A report from The Last Frontier, Part II

In my first report from Alaska, I focused on the state’s policy discussions on pension issues. Today I’m sharing somewhat more about my experiences here in Alaska.

During spring break, I discovered Alaska to be warm and alluring. The people I met this week are friendly, honest and real of their desire to seek out a workable solution to the state’s public service workforce crisis. And while there are different views on an answer – including retirement reform, a raise or paying bonuses – the people I spoke to are genuinely curious about learning the facts and dealing together to seek out the most effective path forward to seek out.

I also had the pleasure of having fun with the breathtaking fantastic thing about Alaska. It’s an incredible place to spend per week and have serious and open discussions about improving public services for Alaskans. Here are only a number of of the numerous pictures I’ve taken over the previous few days.

Through these conversations, I learned that while people desperately need to know the facts and understand the impact of various decisions, there are also some areas where fundamental questions remain. Many of those points usually are not recent to those of us working in retirement, but they’re value addressing:

— Do young people today prefer retirement?

— Is it realistic that the proposed pension profit changes will improve worker retention, and produce other states been successful?

— Will risk-sharing pension costs really work?

First, in keeping with the National Institute on Retirement Security (NIRS) Opinion pollYounger generations are very concerned about retirement and have extremely positive attitudes towards pensions, as shown within the charts below. This feeling has lasted for years.

Second, it will be important to grasp that the U.S. public sector has largely maintained a workforce profession model. Future NIRS research will show that one in two newly hired cops and firefighters keep their jobs and retire with their pension. Few, if any, other industries can claim that. And as discussed in my previous column, schools in the opposite Northwestern states expect a newly hired teacher to have a median of 11 to 19 years of service. Pensions are a giant reason it continues to be common to walk into a faculty and meet an educator who has worked in the identical job in your community for years. So yes, it continues to be possible to attain strong worker retention.

Pensions are critical to supporting this profession model because they address the three Rs: recruitment, retention and retirement. In addition, pensions help be sure that employees can proceed throughout their public service careers and provides them the peace of mind that they’ll have a secure retirement. This is especially vital in professions corresponding to teaching, police and firefighters, where training requires a big investment of money and time.

Third, it became clear to me this week that many stakeholders are unaware of the vital and useful changes which have occurred in pensions because the Alaska legislature’s fateful decision to shut its two statewide pension plans. In states across the country, public pension plans have modified and strengthened significantly over the past 20 years, largely, though not entirely, as a consequence of the Great Recession.

Actuarial practice has also developed remarkably. Nearly all public pension plans have lowered their discount rate or assumed return on investment. This is a smart response to financial markets indicating that yields will likely be lower in the longer term. In addition, public plans have largely adopted generational mortality that includes future mortality improvements into projections, which was not practical many years ago.

More importantly, risk-sharing ideas have kept costs incredibly stable in statewide pension plans in Wisconsin and South Dakota. These risk-sharing provisions are contained in Alaska’s pension laws and supply variable advantages for retirees, with future increases subject to adjustment if the plan encounters headwinds. In addition, employees pay more if plan funding falls below 90 percent.

Alaska’s proposal doesn’t bring back its old pension plan. Instead, it follows the lead of states which are widely touted as model public retirement plans. The Alaska laws is indeed a middle ground where nobody stakeholder bears all of the risks. Almost all other states have moved on this direction because the Great Recession. A report from Pew Charitable Trusts, Cost-sharing functions of state defined profit pension plans, features a map (see page three of the report) that details how states have designed their pensions in order that staff share the prices and risks of their public pension plan. These features will align the interests of all stakeholders in order that the main focus is on maintaining a powerful fiscal position.

I’m encouraged to see Alaskans having an open, honest, data-driven debate about solving their workforce crisis. I’m confident that they’ll recognize how retirement plans will be useful for all stakeholders, including employers, employees and residents.

It also encourages me to be in a spot where, even when there are disagreements in regards to the approach, every conversation ends with a thanks, a smile and a handshake.