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Alaska Pensions Go South

Alaska’s benefits used to be some of the best. Now they’re among the worst. This could impact you, whether you live there or not.

By Cynthia Kopkowski McCabe

It was the day retirement security died in Alaska: On July 1, 2006, with some muscle from the White House, a defined-contribution pension plan became the law of the land for public employees. Gone was the stability of the defined-benefit plan that returned sound investments each year for its teachers, firefighters, and law enforcement, shoved aside by a type of plan that historically earned at least 7 percent less. And that was before the steep drop in individual account balances after the stock market lost 33 percent in value last year.

Would you want to be enrolled in a plan that defines only what you contribute, but not what benefit you get back from it? In Alaska, educators and other public employees had issued a resounding “no!” when the plan was first proposed in 2005. Time and time again, it was defeated in the state legislature.

But on the 66th day, in the final hours of a special legislative session, the proposal passed, muscled through by ideologues touting privatization as a panacea for state budget woes. They had some high-profile support for their cause.

Shortly before the law passed, a letter had arrived at Alaska Senate President Ben Stevens’ office on official White House stationery. In it, the deputy assistant to the President applauded Stevens for his efforts to “improve” the retirement system by scrapping the defined-benefit plan. Stevens’ efforts were coinciding with a similar federal effort to privatize Social Security by President Bush, who “believes that a strengthened Social Security system should include personal savings accounts [such as 401(k)s],” wrote the deputy.

The damage was done. Alaska was now a defined-contribution state. “You have a retirement system that went from the best—20 years and full retirement was yours—to one of the worst in the nation,” says NEA-Alaska President Barb Angaiak. The man who was president at the time, Bill Bjork, calls it the worst piece of governing he’d ever seen. “The cruelest blow,” to educators, he says, shaking his head in disbelief.

What a Bad Law Means to Good Educators
Ramifications were myriad. Education recruiters, who already had a tough sell when trying to staff the many remote areas of the state, now were left not with a stable pension plan to point to, but rather the…salmon fishing? “We’re trying to attract the very best teachers and we’re talking about ‘adventure’,” says Angaiak.

New teachers hired after the law went into effect now had less incentive to view teaching in Alaska as a long-term career. Instead, an increasing number are taking advantage of the relatively cheap housing, getting training and a few years of experience under their belts, then heading off to states with more hospitable benefits.

Factor in that Alaska is one of a handful of states where public employees don’t get Social Security benefits upon retiring, and it becomes clear why the switch to the unstable defined-contribution plan was a particularly stinging blow.

Sadie McDaniel, a 25-year-old in Bethel, said during a forum there in December that she looks to the future and is frightened by the prospects for her retirement. “That will be all I have to retire on, since I won’t get Social Security. I don’t know how long I can afford to stay in Alaska if I won’t have a secure retirement.” Heidi Atkinson, a second-year teacher in Fairbanks, broke into tears as she spoke at that city’s forum. “I want to stay a teacher because I love my job and love what I do,” she said. But, “it doesn’t make sense to me because this new plan costs more and we get less.”

It’s not just the newest employees caught in the defined-contribution net who face a problem. When the state dismantled the defined-benefit system, it prevented new members from contributing. As veteran members retire and begin tapping into that pension pool, there won’t be any replenishment. Questions remain about the long-term viability of a system that’s had its legs kicked out from under it. “Even people who are ready to retire should worry,” says Angaiak.

What You Need to Know
NEA’s public pension activists have another powerful warning: Everything that happened in Alaska could happen in your state. In recent years, there have been as many as 15 states grappling with pension fights at any one time. Here are some things to be on guard for and some to be heartened by:

  • We’re Bleeding Money! — If legislators start to make like Henny Penny about the cost of defined-benefit plans, they’re probably thinking of dumping them. In Alaska, there was much use of the term “hemorrhaging” by legislators who then promised to stop the bleeding by switching plans. But the fees for managing defined contribution plans are typically significantly higher than traditional pensions. Which leads us to…
  • Get Your Own Research — Even opponents sometimes make the mistake of assuming that any numbers waved around by legislators or their actuaries during pension fights are accurate, says Joel Solomon of NEA Collective Bargaining and Member Advocacy. “If you simply take what you’re told, well they can play those numbers any way they want.” Association leaders who identify their research needs and bring in a trusted, outside source to crunch the numbers will be better prepared for the long fight ahead.
  • Beware the Commission — If you hear talk of a retirement commission being formed to study the state’s current defined-benefit pension, “watch out,” says Solomon. “When they form a commission they’re saying ‘How do I undermine that?’” In Alaska, the pro-defined-contribution legislators created a study commission as a first step on the way to eventually closing the defined benefit plan and dissolving several boards of trustees that had significant employee representation. In their place came one smaller combined board that increased the number of employer seats by robbing seats from actual workers.
  • Join Forces — Coalitions of like-minded organizations are invaluable when fighting defined-contribution efforts. In California, Colorado, Kentucky, Nevada, New Hampshire, and Rhode Island—just a few of the states that have faced pension protection fights in recent years—coalitions with other labor organizations proved crucial to success. NEA-Alaska spearheaded the formation of a pension coalition last year that is working to restore a secure retirement system. If a state wants to cut educators’ benefits, then firefighters, police, and other public employees are likely in the same boat and are a great source for coalition building.
  • Be Prepared — Don’t wait for an attack if you’ve got a stable defined-benefit plan. Start educating fellow members now on the importance of the plan and why it makes more sense for both beneficiaries and the taxpaying public. Form a rapid response team of active, retired, and student members who are intensively trained to educate peers if defined-contribution talk surfaces.
  • Use the Resources You Pay For! — NEA provides a wealth of resources for members in states who want to maintain, defend, or get back their defined-benefit plans.

Contact Cynthia McCabe at

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