Senate Bill 55 would allow teachers to enroll in Supplemental Benefits System; municipalities and University raise cost and design concerns

Senate Bill 55 — a proposal to permit Teachers' Retirement System (TERS) participants to enroll in the Alaska Supplemental Benefits System or Social Security — drew testimony and discussion at a Senate Finance Committee public hearing April 14.

Rose Foley, staff to the bill sponsor, reintroduced SB 55 as an “attempt to create a more equitable retirement system” between PERS and TERS employees. Foley said the bill responds to the gap where some teachers and certain non-state municipal employees lack Social Security or SBS participation and therefore have smaller overall retirement resources.

Nils Andreas, executive director of the Alaska Municipal League, testified that local governments face tradeoffs if SB 55 is implemented. Andreas summarized written testimony provided to the committee and said many local employers joined PERS or similar arrangements by negotiation and that the fiscal consequences of opening SBS to additional employers will vary by community. He cautioned that adding SBS might reduce incentives for some employers to raise salaries and that some communities already supplement retirement through pay increases or other plans.

Heather Levin, director of benefits and compensation at the University of Alaska, asked the committee to consider carving the university out of the bill. Levin told senators the university already operates a UA pension plan that currently costs about $15 million per year and that adopting SBS as structured would add roughly $8 million in annual cost to the university’s budget; Levin said that structural change also would require employees to begin contributing more than 6% of pay and could feel like a pay cut unless state facilitator funding were provided.

Sponsor Senator Stedman framed the bill as an equity measure, saying teachers are often materially behind other public employees in total retirement contributions: “If one person has 25% of salary to invest for retirement, and the other person has 15%, that’s pretty easy to recognize who’s going to come up short.” He said the bill is a work in progress and that further changes and a committee substitute are likely.

Committee members asked for additional fiscal details. Senator Stedman noted a rough calculation presented in the hearing that “would be a little less than $50,000,000 to backstop their 6.13%,” and said any state funding to transition teachers into SBS would likely need to be phased in over several years. The committee closed the public hearing and set the bill aside for further work and possible future amendment.