I call this meeting of the House Finance Committee to order a let the record reflect that it
is 1.49 p.m. on Tuesday, February 3rd, 2026.
Present today are representatives Hannon, representative Moore, representatives Bynum,
representative Jimmy, and the three co-chairs of cochair Josephson, co chair Foster and co
Also present today are House Finance Committee staff,
Committee Assistant Helen Phillips,
Paige Talula, Alistofka, Secretary Brie Wiley,
and Secretary Leah Frazier.
We've been joined by Representative Galvin.
We also have our moderator, Emily Mesh
from the Legislative Information Office.
And before we start, please mute your cell phones.
In today's meeting, the Department of Administration
will present on the funding status
of the public employees.
retirement system and teacher's retirement
system.
With us today from the Division of Retirement Benefits
are Kathy Lee, Director, and Christopher
Noble, Chief Financial Officer.
Also with us tonight and available to answer
health care related questions is Christopher Murray,
Deputy Director.
Director Lee and CFO novel, please, or novel,
please come forward, put yourselves on the record
and begin your presentation.
Good afternoon. My name is Kathy Lee. I am the Director for the Division of Retirement
and Benefits, and we are here today to present the funding status of the person terse,
and I'll let Chris put himself on the record.
For the Record, my name's Christopher Novell.
I'm the Chief Financial Officer for The Division
of retirement and benefits, also with us.
For the record, my name is Chris Murray. I am the acting deputy director of health and
Acting chief health official for the Alaska care plans and the division of retirement and benefits
Go ahead, okay
the
person tours is organized amongst three different components we have the
Department of Revenue Treasury Division that handles the investments for the defined benefit plans and also
helps determine the
investments that members can in the Defying Contribution Plan can put their
funds into they are staffed to the Alaska Retirement Management Board and
They have both an internal and an external investment team
The Alaska Retirement Management Board is charged
with the fiduciary duty over the investments.
They set the contribution rates.
They invest all the retirement system assets,
including the health insurance for retirees.
They have an investment advisory committee to assist them.
And they have a secondary actuary to review the primary actuaries
assumptions and work in
rate setting for the plans
The Department of Administration is where the Division of Retirement and Benefits lives
Our fiduciary is the commissioner who is by statute the plan sponsor
We administer the retirement benefits and the health benefits
We have devaluation actuary the primary actuary we hold that contract and we have several third-party
administrators that we work with for the retiree health plans and for record-keeping and
We do audits of the employers to make sure that they understand how they're supposed to report
salary, and service information to us to help them be compliant.
Okay, slide three.
So for the record again, it's Christopher Novell, CFO for
the Division of Retirement and Benefits. At this point, I'd also like to say that's
available on the phone. We have David Kirschner.
our principal actuary with Gallagher, our actuarial consultants and so David's going to be able to
assist with questions relating to the actuarial position of our funds. So the plan format of
our presentation is for me to spend some time speaking to Peres and Terres. Chris Murray will
then spend time on the health funds and lastly Director Cathy Lee will speak to
that occurred in November 24 and the restoration, which took us into July 2025.
So the first slide in this presentation is the membership as of June 30, 2025, as you can see,
Active participants in PERS defined benefit versus deferred. PERs deferred
contribution plans are split 20, 80 percent. The split with TERS is 25, 75
percent defined benefits and defined contribution. We know that the defined
continuing enrollment in 2006, therefore, we fully expect to see the membership split
increase favorable to the defined contribution plan.
Slide 4.
So slide 4 speaks to investment experience.
valuation is still in draft form to be officially submitted to the Alaska
Retirement Management Board, the arm board in March. The assumed actual earnings
has remained at 7.25 percent since 2022 for presenters. Basing earnings on the
fair or market value of assets for 2025, we see present tours at 10.8 and 10
The last row shows the actuarial evaluation of the assets which the draft valuation puts
at 9.3% for peers and tours.
This valuation uses a five-year smoothing method with the intent of eliminating any market
volatility or extreme peaks and troughs.
every four years and discussed we've been submitted to the arm board.
We have a question from Representative Bynum.
Thank you, co-chair Dresseson and through the chair.
Just really quick on slide three,
I know that may be obvious to us here on the committee.
But on your chart, you show the DB tiers, tier 1, 2, 3,
under purrs, Tier 1-2, under tours.
And then down below that, we have
it is Defining Contribution, DC Plans.
And just make sure that we're correct here.
That is Tier 4 under Purrs.
And Tier 3 under the tours, correct?
Through the charts, Representative Bynum.
That's absolutely correct.
for the defined contribution plans, and it's tier three, four, the tourist, yeah.
I just wanted to share, wanted make sure that that was clear for those that are watching.
They may not have intuitively seen that because it is not on the slide that it says tier four and tier
three. So thank you. Okay, back to slide four. Slide five.
The funding status of our pensions, the Paris pension liability for 2025, again in draft
form, stands at $17.3 billion and the actuarial valuation of assets is at 12.2 billion.
This leaves the pair's defined benefit of $5.1 billion unfunded or 70. 3% funded.
As you can see, the same calculation using fair or market value of assets returns a similar
funded amount of 71%.
The TERS pension liability for 2025 stands at $8.1 billion and the actuarial valuation
The pattern across the last three years shows both funds have increased their funded ratio
each year.
That strikes me as certainly noteworthy in something to highlight.
Those are substantial improvements.
Is that right?
The unfunded portions funded
Yeah, the funded portion is growing rather remarkably
At least according to this to the chair. Yes, there's been there has been three years of year-on-year improvement on the funding ratio
Okay, slide six
This slide six speaks to the funded status of our health care funds.
Here we have the opposite story.
The negatives on lines C and F show the healthcare to be overfunded
with a funded ratio of 132.1% actual evaluation assets
or 133.5% FVA on PERS.
is showing an AVA of 140.6 and an FVA of 142.2 percent.
Okay.
Representative Bynum.
Thank you, co-chair Josephson, through the chair.
Really quick, when we're looking at the health care funding,
I think some folks might look at this and wonder
why in the healthcare component we are seeing this funding
ratio of 130 percent, but when
to find benefit portion that we're seeing a funding ratio around 70%. Can you briefly just
tell us a little bit about why that's actually happening because both of, if I'm not mistaken,
both these things actually kind of were part of the same timeline and when they were implemented.
So I just hope you might be able to point out that there's a distinct difference in
why one is performing very well according on paper
and the other one isn't historically performed well.
So through the chair to Representative Bynum,
I'll give you one reason I might hand off to my colleagues.
The main reason is the egg web subsidy,
which was granted to Alaska in 2019.
And we're gonna have a chart a little bit later,
which shows that the
The overfunded status for both PERS and TERS does coincide with that year and the equip.
Thank you.
Okay.
Proceed.
So the graph on slide seven, and this shows the funding status
for PERs, pension and health care.
I'm going to stress at this point, the pension and healthcare funds are completely separate
and may not be used to offset each other, so this side-by-side chart is for visual information
purposes only.
And you can see, as the Paris pension is below the 80% mark,
whereas healthcare is over 130% consistent with the data presented on prior slides.
And also, to reps in Binance question, you
can say that, around about 2018, healthcare moved into overfunded status.
Slide 8 shows tears telling the same story as a PERS, an overfunded health care fund and an underfunded pension fund fund.
Representative Hannon.
Thank you, co-chair, Josephson.
Mr. Novell, does any of that health-care growth...
Is it indicative of all pension health plans as your retirees move to Medicare eligibility, right?
There's the pension benefit for a dramaturge retiree.
That's always on the state, but I've recently moved to the Medicare.
So I assume that I am less burdened on a healthcare retire because Medicare first.
is that impacted as our retirees have aged into that demographic.
And as are later tiers, get closer to people.
I was able to retire at 55, but many of the tier three can't retire till they're 65.
So they immediately, as a retiree, are primarily Medicare before they are drawing on the health trust.
Mr. Murray, do you want to respond to that?
Certainly, for the record, my name is Chris Murray.
I am the Acting Chief Health Official
and Deputy Director of Health
with the Alaska Division of Retirement and Benefits
through the Chair to Representative Hannon.
The answer to your question is yes,
and to sort of expound a little bit
on what you were speaking to.
When our retirees become Medicare age eligible,
Alaska statute requires that the plan
pay supplemental to Medicare.
And so, as the retiree population, and as you know, the
retireee population is aging,
the DB retirees are starting to age.
And year over year, we've seen a significant increase in the
number of retirees who are Medicare age eligible.
I believe, I'd be happy to go look at it exactly, but I
believe last I heard it was about 80% of our DB
retirees.
And, so we're seeing more and more,
and now we are started to see what we sort of reached that peak,
and perhaps even decline a little bit as we go through the years for the DB retirees.
And so you are correct, there is a lower burden on the Alaska care retiree health care
trust and plans for retirees who are Medicare age eligible and Medicare pays primary.
However, it is much less significant contributor to the overfunded status of the plans than
Egg whip that my colleague mentioned that was implemented back in 2018 and one fell swoop that reduced that reduce the liability
By about one billion dollars and so as you can see in the charts
The overfunded status of the health care trust continues to go up and up
And while the situation that you mentioned certainly contributes to it to a small degree
Not nearly to the degree that the implementation of The Egg Whip plan did
Could you remind us of the egg whip?
Thank you through the chair.
The egg wit plan, what it is, and is it an annual,
or was it a one time, $1 billion infusion?
Certainly.
Through the Chair to Representative Hannon.
I'm happy to speak to that now.
We do have slides on it later in the presentation,
if you'd like, it's entirely up to you.
What are we waiting?
Okay.
All right.
We were at slide 9, or were you done with 8-9?
For the record, Chris Nivelle, CFO of the time and the benefits.
Slide 9 shows the correlation between the actual rate of return and
the funded ratio for our pension only.
For your viewing ease, the percentage is in bold.
show a change in the assumed actual earnings rate.
Since 2000, our assumed
actual earning rates has been changed
on three occasions, most recently, in 2022 to 7.25.
The 30-year average is shown on the last line.
In analyzing this data, it's important to consider
the impact of the $3 billion.
infusion in 2015 when looking at that funded ratio.
We have a question from Representative Stapp.
Yeah, think about your adjustment through the chair.
Thanks, guys, for being here.
I'm curious on a couple of things.
So in this slide.
We're looking at our actuary funded ratio with our assumed rate of return versus our realized, but
we're not looking our actual projected liabilities and how they have changed over time.
So I'm curious why we would not want to show the committee when we talk about the funds that these plans.
How many times we've actually had our actually changed our accurate liability projections as opposed to our rate return projections to the chair?
So through the chair to representative staff
We can certainly provide that information to your office
For a side-by-side
Comparison of the of The unfunded liability against these lines
Yeah fault mr. Coacher follow-up represents yeah, I think what you're just into the chairs
So just to be very specific so we mentioned that the our assumed rate return has been ratcheted down
on three occasions, right?
What I find is more interesting on our projections
on the plan is how our total liabilities
have actually doubled on a projected basis
in the last 20 years, and to me,
I've never really understood how on close plan,
projected liabilities, not just the funded
and unfunded sense, but total probabilities
have increased so dramatically on closed plan.
And I'm curious if you guys know
Behind that metric is and it would be nice to show it on a slide through the chair
mr. Navell so through to church a representative stop. I do have
David Kirschner on the on The Line
So I could defer that question to him
I'd be on answer
more succinctly tonight. Well, I'm just getting a sense of where we are and
I think we can tolerate that sort of pivot
Mr. Kirschner are you with us sir
Yes, hello, can you hear me we can did you here the question from representative staff?
Yeah, I believe the the questions was
We've shown here on slide 9 he changes in the investment
investment rate and why have the liability
Over the years, I believe that was the question.
Yeah, through the chair to, yeah, Mr. Kirschner, close enough.
I'll do a follow up if any, thanks.
Okay, yes, that's was a question,
Mr Kirchner. Do you have an answer for us?
Yes. Through the Chair of Representative,
the assumed investment return rate is one element
that we use to measure the future light,
future benefits, which is the liability, the present value of those future
benefits. Every four years, that's the elastic statute to require us to conduct
what we call an experience study,
which means every four
years we re-evaluate all of the assumptions, not just the assumed earning
rate, but we update the
assumptions as regards to how long people are expected to live.
when they're expected to retire, what rates, salaries are expected
to increase over time, et cetera.
And every time we do those experience studies,
we have a developing increase in the liability
due to all of the assumptions.
It's not just the assumed investment rate.
The other thing that comes into play is the actual...
The last, until the most recent year, we've had a series of years where we have been in
a very high inflation environment, which means the post-retirement pension adjustment,
which are the PCI-linked cost of living, increase that retirees get under those curves and sugars.
and what we were projecting them to be based on our inflation assumption.
Also the last year we've had considerable, considerably larger increases in salary,
particularly for the turds, these officers and firefighters, and that has contributed
the larger liabilities that we expect. So it's a combination of all of those factors that have
tension liability to increase more rapidly.
And then on the flip side, we've seen the health care
liabilities in addition to the significant reduction due to
the adoption of egg with, the implementation of
egg whip back in 2018.
We've also seen a few successive years where the actual
claims paid by the plan have been less.
in what we've assumed, although we have seen in the last couple of years, we had seen an actual turnaround
that were claimed to hire. So it's all, every year, it is a series of moving parts that all
contribute to the effects that you're describing.
Yeah, one quick clarification, Mr. Coacher.
Clarification, representative staff.
Yep, thank you, Coature, Justin, through the chair. Thanks for the very detailed answer.
regarding the increases in total liabilities.
Every time we've done the experience study,
the projected liabilities of the plan have been more
than we assumed, correct, through the chair?
Mr. Kirschner.
Yeah, the Chair, yes, that's the last few years,
yes that correct.
Thank you.
A Mr Kirchner, it's Chair Josephson here.
Recently a national group, a challenging reform of the pension system,
claimed that since 2001, Alaska's pension plans have earned just 5.8% in annual returns on average.
Is that consistent with your knowledge and with slide nine?
As you can see, based on these calculations, the average return over these years has been
about 7.6.
We also have historical rates, market rates in our valuation reports in according to our
So I'm not sure where that certificate reference was coming from.
All right.
Representative Biden.
Thank you, Coach.
Also send just as a point of record for the committee.
Is it possible that.
Okay.
So, I,
I am not.
Sure.
Where that specific thank you preference was something.
Allright.
Representative.
Thank You.
we could be shared with that specific information you're referencing so that outside of this
we'd be able to have a better understanding what the question is related to and then secondly
if the answer is yes we'll find it and distribute it thank you and
then secondly if if uh the members testifying we're going to provide some additional information
to represent a staff if that could have been made available to the full committee that would be
Yes, did, represent staff ask for follow-up information?
Chair Justin, I just asked them basically to plot out,
to be able to provide for the committee
the things that Mr. Krishna articulated
that are kind of left out of the slide deck.
So we have one lever that on the assumption
rate of return change, we're not reflecting
the other levers that go into the.
cost basis. And we're happy to see Representative Sadler with us here. I think
we are through with slide 9. Okay. We'll move to slide 10. So slide
10 is related to Slide 7. It shows the unfunded actuarial liability in dollars
pension fund is in blue the health care is an orange. Underwater is overfunded and
as you can see from 2018 onwards health can moved from being under to over funded.
Okay. Representative Bynum. Thank you, co-chair
I know that we had talked about 2018 being the year that
we saw this influx of funding for the health care
component, but if we actually go back and we look at the
trend from 2010 forward that that amount continued to
decline and then have been hovering around that neutral
point starting in 2015.
Is it expected that that trend would have continued without the influx of additional dollars?
In 2018.
Mr. Novel.
Through the chair to Representative Bynum.
I'm going to have to follow up with that and get a deeper dive on my data.
Thank you.
Slide 11.
So slide 11 is telling the same story with the tourist retirement system.
with health care being mostly overfunded since 2015.
The same as, sorry, three years earlier than Paris.
Okay.
It's like 12.
So, slide 12 shows a history of legislative bills
towards the additional state contributions from 2006 to 2026,
a $3 billion infusion into the plans in 2015 and a House Bill 119.
Mr. Novel, could you, in the simplest manner, describe why the governor's budget has about $35
million less for column, the last column that is the state contribution, then the arm board is recommending.
Through the to the chair
would
The division wasn't
Involved in discussions related to them the budgeted
Additional state contribution, so we'd have to refer that question back to The arm board or imb
Okay, represent Bynum. Thank you co-chair Josephson. I think that is a great question
Mr. Co-Chair
Because it's something I've been wondering as well
and I was wondering if at some point maybe not right now that we could get some direction
from the professionals that are looking at this on the recommendation. I believe that maybe from
our perspective this is something that should be funding and you know fully funding at the
recommendation of the arm board as opposed to underfunding it and if there was a thought on that
and what the long-term impact might be it would be nice to know.
Let's go to slide 13.
Sorry, I apologize.
So slide, 13, we have a projection of the additional state
contributions for 2027 through to 2039.
Slide 14
So the purpose of this slide is to demonstrate the difference in additional state contributions and state has employer contributions
with the the inclusion and
Emission of the health plan normal cost the differences 63
0.8 million
In recent years the healthcare normal normal costs is set at zero and this is
Influenced by the health plans being overfunded
Repson Hannon for mr. Novel mister novel. I want to go back to slide 13 real briefly
Through the chair. Thank you
2039 per the additional state contributions protected to be zero is
That because you're anticipating where you've fully paid off in 20 39
through the chair to Representative Hanham.
This is based on armortization as yet to be finalised
by the arm board and their actuaries,
but this runs by these assumptions
that it will be 100% funded by 2039.
Follow it.
Follow up, Representative Hannon from Mr. Novel.
And is there a reason we don't anticipate
that the TIRS system that is currently
at a higher percentage of funded
wouldn't also be fully funded, by then?
Mr. Novell. Through the Chair to Representative Hanham, with this scenario, the PERS would
be fully paid off in 2038 and there would be zero to pay in 2013, whereas TERS' final
payment of $81 million would mean that it would
Follow-up. I just I
So if they're both so it would show a zero in 2040 under the turds system
Mr. Novell for the chair of representative hanland correct. Thank you represent step
Yeah, I think coach you're just into the chairman of mr. Newville
That's assuming that our current
Assumptions actually bear true because if I were to ask you
If the liabilities we had projected on the plan 10 years ago were accurate, would the fund would we have been paid through this debt already?
Yes, you know, I'm fairly certain the answer would have and yes, if that's correct through the chair.
Mr. Novell, and if you've not satisfied with this, we will take the essay answer.
Yeah.
Could you repeat it cuz I yeah, yeah through the chair to mr. Nibel. Yeah, I'll try to summarize it. I said this is assuming our
Assumptions are true because if I were to go to 2014 and I would to look at the total funded
Valuation of the assets of The Plan compared to the Total Liabilities projected in 2014
I'm fairly certain the plan would be have paid off already
If the liabilities we were projecting actually came to fruition through the chair.
Mr. Nivelle.
Through the Chair to Representative Stop, that's a fair assumption.
Thanks.
Okay.
Slide 14 or 15, your preference, 15.
So slide 15 this shows the actuarial projections of the funded level of health care
Trusts over and over the next 14 years with the normal cost normal health cost contributed and
Without the Normal Health Care cost
contributed
Okay, rough to combine him thank you coach here josephson and I'm never thought to ask this question
I probably should have asked it well before now, but
This fund is protected.
We can't move these dollars away from the health care trust.
What is going to happen with this when there are no more
participants partaking in the benefit?
Mr. Novel.
These health funds also serve the defined contribution funds.
There is an option if you no longer have anyone in your fund but you have a similar fund,
that there can be some movement there.
But we're looking over the lifetime of a member and their survivor.
At least 40 to 60 years from then before, you know, they might pass away.
So it's very difficult to project forward exactly what the balances in these accounts
will be because what we're seeing here is also looking at the equip plan.
It could stop at any time and at that point
Our funding for the health plans will start to to regress and the last I heard it would be
6 to 12 years before we're down to a hundred percent
But they will continue to
trend downwards
And possibly after that, depending on claims and how long people are living.
So it's very hard to give a specific answer to that.
Thank you very much.
So, it is complicated.
Complicated.
All right.
Representative Hannon.
Thank You, co-chair Josephson.
We're continuing to take contributions for people into a fund that's overfunded and on this page we are looking at
Growth to 220% over funded in the Terrace health plan
I
Understand being conservative and making sure we have enough money to serve the beneficiaries that we do
But at some point it seems like we're taking money
To invest in something that it's
perhaps not the best use of those dollars in perpetuity,
is the arm board recommending zero contributions
from members or we're just planning for a rainy day
when the Fed goes away and we all live to be 150
and I'll be very expensive by then.
Through the chair representative Hanan,
these are employer costs,
so we are not taking this from employees,
There is the thinking of no further contributions are needed for a time, at least, because the funds are overfunded.
Follow up, President Hannon, for Ms. Lee, who's speaking.
Thank you.
And I probably should have thanked you through the chair when I said members.
I do mean the employers and all of our employer groups from school districts' municipalities are struggling financially.
But we're continuing to ask them to contribute to a fund that's overfunded.
Is the arm board recommending that we take a brief time out from continuing
to fund at the rate we are or reducing it, ratching it very far down?
Because in the end, that would give them some short term economic relief and
seem to not harm the beneficiaries that were obligated to.
Through the chair representative hannon
That's what this slide actually shows is what the effect would be if there are no more normal
contributions taken and as you can see the the trend still
is to increase.
So I can't speak for the arm board,
but I know this is something that they're looking at.
They are also looking
at potentially, they've passed a couple of resolutions
to expand benefits as well.
Representative Stapp.
Thank you, Coach here, Justin,
through the chair to direct your lead.
So, I had, you know, our legislative finance division will run these numbers back much
further.
And I would point out that as recently as FY21, the healthcare portion in PERS was funded
142.7%.
So obviously, five years later, we are less than that, still overfunded, but 131%.
No, I mean this is not modeling normal costs so with with out normal cost contribution to how you could still monitor model
linear growth in funded status with
Outnormal contributions to the chair miss Lee
Through the Chair to representative step these are based on these figures are base on assumptions that we know today and
potential trends
These are the numbers that the actuaries have come up with claim experience will change them
We have had one twelve million dollar claim in the employee plant in
the last year and as the price of
Pharmaceuticals as well as medical treatments new medical treatment and pharmaceuticals come out
those are very expensive and those will also affect this ratio. So this is based on what we know
today. Uh, fault Mr. Coacher, follow up for reference to the staff. Yeah, miss Lee.
Yeah. They coach you're just into the chair, mostly.
So, um, no, I completely agree with you. I mean, they are based
on large claims. Um, pharmaceutical experience, really plan, experience the plan. If I were to go
13 when we were in big trouble in the health care with like our projected liability was 2.2 billion dollars
I I the really the concern I have is without normal contribution to the plan
We have a chart in front of us that says
valuation is going to continue to
Increase exponentially and we know that's not the case
Even with recent experience in The plan like if I go back to FY 21, it's a hundred and forty one percent
then it trended downward because of those planned adverse experience.
So the reason I want to put that on the record is I don't want people on this committee
to think that just because I'm looking at a paper that says number go up,
that that's actually what's going to happen.
Because as I had Mr. Kirschner mention earlier, every single time we've done an experience city
on a pension portion of our plan, it has been wrong one way.
And that's always the way that says the state owns more money.
And the expectation that the healthcare portion is going to continue to be overfunded even if we make no contributions is probably incredibly unrealistic.
Thank you.
Okay, no question there, so we'll go to slide 16.
The slide 16 shows the FY27 contribution rates for the defined benefit plans and how they're
calculated at to arrive at the total actuarial required contributions, employer and employee.
So firstly, we take the employee rates of the peace and fire officer,
then all other employees, and then the school district,
at 22% for peers and 12.5%, 12,56%
for TERS, plus the additional state contributions,
which include the DCR contribution,
which is 5.50%
for PERS and 20.58%
for tears.
Slide 17.
And slide 17 shows the FY 27 defined contribution tier four
rates.
8% of gross is paid by the employee with an employer match of 5% for PERS and 7%
for TERS. All the employer contribution rates are added and the difference between that
and 22% per PIRS and 12.5 for 6% percent for tERS goes towards to define benefit plans
The slide 18 is showing the difference between the statutory rates for pairs and tiers and
the actuarially determined rate.
The spread between blue and orange lines is the portion covered by additional state contributions.
Slide 19 is showing the projected benefit recipients up until 2053.
As more people retire, the pension recipients are forecasted to rise to a peak
for PERS in 2030 and TERS, in 2031.
As is currently the case, we'll employees join the defined contribution tier four.
So defined benefit recipients will become less in number.
Yes, represent Biden.
Thank you, co-chair, Josephson, through the chair.
Really quick, we showed on the slide 16, 17,
and then we have some projections on eight,
or cost on 18.
Do you have, do you actually have the side-by-side
comparison, historical side by side comparison cost?
for what the state and employers are paying specifically
when we compare side-by-side to find benefit,
plan full cost including the 22% cap
and then the State share versus what
the employer is paying for the DC plan
and up to that 22 percent cap that then also
pays for previous DB.
Do you have basically a similar chart to
18 that would show those comparisons
Mr. novelle
Through the chair to represent it binding I can certainly
Get that data to you and a chart form it'd be very helpful. Thank you
Okay
Let's go to
We have 19 or 20 I have 20
Slide 20 is showing a similar story to the prior slide but in a monetary way and relating
to benefit payments.
Tears will peak with 686 million in benefit payment in 2033 and pairs with 1.5 billion
in2038.
Gradually, of course, recipient daughters will reduce to a near zero at the end of this
For the next slide, I'm going to hand over to Chris Murray, our Acting Chief Health Administrator.
Thank you for the record, Chris Murry, Alaska Division of Retirement and Benefits, so
is describing the EGGWIP plan or the employer group waiver plan.
And so essentially, what this plan is,
is this is a group Medicare Part D plan,
so just as anyone who is Medicare-H eligible
can go out and purchase their own Medicare part D plans,
this a plan that is purchased by an employer,
by a Group, and all of our retirees,
for the most part, are enrolled in this particular plan
The plan, what it does is it provides direct subsidies, the egg whip program which is run through CMS,
provides Direct Subsidies to the plan on a monthly basis.
And these subsidies do change from year to year, they believe that Director Lee earlier was speaking.
She said that there's certainly no guarantee that these will continue, there is a slide later on.
But when this plan was implemented back in 2018, essentially what
in the retiree health care plans by nearly a billion dollars.
And you can see that figure there, which is $959 million.
So, to Representative Hannon's earlier question,
it was not an injection necessarily.
It was just a reduction in future liabilities
for the Retiree Health Care Plans.
And specifically, pharmacy calls,
because this is a Medicare Part D, is pharmacy plan.
So that is what the egg whip plan is.
Okay
In slide 22 speaks to the subsidies that I was describing.
And so there are a couple of different types of subsidies
that an egg whip plan provides.
There are direct subsidies,
and those typically come on a monthly basis.
There is a catastrophic reinsurance.
This is an reinsurrence program that is slated,
or excuse me, that it is designed
to help with very high cost medications.
But as you can see throughout the years, in 2021, from 64 million up to in 2025 $107 million in subsidies.
The one thing that I do want to point out is that you'll note that in the earlier years the direct subsidies were negative
and then the catastrophic reinsurance was significantly higher due to the Inflation Reduction Act.
Some changes in calculation of the subsidy payments was made.
So the CMS or the federal government is paying less of that, but they are paying more in direct subsidies.
However, there's certainly no guarantee that this will continue.
And as you can see, these formulas and the amount that we receive in subsidies does change from year to year.
It just happens to have worked out in our favor up to this point.
Representative, step then, Henan.
Um, so let's say CMS comes out and tomorrow and they say we're not going to do it with
any more.
What does that do to the projected liabilities for our plan and therefore the funding status
Mr. Murray through the chair to representative stat while I do not have
Specific numbers it would be a significant blow to the funding status of the plan as as we mentioned the primary reason
For you know the over funding starting in 2018 and moving through current is due to these egg whip subsidies
I, you know, that would be a question that I'd have to take to our actuarial consultants
to be able to give you specific numbers, but I think it's fair to say that it would have
a significant blow to the, um, to, the health of the plans.
Uh, quick follow-up Mr. Cooper.
Follow-ups represent stat.
Um, and, yeah, it'd be super helpful if, I mean,
I don't need like a perfect number here through the chair,
but, uh, would it be nice to know if like, if CMS rug pulls this, are we back to less
than 100% funded status, for example,
Through the chair to represent her staff. We'd be happy to provide that. Thank you. Please provide it through the Chair and
As you do so certainly represent Hanan.
Thank You coach your josison
Does the egg whip program is every state's public pension programs
participating or eligible to participate in the Egg Whip subsidies
Through to chair of representative Hanen
I'm sorry, I don't have the direct answer to that question.
I do know that there are some states that do participate in it.
There are other states who do not.
As in regards to the eligibility and whether or not all states are able to.
I can't speak specifically to them, but I'd be happy to be tracked down the answer of that questions.
Thank you, it coach or just fun. I'd like us to know that so that we have an understanding of whether we're one of 10 benefiting or
All 50 states have pressured Congress to continue to do this because pharmaceutical costs have driven up healthcare
And then I have a follow-up on a slightly on the same topic, but
No, I I mean, yes, But I like your question because
Political pressure is a powerful thing. I mean we could end social security also couldn't we right but represent Hannah
And then just making sure that on chart 22
These are calendar years. So are I'm looking at the catastrophic reinsurance for 25 being such a drastic?
Reduction and I assume that you've got a footnote that says because we've gotta true up
and
I guess in my mind, the catastrophic reinsurance for drugs
are probably cancer treatments and non-cology.
And not that we've had a dramatic downturn in the number of beneficiaries or
people suffering from those kinds of needs.
But the bills just haven't come in because we're on the first of February and
the lag time for being billed for that.
matches what we've had to pay out through the chair to Representative
Hannon. What you're seeing there is and I touched on it briefly earlier is a
result of the inflation reduction act essentially what the federal government
did is they changed the formula that
Essentially, the direct subsidies were increased and the catastrophic reinsurance was decreased.
The intent there is to put the management of these high-cost drugs basically to incentivize
plans to better manage high cost drugs and it sort of takes the liability off of the federal
government and puts it more on to the particular plans.
In 2025, they increased significantly the direct subsidies and decreased the catastrophic
reinsurance reimbursement.
Representative Hannon.
On that issue, thank you, Coach, your Josephson.
needs of the Alaskans who need this catastrophic reinsurance are we making the payments to make sure they continue their medical treatments that are
horrific over the top and
Are we able to pay those bills
Through the chair to representative hannon
The retiree health benefits on the DB plan are are quite robust and
In terms of the medications right now
Our retirees are paying either a zero dollar premium a four dollar Premium or an eight dollar
Premium for a medication that could cost tens to even hundreds of thousands of dollars
Currently the retireee health group health and
Well, trust funds are overfunded, and so it certainly looks good right now.
But as we say, we're hesitant to say.
Yes, because we have no idea what could happen tomorrow.
One of the next slides, as you can see, it does show health care trends and pharmacy trends.
They do increase year over year.
The state of Alaska care is very expensive.
And so it is one of those things that as the projections show currently,
it's looking good, but we are constantly reassessing those, we're constantly looking for ways to
available. Representative Bynum and then Allard. Thank you. Coach
your justice and through the chair the specifics of the employer group waiver
plan. My understanding is that's an opt-in program that is offered to all
states whether state participates or not that it's up to them. Is this a
guaranteed benefit that we're required to provide meaning that if for some
Is this something that could be opted out of by the state or is this guaranteed benefit?
Mr. Murray.
Through the chair to Representative Bynum, I'm sorry,
I do not know the answer to that question.
I'd be happy to track that down and see if I could find that for you.
Thank you, Representative Allard.
Thank You and through the Chair, can you?
You had stated that it's overfunded but we never know what's going to happen in the market.
Can you tell me how much it is over funded by?
Am I, is it on here?
through the chair to Representative Allard.
I believe that there was an earlier slide.
I'm just looking back through my slide deck.
So if you go back to slide 15,
as you can see that as of 2026,
PERS is overfunded to a 131%,
and TERS has over funded to 140%.
Okay, thank you.
Representative Stapp.
Yeah, thank you. Go to your justin to the chair
So a couple
Just quick one on our catastrophic re-injourn what amount of claim lost until we are re insurance kicked in
Through the Chair Mary
Through the chair to representative staff, I would have to go back and look at those specific because, like I said, it was as you mentioned,
it is a percentage and it has recently changed.
I'd like to make sure that I'm giving you correct numbers to say that once it reaches this particular number or this
particular percent, that's when the catastrophic reinsurance kicks in.
Okay, follow up, Mr. Coachear.
Follow up.
Yeah, thank you.
Could you listen to the chair?
Yeah. Thanks.
I mentioned this because the director said a little bit ago
that you've already had a $12 million claim.
So that's clearly going to hit the catastrophic reinsurance
kind of portion of that.
I'm curious, how many, I mean, what are the ramifications
here if you absorb?
claim valuation above the reinsurance numbers paid for on the equip because obviously 15.71 million is relatively close to 12 million so if you have a couple more catastrophic claims I assume we are on
the hook for that obviously because we're the insurer because our reinsurances got to cap out at something I'd imagine through the chair.
Mr. Murray through the chaired representative stat. Yes, yes, you are you're correct a point of clarification if I may
The $13 million claimant was on the employee plan. So it was not it
Was not on a retiree plan so it would not have applied to what we're discussing here today
You know with the increased cost of these drugs with these genetic treatments that are paid through The Pharmacy Plan
and with
Low amount of cost shares that are defined benefit retirees are paying again zero dollars four dollars and eight dollars
The a fair amount is covered by
CMS, but it has been certainly decreased in recent years and so the answer to your question is yes
That would essentially fall upon the retiree health plan to be able to pick up the rest of that
but
Once again, you know when when we're looking at current projections and you
know they take into account as much as they are able to and what is known they
are still projecting that the plans will remain overfunded you
know notwithstanding some sort of you
know disasters change in either CMS or in the
Eggwit program that we were just unable to foresee in that last fall. Mr.
Crotcher last follow-up. Thank you just to the chair. If you could quantify this
At some point maybe it would be just nice to know how many catastrophic claims it
would take to make a material impact on the funded status of the plan. If that
makes sense through the chair. Through the Chair to Representative Staff be happy to
talk to our consultants and see if we could get that information for you and
be Happy to provide that to the committee. Thank you Mr. Ray.
And then slide 23, this is speaking to the health care cost trend rates that I alluded to earlier.
As you can see here they are projected to increase every single year between six and a half percent
you'll notice that the
Prescription rates under the rx egg whip column in 2026 and 2027
Are projected increase by 8.5 percent and 8 point 2 percent
Going down to 4. 5 percent, but
Once again as you see this this chart just goes up it does not
go down and you know there's there certainly no expectation that at this
point health care will get any less expensive. Okay slide 24. Back on record
Christopher Novell, CFO division of retirement of benefits.
So slide 24 here shows the process timeline from valuation
to onboard resolution on additional state contributions
to pay down our unfunded liability for peers.
In March, we are conducting our four-year experience study.
So an experience studies is conducted every four years
and it reassesses the demographics, economic assumptions
and payroll assumptions.
There are no questions. That concludes my part of the presentation
Okay, and I hand over to director Lee for the next few slides director lee
Why don't you take us home here?
Okay
Kathy Lee director of The Division of Retirement and Benefits
This is just a short update on a a
Appropriation that we got approved last year
So, on November 4th, 2024, we were notified by the state security office that we had
an attempted intrusion into our systems.
And so, our system were all shut down while security investigation occurred.
of our information. So we were quite grateful about that. However, the suggestion was that we
move our systems to the state cloud to provide additional protections to this information,
which we did. When we do, though, we discovered that our employer reporting tool was not compatible
So we were unable to accept
employer contribution reporting
from November 4th to about February 6th in that intervening time we did develop a manual process
So, we we're processing some employer contributions, but it was very
laborious and took quite a while
so
e-reporting came back online on
April 9th
And from that point, we had to have a three-phased process
in order to post all of the back contribution reports
because in our system,
we have to report them in date order.
So it took a while to get all
of them collected and posted.
And we're very grateful for the cooperation we received
from our employers.
in getting these caught up, but because we weren't posting the contributions timely
into the defined contribution members account, there was an assumed loss of any gains or losses
to their accounts for that intervening time. The federal government requires us to make that
We requested an appropriation based on an estimate
of what we thought that amount would be,
which was $2.6 million.
And that was our best estimate at the time.
We use the US Department of Labor Voluntary
fiduciary program, correction program
which is an online calculator.
So, as we sent in the contributions that we were processing, our partner, and record
keeper in power, calculated the gains or losses and posted those to the participants'
account and notified us of the amount periodically so we could transfer the money to them.
1,000 of that was to PERS, 552, 000 of those were to TERS and 64,00 was two SBS.
At this point all of our employers have caught up on their contributions except for one.
And we are still working with them to get those contributions process.
a remaining balance of 1.3 million, which on June 30th to 2026, we will be returning to the state.
Doesn't happen very much. Let's go to slide 27. Yeah, this is just
with our communications team and our counseling resources to keep members and employers notified
as to what was going on in their accounts. We had frequent updates on our division webpage.
We sent letters to employers and employees so they understand that they would be made whole.
And of course in power our record keeper provided the resources
I'm not sure we would be returning money
It would have taken us a long time, but empowered
deployed resources to that to this project for us free of charge and
We were able to get everybody
caught up and
resulted in the
1.3 million that will be able
to return all right representative Hannah and then binum
Thank you, co-chair, Josephson. Ms. Lee, how are communications to the impacted employees made and
secondly
if they asked to see how did empower calculate that I got 25 cents or I've got
$3,000 or
I get
the various amounts.
How were those calculations done and were employees able to
Challenge it if they thought that was inaccurate. Yes employees
Excuse me through the chair representative Hannah employees were
notified that if if
They did not agree with the amounts they saw they could challenge the amount
and upon request and power would provide the actual calculation that came from the
Department of federal Department, of Labor calculator
for them. That was sent to members by letter and also repeated on our website.
Follow-up representative Hannon. Thank you, co-chair Josephson. So was the
initial notification to employees that this was happening by
letter, and was it only done by-letter, or were there other communications to
employees, that their contributions weren't accruing to their accounts, because
Power statements don't come monthly, and unless someone was checking their digital portal
It might be a whole quarter before they knew that there wasn't a contribution made
Miss Lee
Through the chair representative hannon if I'm not getting this ride, I'll invite
CFO no vell to jump in but I believe the initial couple notifications were given to employers and we're employers were requested to
Pass this information on to all of their employees that were participating in the plans
How'd she do mr. Nivelle
For the church representative hannon. This is also
This was also published on our on RDRB websites along with the letter to the employers
Follow-up for mr. Novel who's made the last comment. Yes. Thank you chair. Just I guess
Putting it on your website
requires that a member a
beneficiary was looking at the website for some reason and of course many other employees
are on autopilot, this is something that's done at payroll, and they're just quarterly
seeing, yes, my empower account is growing.
And so I am looking to see whether it was just a piece of mail that was sent, or if that
was the only thing and you said to the school district or the municipality, you're to inform
your employees, but how they did it, was up to them.
The power account may not be growing and no contributions have been made for six months or, I guess, five.
It's a fairly passive, and I
guess we've set it up as a system where we expect people to just, the system goes forward.
And so unless we're reaching out to them, they're not going to look and
see that there's problem posted on the retirement and benefits web page.
We didn't send certified mail. We
Didn't any
Response to representative Hannah for the chair to represent of Hannah that but that's correct. That's what happened
We we just communicated with the employers and and put the responsibility of them to
contact their employees
Representative by them. Thank you co-chair josephson through the Chair
during this period when
payments weren't being made, employers notified their employees that this was a problem.
Were employees still able to go into their portals and make decisions based on where
they wanted their contributions to going during that, even though contributions were
not happening?
And if so, do you know if they were made whole based where their elections would have been
they would have been going prior to.
Does that make sense of what I'm asking?
Yes, through the chair, Representative Bynum,
the members still had full access to their accounts
to make any changes that they wanted.
The correction was made taking into account
where their funds were at any particular time.
So if they had made a change in between and power would have noted that and calculated
the
Amount that was owed up to the point of change and then again from the Point of Change till we were completed
The follow-up. Thank you representative buying it for Miss Lee through the chair
We obviously know that
Well, let me rephrase this
From what I've heard is that historically there's been some challenges with confidence
I think from employees on how their assets were being managed
This hiccup with how contributions were been made into the empowered system
Although made whole
Can create a shaky confidence I guess from the employees about the system
Has there been any efforts that you're aware of from in power or employers to better help
educate their employees and power them, as you would say, to make good, wise decisions
and build confidence in the systems that we're currently using for those investments?
Director Lee.
notice or whatever that has gone to employees.
But both our representatives and empower representatives
in discussions with employees,
particularly during this time,
made sure to stress that this was an anomaly
because we have not had an instance like this
in the 30 some years.
I've been working for the division
and that it was caused not by a system failure,
an attempted intrusion thank you very much and that had one fall question that's not related
okay represent item new question for director lee new questions okay so thank
you for the presentation today lots of good information here i know that i'm very interested
To talk a little bit about
The health of our employees as far as retention goes and when employees are leaving on why that's happening
And I'm assuming that today is not the time for that
But that we will have the opportunity to have those discussions am I accurate in that assumption?
Through the chair representative Bynum the division to
give you some information
Regarding why people are leaving why we're not retaining them would be the division of personnel as they conduct exit surveys
with
departing state employees which represent over half of the members in the system
We otherwise we have no idea why somebody is is leaving or why they want to make a disbursement
We only know that they
do.
Okay.
Question for the co-chair?
If that's okay?
We did have division of personnel very recently.
But go ahead.
And I would hope, I'd hope cochlear justice and with the concerns that we have with vacancies
and also with recruitment, we talked a little bit about the compensation and pay study
yesterday that would have an opportunity in the future to dig a bit more into that and
specifically have a focus.
for the health of our employees and the services
that we provide, that that is something
that have a better understanding of, so thank you.
I absolutely share that concern
and you raised it eloquently yesterday.
It's calendar sensitive is the only issue.
But I will ask my staff to take note of that request.
That's my second take note today.
So that concludes our business for today, our next House Finance Committee meeting is scheduled for tomorrow, February 4th, 2026 at 1.30.
At that meeting, the Office of Management and Budget will present amendments to FY26 Governor's supplemental items that we heard, I think, early last week.
Following that, The Department of Education and Early Development will represent its own FY27 budget overview.
With that we will adjourn today's meeting at 305. Thank you