Teacher Retirement Alaska

This is the new version of the Alaska Teacher Placement (ATP) forum for teachers, education majors, and school administrators to discuss working and living in the state of Alaska. Those considering an Alaskan job, or considering a new Alaskan education job ask questions, and those with information and/or opinions provide answers. Although many users are teacher or principal candidates from the Lower 48, a large number of current and former school district HR and school administrators subscribe.

Moderators: Johncn, Betty Walters, Toni McFadden, Damon Hargraves

Teacher Retirement Alaska

Postby Texas2Alaska » Sun Aug 16, 2020 1:23 pm

Hello from Texas!!!

I would like to get some opinions and advice on the Alaska teacher retirement system. From the articles I've recently read, the teacher retirement in Alaska is pretty bad. One article stated the retirement system is the worst teacher retirement program in the United Stated. I understand the new program and a person being hired after 2006, I would just like to get a few ideas, people to talk to, and some sort of direction on information.

I've read over the department of education website and all the retirement/benefits etc.. It would be more beneficial to hear teachers, former teachers, and administrators perspectives. Ideas which you may have would be great to.

One article stated teaching in Alaska has now become the "tourist Alaska teacher". The first time I taught in Alaska, being the "tourist teacher" was true for me. However, this time I will be permanently staying.

Thank you for all the help!!!
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Re: Teacher Retirement Alaska

Postby Johncn » Tue Aug 18, 2020 8:17 am

Hello,

The main change was from a "Defined Benefit Program" (Tier I and II) to a "Defined Contribution Program" (Tier III) for teachers that started on or after July 1, 2006. Tiers I and II pay vested teachers a set amount that was calculated as a percentage of their three highest years' salary. The Tier III system works like a 401K, basically, where you have contributions that are matched by the employer, and can change / control how those funds are invested. You also have portability, which is why some say it discourages teachers from staying in Alaska for a long time.

To be honest, the retirement system WAS a contributing factor to why my wife and I stayed in Alaska under the Defined Benefit approach, as we were offered more lucrative administration jobs in the Lower 48 at various points in our careers. We loved Alaska, but the retirement program was certainly glue that helped keep us in the Great Land a couple of times when the temptation to move was real. I can't speak to the impact of the current system.

There are pros and cons to both types of plans. Teachers were given a choice to convert when the change took place. Imagine that we had cashed out our vested contributions and switched to the 401K approach when the switch happened in June of 2006. The Dow Jones was at 10,989.09 at that time. Let's say we invested wisely in the right stock funds, and the Dow Jones this morning was at 27,878.05. Let's just say that had we taken that approach, I'd likely be writing this post from the Maldives or Fiji. Instead, we stayed with the defined benefit program, retired, and I am writing this from Florida. :lol:

Hope this helps,

John
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Re: Teacher Retirement Alaska

Postby Texas2Alaska » Tue Aug 18, 2020 9:09 am

John,

Thank you for your well defined and informative answer. It sounds like the Tier III plan doesn’t have a guaranteed or “defined” payment/amount. The retirement amount is up to how well you invest and a little “luck”, would you agree with that?

You mentioned in the Tier III plan, “contributions are matched by the employer”. In Texas there is a set amount which schools will match. Texas has a defined plan which takes the average of the highest income of three years (similar to Tier I & II).Of course, to be more lucrative, smaller school districts where it’s hard to keep employees offer a higher match percentage. With the Tier III being more flexible, does the school districts match 100% the amount which the employee wants to contribute to their retirement? Can the employee change the amount of the percentage to invest?

Reading these it seems you’re the on that only answers, thank you for your help!!! I talked to the Department of Education and I will be applying for the Type B Administrator certificate. Any suggestions when applying to administrative jobs?

Again, thank you!!!
Kellan
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Re: Teacher Retirement Alaska

Postby Johncn » Wed Aug 19, 2020 4:02 am

Kellan,

The way it works now is that Tier III teachers (or school administrators) contribute 8 percent of their salary to the whatever fund they participate in, while their school district contributes 7 percent. So, 15 percent of a teacher's salary every month is contributed to their Defined Contribution retirement plan account annually. Because you control the fund (and change the investment just like any 401K), you can always add additional contributions. I don't know the tax implications of that, but TRS can likely tell you. Luck? Sure, luck is involved with any investing, but some prefer to be able to control their own investment funds rather than have the a government define and put a cap on what is (usually) a long-term investment return. Social Security is more like a "Defined Benefit" program, whereas 401K / 403B plans have tax benefits while working, while still making it "easy" to save toward a retirement goal...with investment still a factor. Each to their own, I guess. ;-)

As far "vesting", or having rights to the funds themselves, the old Defined Benefit program was eight years to vest, and either 20 years (Tier 1) or 25 years (Tier II) to collect "normal" retirement. Teachers could NOT take their contributions without penalty if they moved to another state. Under the Defined Contribution plan, teachers have full portability of their contributions, and after a few years, also retain their employer-matched contributions. Teachers receive a percentage of the employer contributions based on a sliding scale of their years of service.

This what they get to take with them if they leave Alaska:

2 years = 25 % of all employer contributions
3 years = 50% of all employer contributions
4 years = 75% of all employer contributions
5 years = 100% of all employer contributions

As far as other considerations, don't forget that Alaska teachers do NOT contribute to Social Security. There are 15 states where teacher retirement plans are in place, and the state does not pay into Social Security by choice. They are Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and, your home state of Texas. There are others which are partially covered (see map below). In fact, there are "Windfall Elimination" provisions passed by Congress long ago which can reduce Social Security benefits for teachers in these states even if they are qualified for Social Security through working enough quarters in other types of covered jobs. This is isn't just an Alaska thing, of course.

Read up on this issue here:

Windfall Elimination Provision - Social Security Document
https://www.ssa.gov/pubs/EN-05-10045.pdf

Strategies for Compensating for the Windfall Elimination Provision
https://socialsecurityintelligence.com/ ... provision/

Why Aren't All Teachers Covered by Social Security - Excellent map below is included in this article on TeacherPensions.org
[url]https://www.teacherpensions.org/blog/why-aren’t-all-teachers-covered-social-security[/url]

Image

Hope this helps,

John
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