The State of Alaska created the Public Employees Retirement System (PERS) in 1961 to provide a retirement system for state and participating municipal employees. Most cities and boroughs in Alaska have participated in PERS for many years. The basic premise of a defined benefit pension plan is that employer and/or employee contributions are invested by the plan administrator in accord with sound actuarial principles so that adequate funds are available for retiree pensions and health care benefits.
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The PERS system is seriously under funded on a statewide basis. The plan’s assets are roughly equal to only 70% of the projected plan expenses and the Alaska Retirement Management Board has drastically raised the PERS employer contributions rates to catastrophically high levels. If gone unaddressed, this problem could eventually zero out Alaska’s Permanent Fund.
The Alaska Municipal League realize that as individual member employer liabilities have been affected by other employer’s actions, and member’s assets have been blended and reallocated yearly, the State cannot say what any member’s actual individual asset or liability balance is, and therefore cannot say what their unfunded liability is, either. Fiduciary duty and legal issues will arise without an equitable and timely resolution.
The League supports, therefore, amending state statutes to reflect an actual consolidated PERS plan with
one uniform consolidated normal cost rate that all members pay. We maintain that 85% of the unfunded obligation should go on the State’s books and be accounted for and paid by the State as a separate stand alone obligation. The other 15% of the unfunded obligation belongs to all PERS employers. To pay the 15%
unfunded obligation, there should be a separate uniform consolidated past service cost rate that all members employers pay, that is a separate rate from the normal cost rate. We believe that TRS should be dealt with in the same manner. Methods to reduce the future carrying costs of the unfunded obligations should be sought and used.
We believe the above shared solution framework will bring the attributes of stability, predictability and affordability to its members and will insure a sustainable retirement system.
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