This photo shows the Alaska State Capitol. (Clarise Larson/Juneau Empire File)

This photo shows the Alaska State Capitol. (Clarise Larson/Juneau Empire File)

School staff eye retirement reform

S.B. 88, sponsored by Sen. Cathy Giessel, R-Anchorage, would establish a new defined benefit system

Nearly three in four staff members employed by the Kenai Peninsula Borough School District would be given the opportunity to transition to a defined benefit retirement plan under a bill currently being considered by the Alaska Legislature.

S.B. 88, sponsored by Sen. Cathy Giessel, R-Anchorage, would establish a new defined benefit system — or a system that is paid out by the State of Alaska — for Alaska’s public employees, with the goal of responding to Alaska’s struggles with workforce recruitment and retention.

Currently, KPBSD staff have either a defined benefit or a 401(k)-style retirement plan, known as a defined contribution plan — depending on what type of employee they are and how long they’ve been with the district.

Some have pointed to the discrepancies in those plans as among the reasons the district and other employers in Alaska are struggling to recruit and retain employees.

With their eye on Giessel’s bill, which would allow public employees who currently have a 401k-style retirement program to move to a defined benefit program, some public employees on the Kenai Peninsula are adding their voices to the conversation.

A tiered approach

The state currently lumps public employees into either the Public Employees Retirement System, PERS, or the Teachers Retirement System, TRS, with that employee’s retirement plan linked to when they were hired for their position.

Within KPBSD, PERS employees include all of the district’s non-certificated positions, such as school custodians, school counselors and some district administrators, while TRS employees include certified staff, such as teachers and principals.

Most of KPBSD’s staff — about 74.3% — are currently in a defined contribution retirement system. Of those 959 employees, 443 are certified and 516 are support staff. That’s as compared to the 331 district employees who are part of a defined benefit plan, including 220 certified staff and 111 support staff.

KPBSD Human Resources Director Nate Crabtree on Friday summed up the difference between defined benefit and defined contribution plans as predictability. While a defined benefit plan allows employees to calculate how much money they can expect to receive once they retire from their positions, a defined contribution is less certain because it is tied to investments.

Depending on when a public employee in Alaska started working, they are further delineated into tiers.

For TRS employees:

Tier I covers all staff hired between July 1, 1955, and June 30, 1990.

Tier II covers staff hired after June 30, 1990, but before June 30, 2006.

Tier III covers staff hired after June 30, 2006.

For PERS employees:

Tier I covers all staff hired between Jan. 1, 1961, and June 30, 1986.

Tier II covers staff hired after June 30, 1986, but before June 30, 1996.

Tier III covers staff hired after June 30, 1996, but before June 30, 2006.

Tier IV covers staff hired after June 30, 2006.

The key difference between tiers is that employees in TRS Tiers I and II, and PERS Tiers I-III are part of a defined benefit retirement plan, whereas employees in TRS Tier III and PERS Tier IV are part of a defined contribution retirement plan.

As part of a defined benefit plan, Tier I and II employees contribute 8.65% of their base salary to their retirement fund each pay period. Tier I and II employees receive as retirement benefits 2% for their first 20 years of service and 2.5% for each year beyond 20 years. That percentage applies to the average of the employee’s highest three contract salaries.

For example, a Tier I TRS employee who spent 23 years in their position would receive, upon retirement, whatever they and their employer have contributed to their retirement fund, as well as 2% of the average of their three biggest salaries. That employee would receive 2.5% for the three years they worked beyond the first 20.

That’s as compared to Tier III TRS employees whose benefits, as part of a defined contribution plan, equate to their plan account balance plus whatever investment earnings they have earned. As part of their retirement plan, Tier III employees choose from various investment options what to invest their retirement contributions into.

TRS Tier III operates more like a 401(k), through which an employee invests their retirement contributions in stocks offered by the State of Alaska, and their employee matches that contribution. The value of that employee’s retirement fund at any given moment, therefore, depends on how well their package of stocks is performing.

Whether or not someone is a Tier I and II or a Tier III TRS employee also affects how much of the money in their retirement fund they can access at any given time. Tier I and II employees become fully vested, or assume ownership of all of the money in their retirement account, after eight years of service.

Tier III employees take 100% ownership of their retirement contributions immediately, but may only access some of the money their employer has contributed depending on how long they’ve been working. Of the money their employer contributes to an employee’s retirement plan, Tier III TRS employees can access:

25% after two years of service

50% after three years of service

75% after four years of service

100% after five years of service

Crabtree said Friday that Tier I is the most lucrative of all the retirement plans. That’s because it requires the least amount of years of service before employees can start collecting benefits and allows employees to start collecting the state’s AlaskaCare retirement medical benefits soonest.

“Once you were eligible for that you could retire with full medical, regardless of your age,” Crabtree said of Tier I.

For Tier III’s defined contribution employees looking for a more stable retirement plan, Crabtree said Giessel’s research shows that a common strategy is for those employees to work for five years until they become fully vested, then take 100% of their retirement fund with them to a state that has a better retirement plan.

Crabtree said a teacher knowing that they could leave Alaska after five years with all the money they’ve accrued for retirement in search of a better plan “really changes a person’s mindset.”

“You’re going to keep growing that (retirement fund) if you stay, but if you chose to start over in a different state, you’d be able to take everything that you’ve accumulated,” Crabtree said. “(That) incentivizes people to stay five years, but, after that point, they’re mobile.”

Tier I and II employees who have a defined benefit system, in contrast, must make at least a 20-year commitment to their position in order to receive their more predictable benefits. Because the benefit calculation formula is spelled out by the State of Alaska, those employees can plug their information into a formula and know how much they’ll be paid upon retirement.

Crabtree is a Tier II TRS employee who, like a number of other KPBSD staff, were affected by a ruling handed down by the Alaska Supreme Court last year. In the case of Metcalfe v. State of Alaska, the Supreme Court found that Tier I or II TRS employees who left Alaska could rejoin their tier upon moving back to Alaska, even if they did so after 2006.

Crabtree was a Tier II employee while working in Alaska from 2002 to 2004. His family moved to Montana, but then was called back to Alaska. After returning to Alaska, he became a Tier III employee because he moved back after 2006. When the Metcalfe ruling came down, Crabtree said he re-enrolled in Tier II.

In doing so, he said he preferred to have a retirement plan that allowed him to calculate what his benefit would be whenever he decided to retire.

“With that defined benefit you can know for certain, early on, what your benefit will be for the rest of your life, essentially,” Crabtree said. “That has value.”

‘Everybody has an exit plan’

Most KPBSD employees, however, fall into the Tier III TRS category, or the Tiers III and IV PERS category.

Nathan Erfurth is president of the Kenai Peninsula Education Association, the union that represents the district’s certified staff. He’s a Tier III employee and said he and his colleagues often refer to that category as “the death tier.” So does Susanna Litwiniak. She’s a Tier IV PERS employee who is president of the Kenai Peninsula Educational Support Association, the union that represents KPBSD’s support staff.

“When I talk to Tier III teachers, everybody has an exit plan,” he said.

It’s not necessarily new teacher hires who are feeling the weight of their defined contribution, as opposed to a defined benefit, retirement plan, he said. Rather, it’s teachers who have been with the school district for a couple of years who learn within the first five years that they may not have a stable way to retire later in life.

“The problem is in that first five years, when you hear about and discover that you’re not going to have a permanent retirement in this state,” Erfurth said. “That discovery does happen at some point.”

Because defined contribution plans are tied to investments, Erfurth said it’s not always clear how valuable his own retirement fund will be when he gets to retirement age.

“You’re taking a gamble that your money is going to last as long as you do,” Erfurth said. “So there’s kind of a life expectancy question, like, how many years am I planning to live after I’m done teaching? Do I have enough money to do that? I don’t know, because I can lose 18% of the value in a given year because it’s tied to the stock market.”

The current system in place, Erfurth said, creates “tourist teachers” who relocate to Alaska planning to spend their whole career in the state, but then leave once they realize they may not be able to retire the way they want to.

Litwiniak said the same is true for support staff workers, who would be more inclined to stay in a position if they knew they could access retirement.

“If there was an expectation that you could retire with something, again, the retention piece would be there,” Litwiniak said. “You’re not necessarily making as much money as a teacher but at least there is the incentive to stay with a district because you have this retirement.”

However, the state’s current retirement structure means that some support staff who have been with the district for years may be required to work beyond their means.

“KPBSD has a lot of support staff who have stayed with the district for many years, and they’ve given their life’s work to the district,” Litwiniak said. “Some of them are in the death tier, and they’re having to continue working when they should be able to retire.”

Erfurth said that he, like a lot of other young educators, wasn’t really thinking about retirement when started working. He’s now in that “death tier” and knows that, the way things are currently, he and other Tier III employees will run out of money once they retire.

“You can’t trust the system to provide for you once you’re done with your career,” Erfurth said.

Until then, he said he’s holding out hope for change to Alaska’s existing structure. Returning to a defined benefit system, he said, would bring the state back up to baseline.

“It’s not necessarily that we are currently at zero, and this brings us up to 25 out of 100, or something like that,” Erfurth said. “Right now, we are below zero because we don’t have this defined benefit. That’s a foundational part of education and public service careers in every other state in the country and for some reason … we still don’t have that here. So once we get that sorted, that might bring us up to baseline, then we can start building some of those other things.”

‘We should have researched this’

Steve and Rebecca Bezdecny, both from Alaska, are both Tier III public employees who live on the central Kenai Peninsula. Steve is a science teacher at Soldotna High School, while Rebecca works as a legal assistant for the State of Alaska. They’re currently in their mid-forties and said they weren’t thinking too much about retirement when they left Alaska for a brief stint in New Jersey.

“I was so happy to be back and I didn’t even think twice about it,” Rebecca recalls thinking after moving back to Alaska. “Part of me now goes, oh, man, maybe we should have researched this.”

Steve said he’s since had similar feelings.

“I have this tendency to think the future is never gonna happen,” Steve said. “The thought of actually having to worry about retirement seemed so far in the future that I was like, we’ll figure out something.”

Steve and Rebecca said they’ve eyed 65 as the age at which they’d like to retire, but said that could change depending on what their lives look like at that time. Rebecca said she likes to stay busy and Steve said he doesn’t know what he’d do with himself if he wasn’t working.

Steve said a lot of teachers have been experiencing high rates of burnout during and after the COVID-19 pandemic and the political charge of education in recent years has also taken a toll. Trying to keep up with inflation, she said, also hasn’t been reassuring.

“Even if we … were one of those people who had 75% or more saved, what would we do with inflation? How would that pan out?,” she said.

Rebecca said that, regardless of what changes lawmakers approve in Juneau this session, she understands things won’t go back to the way they used to be, but that any improvements would be welcome. Any changes, she said, should be made across the board — to teachers as well as public employees.

Steve said that when it comes to teaching, changes to the TRS retirement system may go further when it comes to retention, versus recruitment. The district spends a lot of money on new educators who may ultimately leave once they hit the five-year mark.

“We’re not that old but the older we get, it’s like, oh, yeah,” Rebecca said. “Crap.”

“Whenever anyone asks me, my answer is (that) my retirement plan is to die of a heart attack or stroke,” Steve said.

Rebecca said she and Steve know they won’t be able to retire in the same way that their parents did. Her parents aren’t living “high on the hog,” she said, but they can still live within their means in Alaska.

“I don’t know if that’s going to be a possibility for us,” she said.

Rebecca and Steve said that, even if S.B. 88 passed tomorrow, they may not necessarily reap the benefits of the program. However, they see it as laying the groundwork for Alaska’s future educators who may not have incentive to leave the state if they want a defined benefit retirement plan.

Looking for solutions

Under S.B. 88, all of Alaska’s defined contribution employees would be eligible to migrate to a defined benefit plan. PERS employees would be categorized by whether or not they are a public safety employee, and all teachers would be covered under a new TRS category.

Alaska’s existing public employees who are part of a defined contribution plan would be given the option to participate in the new defined benefit plan. All new hires would be subject to the new plan.

All public employees, including teachers, would become vested after five years of service under S.B. 88 and qualify for retirement at 60 years of age or 30 years of service. Public safety employees could qualify for retirement at 50 years old with 25 years of service, or at 55 with 20 years of service.

The average salary used to calculate an employee’s retirement benefit would take their highest five consecutive salary years, rather than the high three currently used, and offer more multiples for how those benefits are calculated. New teacher hires, for example, would be compensated at 2% for their first 10 years of service

In bringing the bill forward, Giessel, who is also the Senate majority leader, has cited recruitment and retention issues in Alaska’s workforce. In addition to providing stability for workers, a return to a defined benefit system in Alaska would keep in Alaska money the state might otherwise pay out to teachers who leave in search of a better retirement system.

“The existing system is costing the state a lot of money, as it is resorting to hiring bonuses to attract workers, while losing the investment in the training and experience of those who leave after five years of vesting in the current Defined Contribution system,” Giessel’s sponsor statement says. “The lack of a Defined Benefit plan is making Alaska uncompetitive with other states, causing outmigration of families and our workforce.”

Giessel said during a presentation given Wednesday to the Senate Labor and Commerce Committee that, in the last seven months, roughly $62 million has been withdrawn from both TRS and PERS defined contribution plans. Nearly all — 90% — of those withdrawals came from employees who were fully vested.

“That averages out to about $12 million a month being withdrawn from the defined contribution systems,” Giessel told the committee. “That’s important. We talk about being fiscal conservatives, and it’s $12 million moving out of that system. Hundreds of millions of dollars are leaving the system and potentially the state each year as these folks, at vesting — five years — take their money out and leave the state.”

KCHS Assistant Principal Will Chervenak, who testified in support of S.B. 88 on Wednesday, called a pension for Alaska’s teachers and public employees the “linchpin” on which employees base their decision about whether they will leave the state.

“This practice has resulted in ever shallower hiring pools, as well as amazing teachers leaving Alaska for a plan and another state that guarantees a pension,” Chervenak told committee members Wednesday. “I can tell you that I have had many conversations with colleagues about retirement and Alaska and, for my Tier III cohorts, this retirement conversation is the biggest driving factor that will determine if they choose to stay in Alaska.”

Nikiski North Star Elementary School Jenna Fabian, who also serves as board secretary for the Alaska Association of Elementary School Principals, cited high turnover rates among Alaska’s principals as part of the reason she is in support of S.B. 88.

“As a building principal, I have spent a lot of sleepless nights worrying about burnout and our educators leaving the profession or moving to another state to teach the same number of students with a far more supportive retirement system,” Fabian said. “I’m even more worried about whether or not we will have qualified candidates for those vacancies.”

In the meantime, Crabtree said KPBSD is spearheading multiple initiatives to try and attract qualified candidates for district vacancies.

Following the district’s last collective bargaining negotiations with the staff unions, KPBSD now honors 12 years of Alaska teaching experience for new hires. That means an Alaska educator relocating to the peninsula doesn’t have to start at the bottom of the salary schedule.

The district is also being intentional about working with student teachers through a partnership with the University of Wisconsin and last year approved pay raises for support staff and created a “Grow-Your-Own” program meant to further develop KPBSD’s existing workforce.

Crabtree said he’s ready to try some out-of-the-box thinking when it comes to teacher retention and recruitment. As it stands, he said the district’s elevator pitch for potential hires highlights KPBSD’s class sizes, professional development and mentor opportunities and geographic location. Still, he said that’s not always enough if the conversation shifts to retirement.

“There really is no comeback for that defined benefit (point) if that comes up in a conversation,” Crabtree said. “That’s a hard one to overcome, if that’s a priority for the candidate.”

More information about S.B. 88 can be found on the Alaska Legislature’s website at

Reach reporter Ashlyn O’Hara at

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