401(k)-style pension reform in Alaska

In 2005, Alaska froze the state’s traditional defined-benefit pension plan and created a self-managed 401(k)-style retirement plan for new public employees and teachers.

Following in the footsteps of Michigan, Alaska was the second state in the nation to switch to a 401(k)-style retirement plan for all new public employees and teachers.

In 2005, Alaska froze the state’s traditional defined-benefit pension plan and created a self-managed 401(k)-style retirement plan for new public employees and teachers. Alaska public employees and teachers who started working before 2006 remained in the traditional defined-benefit plan, and nonvested employees were given a 12-month window to opt into the new 401(k)-style retirement plan going forward.

Starting in 2006, all new public employees and teachers were given ownership and control over their retirements with 401(k)-style retirement plans.

Under the new retirement plan, the employer contributes between 5 and 7 percent of the employee’s salary into the employee’s individual retirement account. Employees contribute 8 percent of their salary into their individual retirement accounts. Employees own and control the money in their accounts.

Today there are more than 13,000 active public employees and nearly 3,000 active teachers enrolled in the 401(k)-style retirement plan in Alaska.

The state’s reform wasn’t perfect – it only applied to new public employees and teachers. But Alaska made a bold move in passing a statewide mandatory 401(k)-style reform plan.

It’s time for Illinois to follow Alaska’s leadership and give government workers control over their own retirements with 401(k)-style retirement plans.