The Alaska Senate has passed a bill that would reopen two state defined benefit plans that have been closed to new hires since 2006.
The bill, SB 88, was passed 12-5 in Alaska's Senate on Jan. 31. The bill was referred to the Alaska House of Representatives on Feb. 5 and has been referred to the House State Affairs Committee.
The bill would create a new defined benefit plan tier within the $22.2 billion Public Employees' Retirement System and $10.2 billion Teachers' Retirement System and give new hires the choice between entering the DB plans or the existing defined contribution plans.
In a Jan. 16 letter to Donny Olson, co-chair of Alaska's Senate Finance Committee, Teresa Ghilarducci, professor of economics at the New School for Social Research, said the legislation and the reopening of the DB plan is needed in order to reduce significant turnover for police officer, firefighter and teaching positions in a state in which they are ineligible for Social Security benefits.
She estimated the cost savings created by switching to a DB plan would save the state about $76 million.
That total "consists of the direct cost savings stemming from reducing hiring and training costs of $62 million per year, and the direct cost savings to earning a higher rate of return of $14 million," wrote Ghilarducci.
