The Alaska State House passed a bill Monday that would create a new defined contribution plan for public employees and teachers hired after July 1, freezing entrance into the state's existing defined benefit plans. The bill, which won Senate approval in April, is designed to address a combined $5.7 billion shortfall facing Alaska's public pension funds. "We're making the necessary changes to ‘stop the bleeding' in our overburdened pension system and bring more stability to the retirement system," Gov. Frank H. Murkowski said in a news release. Mr. Murkowski is expected to sign the bill into law.
Under the bill, all new hires would contribute 8% of pay into a new defined contribution plan, while employers would contribute 3.5% of pay. Existing employees would gradually see their contributions to the defined contribution plans increased to 9.8% from 6.8%, matching employer contributions.
In addition, the bill would merge the $8 billion Public Employees' Retirement Board and the $3.8 billion Teachers Retirement Board, both in Juneau, into the Alaska State Pension Investment Board, which already oversees investment of those assets. The bill would also charge the ASPIB with monitoring the fund's liabilities, which is currently done by the state's Department of Administration.