While all states are struggling with a tight labor market, Alaska's workforce challenges are compounded by a decade-long recession and a rapid exodus of working-age Alaskans to jobs in the lower 48 states. Nearly 1 in 5 Alaska state jobs are vacant despite significant efforts to fill them, including offering above-average salaries, hiring bonuses of $20,000 or more and generous relocation packages to lure potential employees to Alaska for jobs, the panelists said.

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The lack of public employees has resulted in unplowed roads during recent record snowfall as plows sit idle without heavy equipment operators to run them, schools starting their academic year without teachers in every classroom, and low-income residents unable to access resources like food stamps because the state doesn't have enough employees to manage eligibility services.

Giessel said the switch to a DC system is part of the problem, making it both difficult to recruit potential employees to jobs in Alaska as well as incentivizing Alaska's existing employees to leave, taking substantial value with them.

"When the law first passed to pull us out of a defined benefit to defined contribution system, we were concerned about the long term impact, but we did not fully understand how significant it was going to be," said Kopp. Exit interviews with employees leaving jobs prior to retirement revealed mounting concerns about financial security over the long term and fiscal stability for employees and their families. This was especially significant because most of Alaska's public employees are not eligible for Social Security retirement benefits.

"We don't have the traditional three-legged retirement stool," said Kopp. "We have kind of a teetering stool we place our employees on."

That means many people who come to Alaska for high-incentive jobs are only staying between two and five years.

"They're getting certified, trained and developed to where they're an ideal candidate for another state who didn't make our mistake," said Kopp. "We went from a career focus to a job focus."

Giessel said recent audits indicate 90% of the state's DC plan investments – about $12 million a month – are leaving the plan by five years. Data the state has collected indicates employees who are leaving Alaska are going to Washington, Oregon, California, Arizona and Colorado – all of which have DB plans, she said.

"Washington loves getting our trained firefighters and police officers and teachers and we don't love sending them those experienced people," said Giessel. "We want to go back to a defined benefit where we can keep these great public employees in place."

Giessel is among a group of legislators working to return Alaska to a DB retirement system that provides fair and reasonable benefits to employees while sharing costs and risks among the state, employees and retirees.

She sponsored Senate Bill 88, which would have paid retirees based on their highest five consecutive years of salary. Benefits would not have been available for anyone who works less than five years in an effort to foster longevity. The system would likely have been more expensive for public employees than under the previous plan.

The bill would have allowed current state employees to switch to the new system from the current 401(k) system but all new employees would have been required to use the new system. The retirement age outlined in the plan was age 50 for police, firefighters and other public safety employees with 25 years of service, and age 60 or 30 years of service for teachers and other public employees.

"It's not your grandma's retirement plan," said Giessel. "But it's far better than what we have now."

The bill did not pass out of the finance committee before it adjourned last month, but supporters hope to renew efforts to pass the pension reform during the next session.

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM's Retirement Advisor magazine and LifeHealthPro online channel.