On Tuesday, we wrote about a new case study examining the experiences of Palm Beach, FL after the town closed its defined benefit pension plan for police officers, firefighters, and other municipal employees. Palm Beach is certainly not the only place to face challenges with recruitment and retention after closing a pension plan. The state of Alaska faces significant challenges more than a decade after closing all of its statewide pension plans. A recent report reveals the obstacles facing the state in recruiting new state troopers.
In 2005, the Alaska legislature voted to close its pension plans to new employees hired starting July 1, 2006. All new employees must now participate in a 401(k)-style defined contribution plan. Unfortunately, public employees in Alaska do not participate in Social Security, meaning their defined contribution plan is their only source of retirement savings. This is a unique situation not faced by public employees anywhere else in the United States.
Closing the pension plans gutted the retirement security of teachers, firefighters, and other public employees throughout Alaska. It has also created major problems for the state in recruiting and retaining public employees. Alaska is a unique state. As the geographically largest state, but one with a small population, many communities are spread out and isolated from each other. Being a teacher or a state trooper in Alaska can be more challenging than in other states due to these unique circumstances. All the more important then that the state has a competitive pay and benefits package to offer prospective public employees. Unfortunately, the state no longer has that.
Recently, the Alaska Department of Public Safety (DPS) released a study, at the request of the state legislature, discussing the recruitment and retention challenges it faces over the next five years. One frequently cited challenge in the report is the lack of a defined benefit pension plan. Alaska loses many potential state troopers because those candidates instead go to states where they can earn a pension. As the report states, “prospective candidates report they find agencies outside of Alaska more appealing due to the defined benefit retirement package offered by some other states.” At the end of the report, the DPS identifies as a “critical need” the ability to offer a “defined benefit retirement package for law enforcement job classes.”
Last year, the Alaska House of Representatives held a hearing on HB 83, which would reopen the pension plans and allow public employees to choose between the pension plan and the defined contribution plan. That bill did not pass, but efforts remain underway to push for reopening the pension plans. As we emphasized in Tuesday’s blog post and as this report from Alaska DPS indicates, public employees value their pensions and they will respond when their pensions are taken away.