Pension Flexibility: Alaska

Analysis of Alaska's policies

Alaska provides defined contribution pension plans for teachers. As of July 1, 2006, this is the only type of plan available to new teachers in Alaska. This plan is fully portable, flexible and fair to all workers.

Vesting in a defined contribution plan entitles teachers to permanent rights to their own contributions and any available employer contributions. Teachers in Alaska vest immediately in their own contributions and the earnings from their contributions' investments. They are vested in employer contributions based on the following schedule: 25 percent after two years of service, 50 percent after three years, 75 percent after four years and 100 percent after five years. This means that after three years, the vesting point recommended by NCTQ, teachers earn a 3.5 percent employer contribution. While ideally teachers would be entitled to their full employer contribution at this point, Alaska's sliding scale is a reasonable compromise.

Citation

Alaska Department of Administration, Retirement and Benefits, DCR Plan General Information http://doa.alaska.gov/drb/dcrp/dcr_plan/general_info.html

Recommendations for Alaska

Maintain its fully portable, flexible and fair pension system.
Alaska should maintain its defined contribution system and work diligently to educate teachers about their investments, especially because teachers in Alaska do not contribute to Social Security and may more heavily depend on their employer pension than other retirees.

State response to our analysis

Alaska recognized the factual accuracy of this analysis.