Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Alaska is at risk of an educator exodus by Ben Walker. In 2011, Alaska lawmakers decided to close the state’s pension plans for public employees, including the Public Employees Retirement System and the Teachers Retirement System, moving all newly hired public employees participate into a Tier 3 defined-contribution 401(k). What differs from other states that have decided to make this ill-informed change is that Alaska public employees do not participate in Social Security, making their 401(k) their only retirement vehicle. Since then, government agencies have struggled with recruitment and retention issues, including school districts and the state police. In this opinion piece for the Anchorage Daily News, the 2018 Alaska Teacher of the Year Ben Walker argues that the lack of an adequate retirement, among other issues, is driving teachers from the state. “On the state level, the continued devotion to the disastrous Tier III Teacher Retirement System defined-contribution plan, the lone defined-contribution plan for public school educators left in the United States, has made Alaska the worst place for educator retirement in the entire country. This has created the ‘tourist teacher.’ Tourist teachers come to Alaska and gain experience and training, as well as the school district’s investment in their Tier III accounts, only to leave mid-career, leaving our communities and our children with the disruption and cost, estimated at more than $20 million a year,” Walker said. This year, Alaska lawmakers can pass HB 220, which would provide public employees a choice in their retirement, including the defined-benefit plan.
Governor talks virus, budget, pensions and more by Tom Kenny. For years, lawmakers in Kentucky underfunded their state’s pension plans, often skipping, deferring, or partially paying into the systems each year. Since 2017, lawmakers have made the right choice by fully funding each of the state’s plans by paying the actuarially required contribution. This year, the state’s Teacher Retirement System (TRS) and the Kentucky Retirement System (KRS) have said they expect to need $4.6 billion for the next two-year state budget. “Well, many people think that we’ve got this giant debt, that we owe money going back in time on pensions, and we don’t. We have paid every single year, what’s required for that year. What we do have is liability going forward, right? How much we’re going to owe in the future, which is vast and significant,” Governor Andy Beshear said. The governor is correct in his assessment. As we’ve covered before, unfunded liability is the difference between the total amount of benefits owed to ALL current and active public employees and the value of the financial assets the pension plan manages. This means that at a specific point in time, the pension plan does not have the full amount of money it will need to pay out ALL of the retirement benefits it will owe in the future to ALL of its current and former employees. Pension funds will never need to pay out all of the benefits owed to public employees at one time.
Be sure to check back in next Friday for the latest news in the fight for a secure retirement!
