Senate Labor and Commerce Hears House Bill 78 to Add a Shared-Risk Pension Option for Alaska Workers

Representative Chuck Kopp told the Senate Labor and Commerce Committee on Jan. 23 that House Bill 78 would offer a new defined-benefit retirement option designed to stabilize recruiting and retention across Alaska state and local government jobs.

Kopp said the plan is a "shared risk" model that assigns some funding responsibility to retirees, employees and employers, with employee contributions starting at 8% of pay and a trigger that could raise contributions to as much as 12% if the fund falls below a 90% funding threshold. He said the state's actuaries modeled the design and did not project future unfunded liability under conservative scenarios.

Kopp framed the bill as a fiscal response to workforce shortages and compliance failures, citing recent increases in significant accounting errors reported by the state auditor and asserting that the state once failed to claim nearly $280 million of federal pass-through grant reimbursement. He argued those failures, together with premium-pay spending and turnover, impose recurring costs that the bill would reduce by retaining employees.

The presentation included several specific cost and funding figures: Kopp cited FY20 premium pay at about $83 million, FY25 premium pay approaching $150 million, and $112 million in premium pay through the first six months of the current fiscal year. He said the bill would require an estimated additional state investment of approximately $467 million spread over 13 years to cover costs above local-government payroll caps (roughly $36 million per year) and about $687 million over 13 years for state-paid costs (roughly $52.8 million per year), producing an approximate combined ongoing cost near $80 million annually when annualized under conservative assumptions. Kopp said actuaries believe those estimates are fully loaded and likely represent a high-end scenario because not every current defined-contribution member will shift to the new plan.

On design details, Kopp said the bill sets a five-year vesting period for PERS and TERS, aligns TERS vesting with PERS, and preserves service-year accruals for employees who leave before full pension eligibility. He described health-care eligibility changes: full supplemental state health coverage would require 25 years for most employees and 20 years for public-safety employees, while a minimum of 10 years of service would qualify an employee for reduced supplemental benefits with higher premiums. Kopp said the Alaska Retirement Management Board modeling found the health trusts to be significantly overfunded and that the proposal funds health retirement accounts via a 3% or 4% job-class contribution depending on the plan.

Committee members pressed several points during Q&A. Senators asked whether states with similar shared-risk designs had struggled; Kopp and referenced actuaries said they had not found comparable troubled plans and that multiple actuaries (the ARM board actuary, the state's actuary at Gallagher, and a third-party reviewer) review the numbers. Senators also questioned the 90% trigger threshold, noting the potential for sudden payroll changes if employee contributions rose from 8% to 12% on short notice; Kopp said the actuaries' modeling showed that scenario would require an extreme market event and that each 0.1 percentage-point change materially affects cost estimates.

Senators requested more detail about the third-party actuaries and their experience; Kopp agreed to provide names and resumes before the next hearing. The committee took no vote on the bill; Chair Bjorkman said the committee would "set House Bill 78 aside" for further consideration at a future meeting and scheduled the next Labor and Commerce meeting for Jan. 26.

The hearing transcript records Representative Kopp making several numerical and actuarial claims (for example, funding levels, contribution rates, and projected costs). Committee members asked clarifying questions and repeatedly distinguished legacy pension liabilities—scheduled to be paid off under current law by 2039—from the proposed plan's costs for future service. The committee did not adopt the bill or take a formal recorded vote at this hearing.