Legislature(2025 - 2026)BELTZ 105 (TSBldg)
02/12/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB80 | |
| SB79 | |
| SB55 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 80 | TELECONFERENCED | |
| += | SB 79 | TELECONFERENCED | |
| *+ | SB 55 | TELECONFERENCED | |
SB 55-TRS CONTR RATE; PERS/TRS SOC SECUR OR SBS
1:51:25 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 55 "An Act relating to employer
contributions in the teachers' retirement system; relating to
supplemental employee benefits; and providing for an effective
date."
1:51:51 PM
SENATOR BERT STEDMAN, District A, Alaska State Legislature,
Juneau, Alaska, as sponsor he provided a presentation on SB 55
and moved to slide 2. He stated that the Teachers Retirement
System (TRS) was created in the late 1940s to attract teachers
to Alaska, offering higher pay than many other states at the
time. He said the competitive salary drew in many teachers,
especially from the Midwest. He said Alaska didn't have the
infrastructure to train teachers locally, so the pay helped
bring them into Alaska. The pay has changed in Alaska. Today,
teacher salaries are average compared to other states. He
stated that in the late 1950s, teachers had the option to join
Social Security but chose not to, likely because the teachers'
pay and retirement benefits were already strong. He stated that
over time, federal penalties have also discouraged participation
in both Social Security and state retirement plans.
1:56:11 PM
SENATOR STEDMAN moved to slide 3, and discussed the history of
social security in Alaska, since 1935. He stated that when the
State of Alaska decided to abandon social security and create a
system called the Supplemental Retirement System, teachers were
not included until 2024. Due to the structure of the system
there was no easy path for the inclusion of teachers.
1:57:12 PM
SENATOR STEDMAN moved to slide 4 and spoke about the PERS v TRS
data table. He stated that all state workers contribute to a
retirement system, including Public Employees' Retirement System
(PERS) and the Supplemental Benefits System (SBS), which
replaced Social Security. State Employees, except teachers, each
contribute [6.13] percent to SBS, Total retirement contributions
for a PERS employee are about 25 percent. Teachers, without SBS
or Social Security, only have a 15 percent retirement
contribution. He said that overtime the 10 percent gap creates a
major retirement shortfall. He said even if pay is the same,
teachers can't come close to the retirement benefits state
workers get. He stated that when Alaska moved to a defined
contribution plan about 20 years ago, teacher employer
contributions rose from 5 percent to 7 percent to help make up
for the lack of Social Security or SBS, but it's not enough. He
said many SBS accounts now exceed $1 million. It's one of the
most successful programs the state has, yet teachers have no
access to it. Some school districts offer deferred compensation
plans, but those are funded only by the employee. He said SB 55
aims to spotlight that gap and start the conversation on how to
fix the gap.
2:03:08 PM
SENATOR STEDMAN moved to slide 6 and stated that Option A
proposes raising the state's contribution to teacher retirement
from 7 percent to 9 percent. While still less than what regular
state employees receive, it's a meaningful increase when
compounded over time and a good starting point for discussion.
He stated that option B would allow teachers into the
Supplemental Benefits System (SBS). A path for that was
developed last session. He said the federal government removed
the Social Security penalty for those with other government
pensions, so teachers can now join Social Security. He stated
his belief that may not be the most beneficial option for them.
2:05:06 PM
SENATOR STEDMAN moved to slide 7 and stated that one option
would be to let teachers choose between Social Security or SBS.
The state isn't preventing the teachers from deciding; if
teachers vote for it, the teachers can send the legislature the
bill. If the teachers join SBS, the state will align their
benefits with regular state workers. He stated that the state
will combine a 2 percent contribution increase and SBS, the
state would cover the 6.12 percent employer share. The 9 percent
contribution wouldn't be needed. The employer share will stay at
7 percent and adjust the rest to total 25 percent, just like
other state employees. He said whether someone works as a
teacher or on a road crew, the cost to the state would be the
same.
2:06:41 PM
SENATOR STEDMAN moved to slide 8 and stated that the foundation
of retirement across the U.S. is Social Security and teachers
don't have it. He said no matter what the state adds on top,
they're still starting from behind. SB 55 also addresses a
broader issue beyond teachers. It ensures all employees that are
in the state retirement system, such as municipalities, will
have their employees in Social Security, SBS, or a negotiated
labor contract. Some employee groups were excluded from both SBS
and social security, leaving them in the same situation as
teachers, which is fundamentally wrong. He said going forward,
all new hires must be in either Social Security or SBS.
Employers can't offer a retirement plan without that base. SB 55
aims to fix the imbalance and level the playing field.
2:09:01 PM
SENATOR YUNDT stated that the first employer contribution option
increases from 12.56 percent to 14.56 percent which is about a
15 percent bump. The second option goes from 7 percent to 9
percent, a 28 percent increase. He stated that these numbers are
a significant boost, intended to help ensure that after a 2530-
year career, employees aren't retiring with a pay cut. He asked
if that's the goal of SB 55.
2:09:37 PM
SENATOR STEDMAN answered that on slide 4, it shows about a 10
percent retirement contribution gap. The intention is for that
gap to be closed partially by increased employer contributions
and partially by employee contributions. He stated that there's
no question on if this increase would cost the employer more,
and employees will also have to contribute more. He said to make
this work in practice, the state would likely need to tie it to
an increase in the Base Student Allocation (BSA) or find another
financial mechanism to support the added costs. Once the
legislature decides on the final structure, the legislature can
figure out the best way to implement the new contribution
guidelines.
SENATOR YUNDT asked whether school districts or the state would
be paying the increase.
SENATOR STEDMAN answered that the cost would technically fall to
school districts but get pushed back up through the BSA, so
ultimately, the state pays. He said it's like when the state
took on the teachers' unfunded liability 20 years ago to relieve
local districts. If teachers chose to join Social Security, the
state may not have much say, deciding to join Social Security is
likely up to the teachers, and possibly individual districts. SB
55 is a good step toward evaluating the costs and consequences
of those potential options.
2:12:11 PM
CHAIR BJORKMAN referred to slide 7 and asked if the intent to
show both options at one time.
SENATOR STEDMAN answered no and that's where the confusion comes
from, like last year. The state wouldn't offer both because it
would overburden school districts, raising contributions from 25
percent to 27 percent, which is already high nationally. He
stated that the numbers would be adjusted so the left column
mirrors the right.
CHAIR BJORKMAN asked if the intention of SB 55 was to drop the
employer contribution from 7 percent to 5 percent if a teacher
joins SBS.
SENATOR STEDMAN answered that is correct, a teacher wouldn't do
both options but if a teacher doesn't want to do either, then he
opined the employer contribution should be raised by 2 percent.
CHAIR BJORKMAN asked if an employer chooses the SBS option,
would the employer's contribution to the defined contribution
(DC) account stay at 7 percent, avoiding the 2 percent increase
to 9 percent, or would it decrease to 5 percent.
SENATOR STEDMAN answered that the final bill will include only
one option, not both. There won't be a choice between a 2
percent increase or joining SBS. He stated that the intent is to
pick one: either enter SBS or raise the contribution by 2
percent.
2:15:15 PM
ROSE FOLEY, Staff, Senator Bert Stedman, Alaska State
Legislature, Juneau, Alaska, answered a question on SB 55 and
stated that the current version of SB 55 does not include any
reduction to the employer contribution rate for TRS DC plans if
those employees were to enroll in SBS or Social Security. She
said it's an important question for future discussion,
particularly whether the employer rate should be adjusted to
align both PERS and TRS DC plans at the same total contribution
level of 25.24 percent.
CHAIR BJORKMAN [held SB 55 in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB55 ver A.pdf |
SL&C 2/12/2025 1:30:00 PM |
SB 55 |
| SB55 Sponsor Statement ver A.pdf |
SL&C 2/12/2025 1:30:00 PM |
SB 55 |
| SB55 Sectional Analysis ver A.pdf |
SL&C 2/12/2025 1:30:00 PM |
SB 55 |
| SB55 Fiscal Note-DOA-DRB-02.08.25.pdf |
SL&C 2/12/2025 1:30:00 PM |
SB 55 |
| SB55 Presentation to SLAC 02.12.25.pdf |
SL&C 2/12/2025 1:30:00 PM |
SB 55 |