During the Alaska House Finance Committee meeting on January 29, 2025, a significant discussion emerged regarding the funding status of the Public Employees' Retirement System (PERS) and the Teachers' Retirement System (TERS). The committee highlighted the adoption of a 0% contribution rate for health plans, a decision influenced by the overfunding of these plans.

The ARM board's decision to set the health plan contribution rate at 0% was based on preliminary reports indicating a normal cost rate of 1.97% for PERS and 2.15% for TERS. This move is expected to yield substantial savings, with PERS projected to save approximately $34 million. The committee emphasized that this funding level allows for the expansion of benefits without raising costs for employees.

However, questions arose about the long-term implications of maintaining such a high funding level, which is projected to exceed 200% in the coming years. Representative Galvin raised concerns about whether the board should consider alternative options, such as returning funds to beneficiaries, given the surplus. Miss Lee, a key speaker, clarified that federal regulations govern the trust funds, limiting the ability to issue payouts to participants. Instead, the focus remains on keeping co-pays and premiums low while expanding benefits.

The committee also discussed the uncertainty surrounding federal funding, specifically the EGWIP payments, which are not guaranteed and can be altered based on federal decisions. This uncertainty adds another layer of complexity to the funding strategy.

In conclusion, while the decision to maintain a 0% contribution rate for health plans reflects a strong funding position, the committee acknowledged the need for ongoing evaluation and potential adjustments in response to changing financial landscapes and regulatory constraints. The discussions underscored the importance of balancing beneficiary benefits with fiscal responsibility in managing the state's retirement and health care systems.