Should Alaska Go Back to a Defined Benefit Pension Plan for Government Employees? Is the Financial Risk Worth it?

There is a great debate going on in the State Legislature regarding replacing Alaska’s current Defined Contribution plan (DC) with a Defined Benefit plan (DB). The DC plan is much like a 401K. The former DB plan was replaced in 2006 with a DC plan. Alaska is the only state that does not have a DB plan for its government employees.

Even if you are not a government employee, you must pay attention to this effort to bring back the DB plan for those workers because it may have a substantial financial risk to the state. And you may be paying for that risk through various taxes such as an income tax.

Here’s an example of the possible financial risk to the state’s budget. In 2005 Alaska had a total of $ 12.6 billion in total unfunded pension liabilities. Twenty years later the unfunded liability amount had skyrocketed to $25 billion. So much for bad assumptions back then.

There is currently a bill, House Bill 78, in the legislature which you can see here: https://www.akleg.gov/basis/Bill/Detail/34?Root=hb78

You can hear more from Representative Will Stapp (Fairbanks) and Representative Chuck Kopp (Anchorage) here from Common Wealth North: https://www.youtube.com/watch?v=EF2yLhC8t2s