The state should ensure that pension systems are portable, flexible and fair to all teachers.
Alaska provides a defined contribution pension plan for teachers. As of July 1, 2006, Alaska closed its defined benefit plan to anyone hired after this date, and its defined contribution plan is the only one available to new teachers. Its current 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 plus earnings from investments. They vest 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 half of their employer accounts (equal to 3.5 percent of salary plus gains or losses from investments). While ideally teachers would be entitled to their full employer contribution at this point, Alaska's sliding scale is a reasonable compromise.
State of Alaska Teachers’ Retirement System, Actuarial Valuation Report as of June 30, 2015.
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.
Alaska was helpful in providing information that enhanced this analysis.