Wednesday, May 22, 2013
Senate Committee Considers Change to Public Pension Plans
The administration of Gov. Sean Parnell opposes the switch back to a defined benefit plan.
Five years into the 401(k)-style system for public pension plans, the Alaska Senate is considering a change back to the defined benefit system under which government employees knew exactly what they would get upon retirement.
The administration of Gov. Sean Parnell opposes the switch back, and said there are no hard numbers yet to show cost savings for state government.
Senate State Affairs Chairman Bill Wielechowski thinks the public pension systems known as PERS and TRS are a less divisive topic than they were five years ago, when the state switched to a defined contribution plan for government retirees.
"What I’ve seen is that as the years have gone by in the legislature there seems to be a little bit of a softening on where we were a few years ago,” Wielechowski said.
Wielechowski's committee heard from a nationally known actuary who claims the defined benefit plan that older state retirees are covered under can outperform the current defined contribution plan for new employees.
Even Sen. Kevin Meyer, who voted for the controversial Senate Bill 141 in 2005, when he was co-chairman of the House Finance Committee,, said he might be willing to consider a change.
"Certainly if it doesn't cost any more to go back to a defined benefit, then I think it's something we should look into, at least give the employees the option of sticking with the defined contribution that we have now, or going to a defined benefit,” Meyer said.
"SB 141 did not solve the unfunded liability,” said expert actuary William Fornia. “Doesn't surprise me. DB plans are more economical in general, particularly for Alaska, where you don't have Social Security."
"Right now, where we don't have defined benefits, we only have defined contribution, we really only have what we can get out of our 401(k)s," said state employee Aubrey Ray. "Therefore, we have less security than the private sector."
A pending bill would give employees an option between retirement plans.
"I think there is general support in the Senate for the passage of this bill,” Wielechowski said. “I think there is widespread support in the House for the passage of the bill."
But the Parnell administration is opposed, because benefits promised by the state are constitutionally guaranteed.
"Until we can put this state back on a stable fiscal path, we believe it's imprudent to make promises that can last 70, 80 years,” said Mike Barnhill, deputy commissioner of the Department of Administration.
The question is: When will the debate itself retire?