Protecting the WRS
Fighting for Retirement
Security for All Workers
Adapted from Susan McMurray and Keith
Roberts
WAW September 22, 2012
Outline of remarks
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Not the full pension presentation
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The glowing WRS study
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Right Wingers Foiled, now regrouping
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What your union is doing
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Sen. Dave Hansen’s retirement security legislation
Who participates in Wisconsin Public Pensions?
Most full-time employees of state or local
government, the University of Wisconsin, the
Technical Colleges and school systems are covered by
the Wisconsin state retirement system.
How Many People Participate?
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Active Employees:
266,629
Annuitants
155,775
Inactive Employees
Total
572,219
149,815
Two Kinds of Pensions
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Defined Benefit: The benefit is determined by a
formula that usually involves salary, years of
employment and an accrual rate multiplier
Defined Contribution: The benefit is
determined by using the money, plus interest,
that was contributed to either provide a lump
sum or purchase an annuity. 401K's are often
used for this purpose.
Two Basic Pension Plans
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Defined Benefit Plan: The benefit upon retirement is
determined by a set formula. The formula is usually a
combination of years of service, average salary for last
3 years and an accrual rate.
Example: someone who has worked 20 years, is 65
years old and has an average salary of $50,000 would
receive the following annual pension
20 X 50,000 X 1.6% = $16,000
Defined Contribution Plan: The money that has
accumulated will be used to purchase an annuity
Wisconsin Plan is a Defined Benefit Plan
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The Wisconsin Public Employees Retirement Plan is a
Defined Benefit Plan (as are most Public Employee plans).
Most Private Sector Employers have moved their pension
plans from Defined Benefit Plans to Defined Contribution
plans.
The American Legislative Exchange Council (ALEC) has
encouraged legislators to require Public Employee pension
to become Defined Contribution Plans.
Wisconsin Employee Pension
Contributions
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General employees originally contributed ½ of the
pension contribution.
During the 1970's union contracts requested that
employers pay the employee contribution in lieu of
raises in salary.
In most cases, the employers agreed and the total
pension contribution became part of the
compensation package.
Changing the Wisconsin Plan?
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The ALEC Business/Industry co-chair for Wisconsin is
Lobbyist Amy Boyer.
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Some of her clients are:
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Koch Industries
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Walmart
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Xcel Energy
WRS Study Issues
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Act 32 The study shall address the following issues:
Establishing a defined contribution plan as an option for
participating employees.
Permitting employees to NOT make employee required
contributions.
Providing Choice Dismantles the WRS
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Giving employees the option to not participate
reduces the number of potential annuitants and
reduces the size of the principal that generates
income for the system.
How does this hurt you as a current retiree?
The WRS is an outstanding and sustainable system
because it adjusts the contribution and the payout
each year based upon the size of the principal and the
amount of interest generated.
Bad Deal for Taxpayers!
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Defined Benefit plans are better deals than 401(k)
plans for taxpayers because they cost less, attract &
retain suitable workers, and help stabilize the
economy.
A traditional pension plan yields more benefits than a
401(k) plan because 401(k) management and
investment fees are three times higher.
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Teresa. Ghilarducci, Chair of Economic Policy Analysis,
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New School for Social Research
The pension study findings:
some good news, for a change!
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“Given the current financial health and unique risksharing features of the Wisconsin Retirement
System, neither an optional DC (defined
contribution) nor an opt-out of employee
contributions should be implemented at this time.”
-Wisconsin Department of Employee Trust Funds (ETF), July
1, 2012 report on the Wisconsin Retirement System (WRS)
The ETF study also said:
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The “solid foundation upon which the WRS has
been built means it is well-positioned to fulfill its
intended purposes long into the future”
Dark Cloud
We will “continue to monitor” and “continue to look at
options for reforming the current system” and “…a 21st
century workforce may prefer portability of benefits and
freedom offered by other retirement plans”
-Mike Huebsch
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Red Alert!
Red Alert!
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They’ll have to build a case for the need for
“reform”
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How will they try to dismantle one of the best run
pension systems in the United States?
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They can’t claim the WRS is underfunded!
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In Rhode Island, Illinois, California and other places
- pensions have been underfunded
They’re already making the case
for pension and WRS reforms
“government actuaries” grossly underestimate the
cost of the pension system, and that the “true cost”
of the pension system is two or three times what
you’re paying.
-May 30, 2012 Milwaukee Journal Sentinel
column by the Heritage Foundation policy analyst
Quietly building a case for pension
“reform”
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“we cannot afford the government we have”
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“liberals must see the light on smaller government”
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Lies
Rhetoric
“Public workers are the ones who are rich”
◦
Madison Isthmus, June 2012
Setting the stage…with
misleading, inflammatory
stories
Trying to stir up trouble by writing “news” stories
about SWIB investment staff bonuses while retiree
pensions are cut in 2012
-Wisconsin Reporter, July 12, 2012
Setting the stage: geeky policy
arguments
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may involve advocating for new accounting
methods, such as GAAP which would treat long
term liabilities as if they were due now (2011 AJR
100)
Lobbing more geeky arguments
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GASB 0r Government Accounting Standards Board
new rules for state and local governments.
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If applied here, WRS would look less than fully
funded, but still good: from nearly 100% fully
funded to 93.9%
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Unclear whether Wisconsin will adopt GASB but
some zealots in the legislature may push it
Bottom Line: Be Prepared !!
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Attacks will come on many fronts
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The right-wing already has started
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Letters to the editor, columns, think tank pieces
What are we doing about it?
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AFSCME, other unions formed the “Wisconsin
Coalition for Retirement Security”
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Two goals: Protect the WRS, make retirement
security a reality for all
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Working with local grassroots coalitions
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Yes, more pension presentations!
What we’re doing: setting up
grassroots coalition meetings
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Sept 12 – Pardeeville, Portage
Sept 18 – Janesville
Sept 20 - Milwaukee
Sept 26 – Richland Center
Oct 5- AFSCME Retirees Convention
Oct 10 – Menasha/ Fox Valley
Oct 11 – Stevens Point
Oct 15 – Rhinelander
Oct 16 – Menomonie
Oct 18 – Madison
Green Bay, LaCrosse, Eau Claire, other communities – dates TBD
What your union is doing to
protect your pension and the
WRS:
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Hired a campaign manager
Grant from the National Public Pension Coalition
Editorial Board visits
Lobbying
Preparing “Pensions 101” online course
See wiafscme.org “Protecting your pension” tab
We’re shifting the debate!
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Don’t dismantle the world class WRS: create a dialogue,
and press for a society where every worker has retirement
security!
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Create a parallel, sister pension plan for workers in the
private sector
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Working with Green Bay Democratic Senator Dave
Hansen on legislation
Retirement security for
EVERYONE
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Best defense for the WRS, bring everyone up!
AFSCME’s founders, including Roy Kubista, helped
build the WRS
It is part of our AFSCME heritage!
We need strong pensions to keep the best workforce
Timeline
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Next legislative session starts Jan 7, 2013
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State of the State speech – third Tuesday in January
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Budget address – third Tuesday in February
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Budget deliberations – March thru June
So what proposals might we
expect in 2013?
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Higher pension contributions - driven by actuarial
projections (from 5.9% to 6.4-6.85%) –
recommended by ETF
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Possibly tinker with pension contributions –
politically driven increases
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Possible raise the age of retirement (55 to 59.5, as
suggested in 2005 AB 361)