Alaska's HB 78 Pension Veto: How Firefighters and Police Can Build a Backup Retirement Plan

If you're a firefighter or police officer in Alaska, you already know the news. Governor Mike Dunleavy vetoed HB 78 — the bill that would have reestablished a defined-benefit pension for public employees, including firefighters, police officers, teachers, and other state and municipal workers, according to the IAFF.

The unions say they'll push again next session. That's good. But "next session" doesn't help the firefighter who is 12 years from retirement and just watched the legislative path to a guaranteed pension close back up. It doesn't help the police family that planned around the expectation that lifetime retirement income would be on the table.

This article isn't political. It's practical. If you work in Alaska public safety — or anywhere else where defined-benefit pensions are eroding (which is almost everywhere) — here's how to build retirement security without depending on legislation that may or may not pass.

What HB 78 Would Have Done

HB 78 would have restored a defined-benefit (DB) pension — the traditional kind that pays a guaranteed monthly amount for the rest of your life based on your years of service and final salary. Alaska's public employees have been on a defined-contribution (DC) plan since 2006, similar to a 401(k): the employer and employee contribute, the money is invested, and your retirement income depends entirely on market performance and how much accumulated in your account.

The difference between DB and DC is enormous over a 25- or 30-year career:

When the market is up, DC plans can produce great outcomes. When the market is down at the wrong time — say, the year you retire — they can devastate a household. Pensions smooth that out. The HB 78 veto means Alaska public safety families continue to carry that market risk personally.

The Real Retirement Problem for Public Safety Workers

There's a unique financial pressure on firefighters and police that office workers don't face: you usually can't work until 65 or 67. Public safety is a young person's job. Most agencies push retirement somewhere between age 50 and 55 due to the physical demands and the cumulative injury load of the job.

That creates a 10-to-15-year gap between when you retire from the job and when traditional Social Security and Medicare kick in. If you're relying on a DC plan, you have to fund that gap yourself — and you have to do it without the steady lifetime income a pension would have provided.

The math is brutal. A firefighter retiring at 52 with $400,000 in a 401(k) and no pension needs that money to last potentially 35+ years, often funding a high-cost decade before Medicare. Without a pension or annuity component, a single bad market sequence early in retirement can drain it.

This is the gap that supplemental retirement strategies are designed to fill.

A Four-Layer Backup Plan When the Pension Won't Be There

You can build something that functions like a personal pension — guaranteed-ish lifetime income, downside protection, tax efficiency — using tools that already exist. It takes a few layers stacked together.

Layer 1: Max out the employer retirement plan you already have

If your agency offers a 401(a), 457(b), or 403(b), and especially if they offer any employer match, this is your highest-priority contribution every single year. Match dollars are 100% return — no investment beats that.

For 2026, the 457(b) limit is in the $23,000+ range for regular contributions, with catch-up provisions for workers within 3 years of retirement and for those 50 and older. The 457(b) is particularly powerful for public safety workers because withdrawals are not subject to the 10 percent early withdrawal penalty regardless of age — which is critical if you retire at 52.

Layer 2: Add a Roth IRA for tax-free retirement income

A Roth IRA is funded with after-tax money and grows tax-free. Every dollar you take out in retirement is yours — no taxes owed. For 2026, the limit is around $7,000 per year ($8,000 if you're 50+). Over a 20-year career, a maxed-out Roth IRA can quietly build into a six-figure tax-free pile that becomes incredibly valuable in the gap years between retiring from the job and Medicare.

Layer 3: Term life insurance to protect the family before retirement

If you die in the line of duty or from any cause before retirement, your spouse and kids need income replacement. Department-provided life insurance is rarely enough — usually one to two times salary. A personal 20- or 30-year term policy at 10 to 12 times your income is the foundation.

A healthy 35-year-old firefighter or police officer can typically get $500,000 of 20-year term for $40 to $70 per month, depending on rank, agency, and health.

Layer 4: Supplemental permanent coverage or IUL for the lifetime income gap

This is the piece that's been getting more attention since pensions started disappearing nationwide. Indexed Universal Life (IUL) is a permanent life insurance policy with a cash value component that grows based on a market index (usually the S&P 500) with a floor that protects against losses. In retirement, you can take tax-free loans against the cash value as a supplemental income stream — functioning somewhat like a self-funded personal pension that also includes a death benefit.

IUL is not a replacement for a real pension, and it's not the right tool for everyone. It costs more than term life. It only makes financial sense if you fund it consistently for at least 10 to 15 years. And the value depends heavily on how the policy is structured (caps, participation rates, fees).

But for a public safety worker without access to a defined-benefit pension, used alongside the other three layers, an IUL can be a legitimate part of the retirement plan. An independent advisor will lay it out alongside term life and traditional retirement options — and you choose.

How Much Coverage and Contribution Do You Actually Need?

The honest answer is: it depends on your age, your spouse's income, whether you have kids at home, and what your current debt load looks like. But here's a reasonable starting framework for a 35-year-old public safety worker earning $85,000 with a family:

• Term life insurance: $750,000 to $1,000,000 of 20-year term
• 457(b) or 401(a): Contribute at least enough to capture the full employer match; ideally max it out
• Roth IRA: Maximum allowed each year ($7,000 in 2026)
• Supplemental permanent or IUL: $50,000 to $150,000 death benefit, funded at a level that builds cash value over 20+ years

Run the numbers with an advisor. The point isn't to hit these exact figures — it's to have a coordinated plan instead of hoping the next legislative session restores what was taken away.

What the HB 78 Veto Means If You're Already Close to Retirement

If you're within 5 to 10 years of retirement, here are the moves that matter most right now:

1. Calculate your "retirement income gap" — what you'll have in your DC plan vs. what you'd have had with a pension. Knowing the number is half the fight.
2. Look into purchasing service credit if your plan allows it.
3. Consider an annuity strategy to convert part of your DC balance into guaranteed lifetime income at retirement.
4. Stress-test your plan against bad market years. A drawdown calculator with low or negative returns in years 1-5 of retirement is sobering.
5. Make sure your life insurance and disability coverage will still be in place after you leave the agency — department coverage usually ends or shrinks dramatically at retirement.

FAQ

Will HB 78 come back next session?

The unions backing it have said they intend to push again. Whether the political math changes is uncertain. Either way, your retirement is too important to depend on legislation. Build a plan that works without HB 78. If a pension is later restored, that's upside — not the foundation.

Are firefighters and police hard to insure due to the risk of the job?

Higher-risk than office work, but absolutely insurable. Many carriers actively underwrite public safety occupations. The trick is working with an independent advisor who can shop your file across multiple carriers — different companies treat the same occupation very differently in their underwriting.

Is there special coverage for line-of-duty deaths?

Yes. The federal Public Safety Officers' Benefits (PSOB) program pays a one-time tax-free benefit for line-of-duty deaths, plus education assistance for surviving spouses and children. State and municipal programs add more. This is in addition to, not a replacement for, personal life insurance — and PSOB benefits don't help if you survive but become disabled, or if your death isn't classified as line-of-duty.

Can I use a 457(b) and a Roth IRA in the same year?

Yes. 457(b)s and IRAs have separate contribution limits and can both be funded simultaneously. For public safety workers, doing both is one of the most powerful retirement moves available.

Is IUL really comparable to a pension?

Not exactly. A pension is guaranteed lifetime income backed by the employer (or the state). IUL is a personally owned life insurance policy that can produce supplemental tax-free income through policy loans. It carries policy fees, mortality charges, and depends on how the policy is structured. Used correctly and funded consistently, IUL can produce pension-like supplemental income — but it's one option among several, not a magic bullet. A good advisor will compare IUL to annuities and traditional retirement vehicles and let you choose.

If you're a firefighter, police officer, or public safety worker in Alaska — or anywhere else where pensions are no longer a sure thing — get a free quote and retirement gap analysis from an independent advisor. ShieldPath connects you with advisors who specialize in firefighter and law enforcement families — not captive insurance companies, just honest options.

Call (213) 537-9906 or email hello@shieldpath.org to start the conversation. Free quotes. No pressure. Real answers for the trade you've given your career to.