The Wisconsin Retirement System is the envy of retired people or those nearing the close of their working career.
The ballyhoo over employees making contributions to the plan who were previously exempted has not affected the plan’s performance or retirement policy per se, with two obvious exceptions.
Many public employees – especially teachers – opted to retire early, increasing the number of persons sharing the money pool from which pensions are drawn.
The continued erratic economy has affected those collecting their pension under the variable plan which is tied to performance of the stock market – much like a 401K plan is for individuals.
One of the proposals considered in a current review of the WRS includes a retirement system more closely resembling a 401k. That study has a June 30 deadline.
Recent statistics on the system show:
• $79 billion in the WRS fund as of December 2010.
• 1,469 government entities (state, school, counties and municipalities) and 267,293 active employees participating as of Dec. 31, 2009. In total there are about 566,000 participants, including retirees.
• The average annual payout for a public worker was $24,488 in 2009.
Retirement age for full benefits varies from 65 for most employees to 62 for elected officials and executive employees. Police and firefighters are eligible at 53 or 54.
Investments account for much of the pension value but annual contributions maintain its viability. In 2009, the total employee-required contributions, paid by employers, amounted to $627 million. Employer contributions totaled $699 million. Another $101 million in adjustment were required from employees.
Retiring employees have two options entering the plan. The variable fund with the pension payout determined year to year and the core fund with the pension set at a fixed level of income.
Because of my job, I have many friends who worked in the public sector as teachers and various municipal and county positions. The anecdotal information below has no attribution because it is from personal conversations not for a story.
Two friends of nearly 50 years have been in the WRS for more than 20 years. Their retirement benefit has taken a hit in the last three years because of their opting for the variable plan which is heavily invested in the stock market.
The market has been erratic since 2008 when an overall economic crash began the continuing economic problem.
One of the friends said, recently, that his monthly stipend from WRS was down a couple hundred dollars a month because of the loss in value of the variable fund.
“It still is better than what most people get for pensions,” he said.
Some of the pension issues date back to 1999 when participation in the retirement, pensions and rules were approved by the state Legislature in response to proposals by Gov. Tommy Thompson. Thompson and legislators were among those enjoying larger pensions.
These changes resulted in schools, counties and municipalities each having $5.5 billion in unfunded liabilities. Local officials settled most accounts with short term, low interest bonds.
Thompson made use of the changes during his final term as governor appointing several former colleagues in the legislature to administrative jobs at a salary two or three times more than what they were getting.
Politicians covet any money they see on the balance sheet such as the WRS fund of $79 billion. The WRS is the 9th largest retirement plan in the country and 30th largest in the world and is virtually 100% funded.
Thompson tapped the fund for $220 million in 1999 to fill a hole in the state budget, but that action was ruled illegal by the State Supreme Court, which passed on ruling on the pension changes.
Only adjustments that should be considered in the June report are maintaining the current pension plan and to ensure the viability of WRS. This would include increasing the amount of contributions of employees in their own pension plan.
It is a system that works provided politicians keep their hands off and not meddle with constituent’s futures.
Excluding elected officials – especially at the state level where the rules are made – is the only change that I would make.
Politicians have evolved a part time representative position into a professional, full time , full benefit job.
We are all paying a price for it.