Alaska is considering changes to plan provisions for peace officers and firefighters who are members of the Public Employees’ Retirement System (PERS), as presented in House Bill 55 (HB55), introduced in February 2021. The stated intent of the legislation is to improve recruitment and retention of public safety officers by replacing the current defined contribution plan with a pension plan. Equable Institute has analyzed the proposed changes using methodology from the Retirement Security Report to measure how changes to benefits would influence current and/or future retirement plan members.
KEY POLICY CHANGES IN HB55:
- Peace officers and firefighter members of Alaska PERS who are enrolled in the current defined contribution plan will have the option to switch into a defined benefit pension plan.
- All future peace officers and firefighter members of PERS will be enrolled in a defined benefit pension plan.
- The pension plan has an increased multiplier after 10 years of service, inflation adjustment, and normal retirement eligibility at age 60 with five years of service or age 55 with 20 years.
- By contrast, the status quo is a defined contribution plan that requires members to contribute 8% of salary, with a 5% employer match into an individual retirement account.
- Employers will have to pay at least 9% of payroll for the new defined benefit pension plan, plus continue to pay down the existing PERS unfunded liability.
WHAT HOUSE BILL 55 MEANS FOR WORKERS:
PERS public safety members would be offered a pension plan with inflation adjusted benefits in exchange for slightly lower overall annual earnings compared to the status quo. Our scoring methodology measures retirement plans based on how the benefit value they provide compares to an income adequacy threshold (reaching or exceeding 70% of an individual’s final average salary).
The table below shows the proposed plan’s total Benefit Scores, e.g., the percentage of available points for a given category. We also show the Benefits Score of the current plan as a point of comparison. And we show what the material effect would be on an average employee’s annual retirement earnings, using salary assumptions used by PERS trustees.
HOUSE BILL 55 ANALYSIS BY CLASS OF MEMBERS:
The two tables below show complete, detailed Benefits Scores for the proposed plan under HB55 and for the current plan. These two tables are summarized and combined for easier points of comparison above. However, the detailed breakout makes it clearer to see where the proposed plan and current plan perform better or worse.
What House Bill 55 Would Mean for 25-Year-Old New Hires & 40-Year-Old New Hires
The tables below show the proposed plan’s total Benefit Scores, based on how old a member is when they are hired. We also show how proposed changes compare to the current plan for the same kind of public worker. And we show what the material effect would be on an average employee’s annual retirement earnings, using salary assumptions used by PERS trustees. Underneath each table is a figure that shows a comparative forecast for the value of benefits over time