Parnell Administration Opposes Retirement Change
October 14, 2011
Alaska public employees to switch back to a traditional pension plan
would cost more than continuing forward with the state’s new 401K–style
program, a member of the Parnell administration told a state Senate
the administration would continue to oppose the switch to a
traditional defined benefit retirement plan even if it saved money,
because it wants employees, not the state, to bear the risk of any
retirement funding shortfalls, said Mike Barnhill, deputy commissioner
of the Department of Administration.
very nature of a defined-benefit system exposed the state and
future taxpayers to the risk of having to pay for unexpected future
retirement costs, he said.
the reasons Alaska currently has an $11 billion unfunded
liability in its retirement plans is a combination of investment
losses, longer life spans, changing health care cost expectations and
negligence on the part of some outside managers and advisors, Barnhill
a traditional retirement plan, there’s no guarantee that can’t
happen again, even in a plan designed to be cost-neutral, he said.
always going to be a risk of unfunded liability creeping into
the system at any time,” he said.
became a national leader in the controversial field of pension
reform in 2005 when it switched from a defined-benefit plan to the
401k-style defined contribution plan, and shifted retirement risk from
the state to public employees.
then employee advocates, including Sen. Dennis Egan, D-Juneau,
have been trying to switch back.
Senate State Affairs Committee, chaired by Sen. Bill Wielechowski,
D-Anchorage, met in Fairbanks Thursday for a hearing on Egan’s Senate
Bill 121, which would let employees chose between plans.
history teacher Sean Gensen told the committee every other
state has better retirement plans, and teachers like him are being
forced to consider moving to ensure their retirement.
don’t want to leave Alaska, but I might have to if I want to
continue teaching,” he said. “I don’t want to quit teaching, but I
might have to if I want to stay in Alaska.”
aide Jesse Kiehl told the committee the switch in Alaska harmed
retirement security, without saving the public any money.
hearing was for the committee to review the just released
“fiscal note,” the Parnell administration’s official estimate of what
SB 121 would cost.
said Egan’s goal is to have a revenue-neutral bill, offering
better retirement options at no additional cost to the state.
fiscal note reviewed by Wielechowski’s committee in Fairbanks
showed SB 121 would cost the state money because while it would reduce
pension costs to the state, it would increase health care costs.
not the goal or expected result of the bill, said Kiehl, who
said independent actuaries have not had an opportunity to review the
cost estimates of the state’s actuarial consultants.
acknowledged a previous fiscal note had been withdrawn after
Kiehl had found errors in how it had been calculated.
said the state has given permission for the its actuaries, Buck
Consultants, to work with actuaries from the union-backed Public
Pension Coalition to try to come up with numbers on which they can all
Fornia with the Public Pension Coalition said he thought that
would be possible.
important that you guys don’t have fighting actuaries,” Fornia
we can get actuaries to agree on what the numbers are with a high
degree of certainties, I think that will be a big step forward,”
said Egan would be willing to change SB 121 to ensure it costs no
more than the current system.
Egan is committed to making this a workable bill, making SB 121 a
good deal for Alaska and Alaska’s public servants,” he said.
if thought to be cost neutral, Barnhill said the Parnell
administration would never support the bill.
the only thing that would change the position of the
administration at this time is a crystal ball” which could guarantee
that all the actuarial assumptions were accurate, he said.
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