What Types of Alabama State Pensions are offered?
Alaska offers two main options for pension plans, both of which are controlled and managed by the Division of Retirement and Benefits. As the governor continues to push for further budget expansion, the movement to increase the capital of both plans also grows.
The Public Employees’ Retirement System (PERS) is Alaska’s largest state pension program and serves as an over-arching support system for most government employees. The Teacher’s Retirement System (TRS) is the secondary pension program – deliberately intended to support Alaska’s educational professionals.
Both pension plans waver around 60% of funding, as of 2013, nearly twenty percentage points below the federal recommended level. With budgetary restructuring looming in 2014 and 2015, this level is sure to increase in the coming years.
The Alaska PERS is designed to supplement the savings of Alaska public employees after retirement by providing pension benefits to members and their survivors. These retirement benefits are designed to combine with other income and savings to help provide financial security during retirement.
Benefits, Contributions and Funding
The benefit available from the PERS is dependent on the number of years served and average monthly salary. Benefits of the PERS also include coverage under the State of Alaska Retiree Health Plan (Alaska Care), effective immediately at the date of retirement. For members who entered the PERS after June 30, 1986 under the age of 60 and for members who entered the PERS after June 30, 1996 with less than 10 years of credited service, enrollment in the medical plan is dependent on registration and payment of monthly premiums. Police and fire service members who entered the PERS on or after July 1, 1986 and have at least 25 years of service are not required to pay medical premiums, regardless of age.
The amount of benefits available in the Alaska PERS are calculated using a formula of a multiplier times the average monthly salary and then multiplied by the total years served. The multiplier increases at certain points of length of service as a way to reward longevity in the PERS plan.
Contribution rates for the PERS are dependent on type of employment membership. Police and fire service members contribute 7.5% of pre-tax income, school district employees contribute 9.6% of pre-tax income, and all other state employees contribute 6.75% of pre-tax income.
In addition to the designated pension plan, the Alaska PERS also offers the Voluntary Savings Plan, also know as the Employee’s Savings Account. Members have the option to contribute voluntary, post-tax savings to fund the account. These contributions are fully separate and independent of the mandatory PERS contributions to the retirement system. The Voluntary Savings Plan is available for all active employees.
Because of changes in legislation affecting state pension plans, member eligibility is divided into tiers. Tier I is for those who entered PERS on or before June 30, 1986, Tier II for those who entered PERS between July 1, 1986 and June 30, 1996, and Tier III for those who entered PERS on or after July 1, 1996. Tier I members reach normal retirement at age 55 and early retirement at age 50 if they are vested, or may retire at any age with 30 years of service for most employees or 20 years of police or fire service.
Tier II and Tier III members reach normal retirement at age 60 and early retirement at age 55 if they are vested, or may retire at any age with 30 years of service for most employees or 20 years of police or fire service. A PERS member is considered vested once they have reached 5 or more paid-up years of membership service. Once vested, members will receive a monthly retirement benefit once they meet retirement age even if employment ended earlier, so long as contributions were not withdrawn from the PERS.
When You Retire
Under the Alaska PERS, the policy is set for survivor benefits as a default. If a member is married, they are required to select a join and survivor option when choosing a retirement plan unless the spouse consents to another benefit payment plan. Pension benefits are slightly reduced under the joint and survivor option, as it will continue to provide pension and medical benefits for a surviving spouse even after death of the member. The PERS offers two options for survivor benefit payment plans. The first allows for a continued 50% of a member’s reduced benefit to continued for the lifetime of the beneficiary, or for a greater reduction in benefits, the survivor may receive 75% of the reduced benefits for the rest of their lifetime. Health insurance benefits also continue for rest of the beneficiary’s life. If a spouse dies first, the member’s retirement benefit does not change. The Alaska PERS does not offer cost of living adjustments.
For both pension plans, there are separate tiers that are assigned based on the employee’s starting employment date. Tier One applies to all employees starting between January, 1961 and June, 1986, and each Tier increases from thereon. The most recent tier, Tier Four, applies to all those hired after June 30, 2006. Each Tier differs in the benefits package it offers its members. More details on the Tier qualifications can be found via the Division of Retirement and Benefits.
PERS General Benefits (Tiers I – III)
Most state government agencies that aren’t considered educational fall under the PERS program. The DORB provides a helpful directory for locating one’s place of work to ensure qualification.
- Employee contribution is set at 6.75% as a general rule. However, police and fire department employees contribute at a rate of 7.5% and employees of the school district contribute at 9.6%.
- Full-time PERS members accumulate daily service credit for every day worked at their government position. Part-time members accumulate credit in the form of service hours.
- PERS members become vested after five years of credited service. Vested members retain retirement benefits and may collect benefits at the retirement age, despite discontinued service.
- The retirement age varies, depending upon an employee’s tier, ranging from 55 – 60. An employee can also retire at any age, provided that he or she has accumulated thirty years of government service.
- In the event of a non-vested PERS member’s death, their beneficiaries can receive either a lump sum of $1,000 plus $100 per year of creditable service or the balance of the member’s contribution account.
- In the event of a vested PERS member’s death, their beneficiaries will receive a monthly 50% joint survivor benefit. This benefit is calculated based on years of creditable service and the member’s average monthly contribution.
TRS General Benefits (Tiers I – III)
The TRS is available for state teachers and those employed by state-sponsored educational agencies. .
- Employee contribution is set at a flat rate of 8.65% of one’s income, pretax.
- TRS members also become vested after five years of credited service.
- The retirement age varies, depending upon an employee’s tier, ranging from 55 – 60. Employees who have accumulated twenty years of both part-time and full-time service are free to retire at any age.
- In the event of a non-vested TRS member’s death, their beneficiaries can receive either a lump sum of $1,000 plus $100 per year of creditable service or the balance of the member’s contribution account. Beneficiaries also receive $500 for every dependent child the member had at the time of their death.
- In the event of a vested TRS member’s death, their beneficiaries will receive either a monthly 50% joint survivor benefit or the lump sum of the member’s contribution account.
Defined Contribution Retirement Plan Benefits
All members of Tier Four enrollment are eligible to participate in the Alaska Defined Contribution Retirement Plan, which is an investment retirement plan. Tier Four members are defined as any employees hired after June 30th, 2006.
- All DCR members contribute at a flat rate of 8.0% of their pretax payroll. In addition, employers of PERS participants contribute an additional 5.0%. Employers of TRS participants contribute an additional 7.0%.
- Similar to other Alaska pension plans, all DCR members become vested after five years of creditable service.
- Participants in the DCR plan are offered a number of retirement investment options, which can be altered over the course of their contribution.
Cost of Living Allowances
Participants in Alaska pension plans are also eligible for cost of living allowances if they continue to live in the state of Alaska after retirement.
A PERS member receives a cost of living allowance (COLA) that is equal to either 10% of their monthly retirement benefit or a minimum of $50 per month, whichever is larger.
A TRS member receives the same 10% of monthly retirement benefit as their COLA, but there is no minimum monthly amount.
COLA benefits cease when a member chooses to leave Alaska and reside elsewhere. However, members are allowed to take trips outside of the state of Alaska of no more than 91 days and still retain their COLA benefits.
Other Alaska Pension Plans
In addition to the two previously mentioned pension plans, Alaska provides some smaller, more specialized pension options.
The National Guard and Naval Militia Retirement System provides monthly retirement benefits to recently separated members of the Alaska air guard, army guard, or naval militia. Members must have accumulated at least twenty years of military and national guard service (including service in other states), but five years of this service must be with a qualifying Alaska state guard.
The Judicial Retirement System provides retirement benefit to judges and justices with at least fifteen years of creditable service.
The Elected Public Officers Retirement System is the smallest and most specialized pension plan. This plan caters to officials who entered into office through the general election – such as Governors, Lieutenant Governors, and State Congress. All other public employees are covered under the previously-mentioned PERS plan.
The most recent reports on Alaska’s PERS note that the pension system was funded at 60% in 2010, which was well below the 80% of funding that is recommended. As such, the pension system has been given serious attention. The funding ratio for the Alaska PERS has decreased from 2006 levels at 74.2% down to 54.7% in 2012. Unfunded liabilities have also increased from $3.4 billion in 2006 to over $8 billion in 2012.
More information about the qualifications for these individual pension plans is available through the Alaska Department of Retirement and Benefits. The plan information from Alaska’s PERS official website is available at doa.alaska.gov/drb/ which can also help current members navigate all parts of their retirement plan. The website also offers an online estimator of projected retirement benefit at myalaska.state.ak.us/drb/myRnB/.