PERS-TRS reform: how will it work? Signed into state law in late July by the governor, this reform will benefit the state. But what about its employees?

• Author: Millhorn, Melanie

Gov. Frank H. Murkowski has signed landmark legislation reforming the Public Employees' Retirement System and the Teachers' Retirement System. The legislation repairs a retirement system that was under-funded by $4 billion in 2002, a shortfall that has grown to about $5.7 billion today.

Now Alaskans are asking how PERS and TRS reform will work. The answers are important and should be free of political rhetoric.

What will retirement reform mean to the Alaska public?

Reform protects taxpayers by containing costs. It insures that future retirement obligations don't spiral out of control. It creates a new Alaska Retirement Management Board. It charges the board with analyzing the unfunded liability and providing policymakers with recommendations to address the unfunded liability.

At the same time, we will not ignore an obligation that will affect Alaska taxpayers well into the future: The cost of guaranteeing existing pension obligations for existing PERS and TRS members that will compete for future state dollars.

What does retirement reform mean for current public employees and employers?

Retirement reform does not disturb the existing retirement benefits of current and retired state employees. The benefits conferred on existing members are constitutionally protected. No ifs, ands or buts.

More than a year ago, employers and unions representing PERS and TRS members were invited to join a discussion and survey about new tiers. The survey confirmed that employers were no longer willing to bear the entire financial risk associated with the existing defined benefit plan. They needed predictable, stable contribution rates to balance recruitment and retention needs with budgetary constraints.

While there was only one out of 12 unions contacted that responded to the survey about new tiers, there were 125 employers that responded.

An overwhelming majority of employers stated they needed predictability and stability of contributions, which is exclusively found in a defined contribution plan, not a defined benefit plan.

Employers recognized two realities: First, the defined benefit was no longer sustainable or affordable. Second, changing employee benefit tiers would not relieve them of their employer contribution responsibilities. However, it would stop the hemorrhaging of red ink.

Employers didn't hide from the reality that the defined benefit retirement system was no longer sustainable or affordable.

Can current employees switch to a defined...