State legislative sessions have begun. From Alaska to Florida to Hawaii, lawmakers have returned to state capitols to start the work of the people. Every year, NPPC is dedicated to ensuring public employees and their defined benefit pension plans are protected from harmful changes. As readers of Defined Benefit know, pensions provide public employees with dignity and security in retirement. Our goal is to protect that.
In recent years, NPPC and our state coalitions have been in a protective stance, defending against attacks from lawmakers seeking to close defined benefit plans for future employees or create unnecessary new tiers that diminish the retirement security of current public employees. This year, however, we are seeing several positive pieces of legislation that could even re-open pension plans. Here are two of the top states we are watching and working with this year.
During the 2021 legislative session, state legislators attempted to close the North Dakota Public Employees Retirement System (NDPERS) defined-benefit-hybrid retirement plan for all new hires. While pension advocates were successful in killing that bill, lawmakers committed to gutting pensions did pass a bill tasking a committee with studying the issue. Unsurprisingly, the resulting plan would effectively accomplish the same goal: Closing the system for future hires by January 1, 2024.
With the 2023 legislative session upon us, lawmakers have proposed HB 1040, which would close NDPERS’ defined-benefit-hybrid system to future employees and convert them to a defined-contribution 401(k) retirement plan. We’ve covered why this is a terrible policy in the past, including writing an entire report about the subject. Not only would this weaken the retirement security of public employees, it would also harm state agencies’ ability to hire and retain the best and brightest public employees. Additionally, this bill would cost taxpayers a whopping $5.5 billion.
As a counter, lawmakers in the state senate introduced SB 2239, which does not close the system – in fact, it seeks to bolster it. SB 2239 would allocate $250 million to shore up NDPERS and does not drain the Legacy Fund to cover the pension liability. It instead increases both employer and employee contributions to the plan.
Our coalition in the state is working hard to defeat this legislation while our opponents, like the Reason Foundation, are looking to harm the state’s finances and hurt the recruitment and retention of public employees.
The State of Alaska has a public employee recruitment and retention crisis. State agencies and school districts have been sounding the alarm for years; they are struggling mightily to recruit and retain public employees, and it’s costing the state millions of dollars. Before we dive into what legislation we are tracking, it’s essential to understand how the state got into this mess.
In 2005, a unique set of circumstances unfolded. After the state’s actuary made grossly inaccurate projections about Alaska’s pension assets, lawmakers faced an inflated $4.1 billion unfunded liability for their Public Employees Retirement System (PERS) and their Teachers’ Retirement System (TRS). In response, they made the unwise decision to close their defined-benefit pension plans to newly hired public employees and switch to a defined-contribution 401(k)-only plan. This policy differs from other states that made this change because, in Alaska, most public employees are not eligible for Social Security benefits. Thus their 401(k) is the only retirement vehicle at their disposal.
Since the closure, state agencies and school districts have had severe problems retaining and recruiting employees. Some school superintendents have offered up to $3,000 signing bonuses for teachers, and Juneau has proposed offering up to $40,000 sign-on bonuses for certain public employees.
In the 2023 legislative session, lawmakers are trying to reverse this trend by re-opening PERS and TRS. HB 22, SB 11, and SB 35 would open one or both plans. As we keep an eye on this monumental effort, our coalition in-state is working hard to educate and inform both lawmakers and the general public on why this is necessary. These bills are cost-effective, would improve recruitment and retention, provide better public services, and improve public employees’ retirement security.