that
employers need to attract and retain qualified
employees who are needed to perform essential public
services, such as teaching in schools, protecting the
public, building and maintaining roads and
infrastructure, and performing the range of services
we rely on government go provide. Employees want a
competitive compensation package that includes a
decent retirement benefit. And taxpayers want public
services provided at a cost that is reasonable and
predictable.
Before I describe the elements of retirement plan
design that are known to facilitate a mutual
attainment of stakeholder objectives, I will point out
to you three examples of retirement plans sponsored by
states that have stable costs and unfunded liabilities
that are either nonexistent or negligible and entirely
manageable.
• The South Dakota Retirement System operates with
fixed contribution rates for employees and
employers: six percent of pay paid by both
employees and employers; eight percent each for
public safety officers. The retirement system has
a funding policy that keeping those required
costs and maintaining a fully funded pension plan
are essential. And the retirement plan has done
so for years. The SDRS is a traditional defined
benefit plan.
• The Wisconsin Retirement System is similar: their
required contribution rates are comparatively low
and stable, and the plan has remained fully
funded or nearly so for many years. The Wisconsin
Retirement System also is a traditional defined
benefit plan.
• The Nebraska state and county retirement plans
are cash balance plans, which are similar to a
traditional defined benefit plan, with the
primary differences being that retirement
benefits are affected by the plan's investment
performance and by the participant's age at
retirement. Together these plans provide
retirement benefits for nearly all non-teacher
public employees in the state. The plans are
overfunded, meaning they have an actuarial
surplus, and their costs are modest and stable,
at around 7.5 percent of payroll.
2:16:57 PM
MR. BRAINARD continued with his testimony:
There are other examples of public retirement plans
that feature stable costs and minimal unfunded
liabilities, but you get the idea. The overarching
message I want to convey is that a good retirement
plan is defined not by its labeldefined benefit,
defined contribution, hybridbut rather by the way the
plan is designed. To institute long-term
sustainability into the plan, building flexibility
into the way the plan is designed is key.
Some of the characteristics of retirement plan design
found to facilitate key stakeholder objectives are:
• Cost sharing between employers and employees.
That means that employers and employees alike
contribute to the cost of the plan.
• Assets that are pooled and professionally
managed, an arrangement that earns a higher
return for the pool at a lower level of
investment risk.
• Lifetime benefit payouts, meaning that once an
employee qualifies for a retirement benefit and
elects to retire, that employee should be able to
receive a benefit they cannot outlive.
These core features of retirement plan design are
known to promote employees' retirement security, to
reduce expenses, and to enhance the ability of
employers to attract and retain employees.
2:18:38 PM
CHAIR BJORKMAN asked where does the design of SB 28 fall in
comparison to retirement plan models in South Dakota, Wisconsin,
and Nebraska regarding cost and value.
2:19:21 PM
MR. BRAINARD replied that he will get back to the committee with
an answer after he analyzes the legislation.
2:19:56 PM
DOUGLAS SCHRAGE, Chief, Anchorage Fire Department, Anchorage,
Alaska, testified by invitation on SB 28 and stated that
Alaska's lack of a defined benefit pension for public safety
creates major retention issues, costing taxpayers millions in
recruitment and training. While Anchorage can recruit new
firefighters, experienced journeyman firefighters leave after
five years for other states that offer defined benefit pensions
and lucrative signing bonuses. He said this has forced Alaska
fire departments to recruit only in-state and invest heavily in
paramedic training, costing over $100,000 per trainee. Smaller
rural departments are disproportionately affected, and as Tier 3
employees retire, turnover and long-term costs are expected to
further rise.
2:26:02 PM
SEAN CASE, Chief, Anchorage Police Department, Anchorage,
Alaska, testified by invitation on SB 28 and emphasized that a
defined benefit retirement system for Alaska police officers
would benefit both officers and the state by:
-Ensuring financial security through a stable, predictable
pension.
-Attracting and retaining talent, making Alaska more competitive
and reducing turnover.
-Promoting community stability by keeping experienced officers
who build trust and local knowledge.
-Providing financial sustainability and predictability,
shielding officers from market risks.
-Upholding the state's commitment to officers who risk their
lives for public safety.
He urged the committee to pass SB 28, stressing it honors
officers' service while strengthening communities.
2:29:00 PM
BILL MEERS, Business Representative, Public Employees Local 71,
Anchorage, Alaska, testified by invitation on SB 28 and stated
that eliminating defined benefit pensions and replacing them
with Tier IV defined contribution plans has made recruitment and
retention in Alaska's public sector far more difficult, turning
many jobs into a revolving door. He said in the past, solid
retirement and benefits offset lower wages, but now employees
leave Alaska after five years for better-paying jobs. To keep
workers, the union has offered advanced step placement just to
attract candidates. He urged lawmakers to support SB 28, arguing
that restoring a defined benefit system is essential for
stabilizing the workforce, retaining staff, and recognizing
employees' value.
2:33:22 PM
LON GARRISON, Executive Director, Association of Alaska School
Boards, Juneau, Alaska, testified by invitation on SB 28. He
read the following testimony:
[Original punctuation provided.]
Chair Bjorkman and members of the Senate Labor &
Commerce Committee. My name is Lon Garrison. I serve
as the Executive Director of the Association of Alaska
School Boards. We are a nonprofit association
established in 1954, serving 52 of Alaska's school
districts. I am pleased to offer my testimony in
support of SB 28.
AASB's Board of Directors has adopted three
legislative priorities for the year. One of those
priorities is the retention and recruitment of
teachers, administrators, and staff
2:33:58 PM
MR. GARRISON continued with his testimony:
Our legislative priorities, along with the supporting
resolutions and beliefs of the AASB membership,
are attached to my written testimony.
AASB has consistently advocated for a defined benefit
program as the best choice for staff retirement
investments. In 2005, the AASB membership passed the
following resolution and has continued to strongly
support reinstating a defined benefit option:
AASB supports re-establishment of a defined benefit
retirement program that improves the
hiring and retention of highly qualified and effective
staff.
School districts are grappling with a persistent
crisis in retaining qualified teachers and staff due
to inadequate funding, challenging working and living
conditions, and benefits that are often not
competitive with those in other states. This situation
undermines our capacity to deliver quality education
to Alaskan students and complicates the efforts of
school boards to fulfill the state's obligation to
public education each day.
One of the most critical factors in a student's
success is the quality of the educator working with
them. While effective learning depends on having a
high-quality teacher, it is essential for the entire
school system to support this vital interaction
between teacher and student. This requires assistance
from various school staff to enhance the learning
experience. Thus, moving to a defined benefit program
will impact a wide variety of staff.
School boards across the state face unprecedented
challenges in allocating rapidly dwindling resources.
The shortage of applicants, coupled with inadequate
funding, results in staff shortages that exacerbate
the situation. The lack of a defined benefit
retirement option undermines Alaska's ability to
attract and retain essential public service employees.
In recent years, numerous districts have turned to J-1
or H-1B visa programs to address teacher shortages by
hiring international staff. These programs serve as
temporary solutions to fill vacancies with qualified
professionals. However, more districts are
increasingly relying on them. With the Trump
administration's intensified focus on immigration,
even these short-term solutions may be at risk of
disappearing. Relying on such programs should not be
necessary. Alaska needs competitive salaries and
benefits to attract new staff and retain current
employees.
2:36:48 PM
MR. GARRISON continued with his testimony:
SB 28 seeks to establish a new retirement system that
motivates educational professionals to commit to
careers in Alaska. It incorporates past lessons,
distributes risks among participants, and sets
retirement age and qualification criteria that are
more aligned with contemporary needs. Furthermore, SB
28 retains the existing contribution rates for PERS
and TRS from school districts, which is a positive
advancement. It's essential to acknowledge the
persistent challenges faced by school districts,
municipalities, and boroughs, as they struggle to make
these contributions due to the unpredictability and
inadequacy of state and federal funding.
A couple of years ago, during a meeting facilitated by
AASB between school board members and their
legislators, a legislator asked, "What is the
difference between spending and investment?" School
board members often refer to investment in staff and
students. A board member replied, "Investment implies
an expectation of a beneficial dividend or outcome,
while spending is merely a response to an expense."
In our view, a competitive and attractive defined
benefit program is an investment in recruiting and
retaining quality staff, which leads to improved
student outcomes.
AASB calls on the Legislature to address this urgent
need. This is one of the resources we have to enhance
Alaska's competitiveness in the public sector job
market. Investing in this initiative benefits our
students, communities, and the entire state.
2:39:17 PM
CHAIR BJORKMAN held SB 28 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB21 ver A.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Sponsor Statement.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Sectional Analysis.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Fiscal Note-DOR-PFD 03.28.25.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Fiscal Note-DOR-TRS 03.28.25.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Draft Proposed CS ver N.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Explanation of Changes ver A to N.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Presentation to SLAC-revised 03.31.25.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Supporting Document-Research-AARP Alaska Study 2023.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB21 Public Testimony-Letter-ACLI 02.20.25.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 21 |
| SB28 Supporting Documents-Bill Summary Table.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 28 |
| SB28 Updated Summary Table-ver A 03.31.25 rev. 1.pdf |
SL&C 3/31/2025 1:30:00 PM |
SB 28 |