File this under idle speculation: COVID could end up saving the State of Alaska millions of dollars. That’s because COVID-19 kills off the elderly more aggressively than other groups.
NPR reports that due to COVID-19 deaths last year, life expectancy at birth for Americans will shorten by 1.13 years to 77.48 years — the largest single-year decline in life expectancy in at least 40 years.
This phenomenon could possibly save the State of Alaska money. Here’s why: If the Tier 1 PRS and TRS retirement beneficiaries die off from COVID-19, the current $7-12 billion in State liability could be reduced substantially over subsequent years.
Of course, it might be just as effective to issue all the Tier 1 retirees, now in their 60s-90s, their very own Ducati Monster muscle motorcycles and wish them the best, but that’s not likely to happen. Dying of COVID? That could be more likely, especially if the world is now in the new-normal of a mutating virus that has to be vaccinated against every year.
State workers — whether chancellors or legislators or deputy commissioners — who worked under the old defined benefits system still reap huge retirement benefits, especially if they worked 20 39 years either as a State worker or a teacher in one of the school districts. They get 90 percent of their high-three salaries for the rest of their lives, and then their immediate beneficiaries get a lesser amount after the retired workers die. It’s no exaggeration to say some are making $12,000 a month as Tier 1 retirees.
The State has been paying the liability on an as-you-go basis for some time — barely keeping up.
Read a technical analysis of the retirement liability at this link.
The real unfunded liability could be over $12 billion, of which the state would pay about $20 billion, according to MRAK sources. The unfunded liability applies entirely to the defined benefit tiers, and mainly Tier 1, which closed back in 2006 for new entrants. A few grandfathered-in workers returned and were able to log in some final years, if they were working again for the State by the beginning of Fiscal Year 2010, but there are not many of those.
The state owes the bulk of the PERS liability not only because it’s the largest employer, but it picks up so much of municipal government employee TRS costs.
How may Tier 1 retirees are there? Tens of thousands, likely. By the time they retired, they were no longer working at a Clerk 1 wage, either.
Read the Tier benefits at this State chart.
The unfunded liability is concentrated in Tier 1, which initially closed in the early 1980s. Total annual defined benefit wages are now about $800 million.
Of course, there’s likely no Alaska Retirement Management Board analysis on this, because it’s politically too charged to even verbalize. Everyone knows that the unfunded liability is officially understated, but the number is radioactive.
And what public official would want to talk about a substantial windfall from the COVID-19 coronavirus killing elderly Alaska constituents?
