Kito and Egan propose new pension system for longtime state employees

Juneau’s two Democratic delegates to the Alaska Legislature are pushing a proposal that would allow younger state employees access to a guaranteed pension system. The move is being proposed as a way to save money and reduce turnover among public workers.

“Basically, what this bill does is provides an opportunity,” Kito told the House State Affairs Committee, which approved House Bill 280 on Thursday morning.

The bill creates a new “defined benefit” retirement program for public workers who stay with the state for many years. In recent years, the state has gone away from defined-benefit, pension-style plans and toward 401(k)-style “defined contribution” retirement plans.

The 401(k) approach is cheaper but less secure for employees, and there’s little disincentive to keep employees from quitting. The state switched to the defined contribution approach after Alaskans began living longer than actuaries expected, and costs soared, creating a multibillion-dollar unfunded pension liability.

The state fixed its system of estimates, and the system now proposed by Kito and Egan is a hybrid approach that incorporates lessons learned.

Instead of paying 6 ¾ percent of income, employees will pay 8 percent of income to enter the plan. They also will be more responsible for health care costs, paying a monthly premium. The state’s older pension system covered health care costs without a premium.

Employees also have to work longer to become vested: 5 years for financial benefits and 10 years for health care benefits.

“There will be a shared risk at this point as opposed to having the employee pick up 100 percent or the state pick up 100 percent,” Kito said.

Kito’s proposal is co-sponsored by Rep. Cathy Muñoz, R-Juneau, and three other House Republicans. Rep. Chris Tuck, D-Anchorage, has also co-sponsored the bill.

Sen. Dennis Egan, D-Juneau, has introduced companion legislation in the Senate. Senate Bill 88, co-sponsored by five other senators, received its first hearing in the Senate Community and Regional Affairs Committee on Thursday. The committee lacked a quorum to move the bill forward.

• Contact reporter James Brooks at james.k.brooks@juneauempire.com.

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