Legislature(2025 - 2026)BELTZ 105 (TSBldg)
01/28/2026 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| SB198 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 78 | TELECONFERENCED | |
| *+ | SB 198 | TELECONFERENCED | |
SB 198-PERS/TRS RETIREMENT & MEDICAL ELIGIBILITY
2:34:16 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 198 "An Act relating to the
teachers' defined contribution retirement plan; relating to the
public employees' defined contribution retirement plan; and
providing for an effective date."
2:34:49 PM
SENATOR JAMES KAUFMAN, District F, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 198 read the following:
[Original punctuation provided.]
The bill before you addresses two issues with the
medical benefits our defined contribution employees
receive when they retire.
Our current system lacks important flexibility,
penalizing employees who have dedicated their career
to public service.
The specifics of this bill mirror the March 2025
recommendations of the Alaska Retirement Management
Board. You'll find their two resolutions in your bill
packet.
Specifically, this bill applies to public employees in
PERS Tier 4 and teachers in TRS Tier 3. These are
employees who were hired beginning July 1, 2006.
(Background on years of service)
For some background, when an eligible defined
contribution employee retires, they can access the
Retiree Major Medical Insurance Plan and the Health
Reimbursement Arrangement.
To do so, current statute requires they work 30 years
(and 25 years as a peace officer or firefighter).
Alternatively, if an employee reaches Medicare age
after working 10 years they qualify for the benefits.
The funds that support both the PERS and TRS DC
healthcare plans are overfunded. PERS is at 121
percent and TRS is at 136 percent.
Based on actuarial analysis, the ARM board found that
the years of service required could be reduced while
keeping the funds overfunded.
(Amending years of service)
So, taking one of the options recommended by the ARM
board, SB 198 reduces the years of service required by
5 years.
So public employees/teachers work 25 years and peace
officers/firefighters work 20 years to be eligible for
health benefits.
Employee contributions are slightly increased, and the
surplus more than covers the new liability.
This way, we are able to improve our health care offer
to DC employees, without jeopardizing the solvency of
the funds.
You can find the ARM board's full actuarial analysis
in your packet.
2:37:24 PM
SENATOR GRAY-JACKSON expressed hope for the return of a defined
benefit plan and asked how requiring continued service in the
final year aligns with the original goal of defined contribution
plans, which aim to support non-linear career paths.
SENATOR KAUFMAN replied that SB 198 primarily removes a barrier
to increase flexibility for employees entering the system, and
asked whether the question concerns that flexibility or the 12-
month service requirement.
2:38:35 PM
CHAIR BJORKMAN asked whether defined contribution plans support
career mobility and why the previous plan required employees to
retire directly from the system to receive health benefits.
SENATOR KAUFMAN replied that he cannot explain the original
requirement and stated that SB 198 removes the 12-month
requirement to provide greater flexibility.
2:39:38 PM
SENATOR KAUFMAN continued with the summary of SB 198:
[Original punctuation provided.]
(Background on 12-month requirement)
Let me return for a minute to current statute to set
up the second issue this bill addresses:
Current law requires DC employees who have met their
years of service, to retire directly into the health
benefit plan. It further requires that they work 12
months immediately before they retire.
This 12-month requirement imposes unnecessary rigidity
on employees.
For instance, an eligible employee who isn't ready to
enroll in their retiree health plan is forced to
either delay retirement or leave public service and
come back 12 months before they want to take their
benefits.
There is no option for DC employees to strategically
defer taking their health benefits.
Pre-Medicare premiums for retirees are high, so this
lack of flexibility poses a real problem for folks
who've earned this benefit
(Amending 12-month requirement)
SB 198 removes this 12-month requirement for eligible
DC employees.
This change will give them the flexibility to
strategically plan when they enroll in the health
benefits they earned based on their personal medical
and financial situation.
(Closing)
-In closing, since no members have yet reached the 25-
or 30-year thresholds, now is the right time to
address these eligibility requirements.
-SB 198 makes important improvements to the DC
healthcare plan to better serve the employees who have
dedicated their career to public service.
2:41:43 PM
EMMA TORKELSON, Staff, Senator James Kaufman, Alaska State
Legislature, Juneau, Alaska, provided a summary of the sectional
analysis for SB 198.
[Original punctuation provided.]
Sections 1 & 4 make changes for defined contribution
teachers and public employees
-It removes the requirement to retire directly into
their retirement health benefits after working the
preceding 12 months.
-It also reduces the years of service required to
qualify for benefits to. Teachers and public
employees will qualify in 25 years (from 30 years).
-Peace officers and firefighters will qualify after
20 years (down from 25).
-Note that if any DC employee reaches retirement age
after serving 10 years, they still have to meet the
12-month requirement.
Section 2 & 5
-Amend the premium (cost subsidies) for Medicare
eligible retired teachers and public employees based
on the changes in Sections 1 and 4
Section 3
-Amends the Health Reimbursement Arrangement (HRA)
account procedures so that defined contribution
teachers and public employees returning to work
after a gap will have yearly interest (instead of
inflation) credited to their existing HRA account.
The ARM board will set the interest rate based on
yearly market performance.
I'll make one note about Sections 3 and 5. When we
were drafting this bill, these sections were added in
as what we believed were conforming changes to change
in the years of service. After the bill was
introduced, however, we learned that the ARM board had
intentionally not recommended changes to these
subsidies as they have an actuarial impact on the
health of the fund that was not studied. We would like
to work with the committee to remove these sections in
a future version of the bill.
Additionally, after this bill was introduced last
session, the ARM board made a few more recommendations
for changes to the DC health benefit system. We are
still reviewing those recommendations, so I am not
prepared to go into depth on them at this time. But we
would like to work with committee members after this
hearing to see if there is a desire to incorporate
them into the bill.
2:44:55 PM
CHAIR BJORKMAN asked the Alaska Retirement Management (ARM)
Board chair to outline the board's additional recommendations
and explain how the changes in SB 198, along with those
recommendations, improve the system and work together.
2:45:44 PM
BOB WILLIAMS, Chair, Alaska Retirement Management (ARM) Board,
Juneau, Alaska, answered questions regarding SB 198. He answered
that the board's additional recommendations focus on improving
system design by reducing service requirements for medical
benefits and increasing member flexibility. Specifically,
Resolutions 2025-02 and 2025-21 propose lowering the vesting
period from 30 years for teachers and public employees to 25
years, and from 25 years for public safety to 20 years. He said
the ARM Board explains that these recommendations and SB 198 are
complementary. While SB 198 provides a simple, already-funded
path to these lower service requirements, Resolution 2025-21
offers an alternative funding mechanism through forfeited HRA
balances. He said together, these changes improve the system by
removing rigid, 2006-era restrictions, such as the requirement
to retire directly from a plan, and allowing employees to use
their HRA accounts more flexibly to cover premiums before
Medicare eligibility. This unified approach ensures the system
remains over 100 percent funded while providing the flexibility
necessary for modern retirement planning.
2:51:03 PM
MR. WILLIAMS stated that the ARM Board rarely makes legislative
recommendations and approaches them carefully and thoughtfully,
aiming for broad agreement. The ARM Board believes its
resolutions would improve the system.
2:51:56 PM
CHAIR BJORKMAN asked Mr. Murray to explain the current fund
balances within the retirement trusts and whether they can
support these changes over time.
2:52:42 PM
CHRIS MURRAY, Acting Chief Health Official, Division of
Retirement and Benefits, Department of Administration, Juneau,
Alaska, answered questions regarding SB 198. He responded that
the trust funds are overfunded and deferred the question to Mr.
Novell.
2:53:30 PM
CHRIS NOVELL, Chief Financial Officer (CFO), Division of
Retirement and Benefits, Department of Administration, Juneau,
Alaska, answered questions regarding SB 198 and said that Mr.
Murray is correct, the health care funds are over funded and
projected to stay well-funded through 2039. He said SB 198 can
adequately carry this.
2:54:13 PM
CHAIR BJORKMAN stated that he is open to considering additional
recommendations from the retirement board and notes that,
regardless of future defined benefit policies, many state
employees in the DC plan would benefit from this change, which
aligns with the current bill.
2:55:02 PM
CHAIR BJORKMAN held SB 198 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB198 ver. A.pdf |
SL&C 1/28/2026 1:30:00 PM |
SB 198 |
| SB198 Sponsor Statement ver. A.pdf |
SL&C 1/28/2026 1:30:00 PM |
SB 198 |
| SB198 Sectional Analysis ver. A.pdf |
SL&C 1/28/2026 1:30:00 PM |
SB 198 |
| SB198 Supporting Documents ARM Board Resolution 2025-01.pdf |
SL&C 1/28/2026 1:30:00 PM |
SB 198 |
| SB198 Supporting Documents ARM Board Resolution 2025-02.pdf |
SL&C 1/28/2026 1:30:00 PM |
SB 198 |