A big piece of fixing Alaska’s problem with teacher staffing is addressing retirement plan issues, says none other than the Majority Leader of the State Senate.
Cathy Giessel (R-Anchorage), the Majority Leader of the Alaska Senate, made her comments as a panelist in the June 12 National Institute on Retirement Security (NIRS) webinar, “Alaska’s Experience: Defined Contribution vs. Pensions.” Chuck Kopp, a former member of the Alaska House of Representatives, joined Giessel as a panelist. The moderator was NIRS Executive Director Dan Doonan.
The webinar concerned Alaska’s experience in shifting from a defined benefit plan for public sector employees, including teachers, to a defined contribution plan. The webinar follows the NIRS’ recent release of “Alaska Teacher Recruitment and Retention Study: Options and Analysis Supporting Retirement Plan Design,” its study that examines the effect that shift has had on retention and recruitment in the teacher workforce in Alaska.
Alaska Stands Out
Alaska “really stands out” as a state with no DB plan and no Social Security coverage for its public sector employees, said Doonan.
NIRS reports that Alaska is the only state that offers teachers only a DC plan and no Social Security coverage. Fourteen other states do not provide their public sector teachers with Social Security coverage; one offers them a choice of DB or DC plan coverage, one offers a DB plan or a plan that is a combination of a DB and DC plan, and 12 provide only a DB plan. Thirty-eight states make it possible for their public sector teachers to enroll in Social Security; none of them offer only a state-run DC plan.
“No one followed our lead,” said Koop.
The Results
Working age Alaskans are leaving the state for other states that offer their public employees DB plans, said Giessel. She added that the data shows that the DC system encourages people to leave public sector jobs. Doonan backed that observation, noting that during the period 2017-2021, more than twice as many teachers left their positions in the Alaska system because of the shift to a DC plan than left for any other reason.
Koop suggested that the shift in the retirement plan has changed the mentality toward public employment, and that now “a huge segment” of new hires stay in their positions from two to five years. Public employees’ focus in Alaska now has moved from one that is focused on building a career to one that considers a position to only be a job.”
And the effect of the shift in retirement plan coverage is exacerbated by the economic conditions in Alaska, Giessel suggested, remarking that the state has been in an economic recession for the last 8-10 years.
An Answer?
On March 1, Giessel introduced SB 88, a bill that would provide certain employees of the Public Employees' Retirement System of Alaska and the teachers' retirement system an opportunity to choose between DB and DC plans of the Public Employees' Retirement System of Alaska and the teachers' retirement system.
Among the things that the bill would accomplish is to again make a DB plan available to state employees and teachers, and to make DC plan coverage a default. The bill includes a provision stipulating that a teacher who first becomes a member on or after June 30, 2006, and before July 1, 2024, and who does not participate in a DB plan the state offers, shall instead participate in a state-provided DC plan.
Giessel’s bill is now before the Senate Finance Committee. She is optimistic about its progress, remarking that she sees the “opportunity as very hig” and that she believes that data in an upcoming audit will help convince state legislators who are skeptical.
The Big Picture
“There is not a three-legged stool in Alaska,” said Koop; rather, the state has “a teetering stool.”
The NIRS expresses a similar tone, arguing that “there are important choices about how benefits are designed and how they are funded,” says the NIRS. It continues, “A strong case can be made that reopening the DB plans would help in honoring the obligations that already exist in the legacy plans.”
And there may be more that can be done, the NIRS suggests. It argues that while Alaska may be the only state that has made the change that it has, it is not alone in struggling to keep newly hired teachers. “The problem is exaggerated in Alaska,” says the NIRS, but it adds that non-retirement policies also could help with retaining teachers.
Alaska’s experience is “a cautionary note,” said Doonan.
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