Alaska House votes to revive pension plan for state and municipal workers
Rep. Kevin McCabe, R-Big Lake, talks with Rep. Andy Josephson, D-Anchorage, during a break in debate over House Bill 78, the pension bill, on Monday, May 12, 2025. (Photo by James Brooks/Alaska Beacon)
Almost 20 years after eliminating Alaska's public pension program, the House of Representatives has voted to open a new pension system for municipal and state workers.
With proponents saying the state's existing, 401(k)-like retirement system is ineffective and a deterrent for hiring and retention, the House voted 21-19 late Monday to approve House Bill 78. If enacted, it would create a new pension plan and allow current employees to opt into the program.
The bill would cover Alaska's state employees as well as all of the teachers employed by local school districts and thousands of municipal workers employed by cities and boroughs across Alaska.
The bill's opponents cited potential costs and said they fear a repeat of the state's prior pension system, which accrued a multibillion-dollar shortfall after a failed estimate by actuaries.
Monday's vote is a significant accomplishment for pension supporters: This is the first time since the old program ended in 2006 that the House has voted to restart a public pension for all state and municipal workers.
The state Senate voted in 2012 and 2024 to revive a pension program for all employees, and the House voted in 2022 to create a pension just for public safety workers, but none of those bills became law.
This time may be different. Prominent members of the state Senate have said they intend to advance a pension bill next year, which would put the issue in front of Gov. Mike Dunleavy, who has previously opposed the idea.
House Majority Leader Chuck Kopp, R-Anchorage, said the bill is a major priority, even if the governor vetoes it.
'The constituents who sent us here to Juneau need to see us trying, with all our might, to fix the threadbare fabric of our public services in a way that is fiscally sustainable,' he said by text message after Monday's vote. 'Every time the bill is presented, heard, and argued, the fiscal responsibility and justice of our cause shines like the noonday sun. Alaska will soon have a responsible pension plan; I don't know what day or year, but it will have one again and we will be a competitive employer again.'
HB 78 would create a new pension investment fund separate from the existing one. Unlike in the current system, employees would be guaranteed a certain level of retirement pay, regardless of stock market performance. They also wouldn't increase those benefits if they leave their public sector job, unlike the current system, in which benefits grow as the investments grow.
Current employees would be allowed to switch from their 401(k)-style retirement system to the new system.
Retirement would be possible at age 60, or with 30 years of service. Police officers and firefighters would be allowed to retire at age 55, with at least 20 years of work, or at age 50 if they've worked at least 25 years.
Employees would be asked to contribute 8% of their pay to the pension plan, but that would be adjustable, up to 12% of income, if needed to avoid a funding gap.
Health insurance benefits, a major contributor to the cost of the old pension system, are not included.
Pensions would be based on the highest five years of an employee's salary, rather than the highest three years, as was the case under the old system.
Proponents have billed the pension revival as a way to fight employee turnover and alleviate a chronic worker shortage at state agencies.
Since 2006, when the pension program ended for new employees, research has found that new state and municipal workers in Alaska are now much less likely to remain in the state and frequently earn less money toward retirement under the defined contribution, or DC, plans than employees who receive pensions.
'In the world of teaching, if you're a Tier 3 teacher, which is the DC plan, it's called the death tier,' said Rep. Rebecca Himschoot, I-Sitka and a former teacher. 'You're going to teach until the day you die. That's because studies have shown that a teacher in Tier 3 has a 30% chance of success in retirement. It's not working for our Tier 3 teachers.'
Rep. Donna Mears, D-Anchorage, said her son was born in July 2006, the same month that the state stopped offering pensions. He's now preparing to graduate high school, and in the intervening years, she's had a career as an engineer.
'In that time, I've seen a decline in the longevity and expertise of regulators,' she said.
Kopp, speaking on the House floor, said that because the state's retirement system has failed to meet employee demand, the state is now paying more than it should in pay and bonuses.
'This is the cost of doing nothing. It is huge. We are burning bonfires of money,' he said.
Proponents also argue that the state is spending much more than it needs to on training, because it won't have to repeatedly retrain new employees.
'The fundamental question to me is are we going to create an environment where people can stay in Alaska or move to Alaska … and stay for a lifetime,' said Rep. Ky Holland, I-Anchorage.
Those who voted against the bill on Monday said they are concerned about the accuracy of cost projections and doubt that the bill will deliver on backers' promises.
'You can say it's a more modern version (of a pension). Perhaps it is, but it feels like it is still an unaffordable model,' said Rep. Cathy Tilton, R-Wasilla.
Rep. Kevin McCabe, R-Big Lake, noted that actuaries failed to accurately track prior costs.
'We are asking them to trust the actuarials. How did that work out last time?' he said.
Kopp responded by saying that this time, the pension system will rely on three independently operating actuarial estimates, not one potential point of failure.
Rep. Andy Josephson, D-Anchorage, said the bill offers a chance to stop the 'everlasting hamster wheel' of employee training and will be a big morale booster for public employees.
'This is a vote of hope that we can do better,' he said.
Rep. Justin Ruffridge, R-Soldotna, wasn't convinced.
'There's a lot in this bill that we don't understand, and we don't really have a grasp on how much it's going to cost us, and we are literally — to quote another member — making a vote of hope. Oh, that doesn't give me a lot of confidence. I hope that it does work out well, but if it does not work out well, what is plan B?'
House Bill 78 advances to the Senate, which is expected to take up the measure when the Legislature reconvenes in January 2026.
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