Tag Archives: Pension

Does Governor Scott Walker have a Smoking Gun buried in the Budget Bill?

Yesterday was an incredible day for news, and my head is still spinning. And some of the news content has given me a theory, which might explain Governor Scott Walker‘s stubbornness about refusing to  yield on the collective bargaining issue.  It is only a theory now, but if I am right – then Walker may have stepped on the proverbial bee hive.  The nuggets of information in the news content:

1. Huffington Post blogger – Zach Carter posted something interesting about the financial health of the Wisconsin Retirement System (WRS)  and its ability to pay current and future retirement benefits.

2. Zach also referenced a report prepared by the The Pew Center on the States.

3.  The main point of the two articles, was that the Wisconsin Retirement System is very close to being 100% funded for current and future retirement benefits.

These  facts, caused me to ask “Does the Wisconsin retirement plan have excess assets that could be re-captured by the state government if they terminate the plan and replace it with a different type of retirement plan?

Time for a little history lesson. Back in the late 1980’s to early 1990’s, a lot of American companies were still providing retirement benefits for their employees with plans that provided annuity income when the employee retired. The IRS and Dept. of Labor considered this type of plan to be a safer and more valuable benefit than account balance plans. It reduced the risk to employees of fluctuations in the stock market, because retirees are guaranteed a monthly or annual income, and the retirement benefits are not affected by market losses or gains.

But, a  significant percentage of these plans were over funded back then, which made these plans targets for employers wanting to recoup the excess assets. And the recovered excess assets were significant – many times it was in the millions of dollars. The only way an employer could recover these assets was through terminating the plan, paying out the accrued benefits to the employers through lump sums distributions or purchasing deferred annuities. Once the plan had paid out the benefits accrued by employees – the remaining assets would revert to the employer (i.e. the plan sponsor) and would flow back to the corporate balance sheet. The excess assets could not go to the employees, it was prohibited because of the way these plans are legally structured.

Think Gordon Gekko and the first Wall Street movie. Most of the terminated plans were replaced with less expensive 401k plans, mostly funded through employee contributions. And the responsibility for managing the growth of the these funds were left to the employee.

I think we all know how that worked out, through the dot com bubble, 9/11 and the 2008 financial crisis.

On to Page Three of Governor Walker’s Budget Bill, third paragraph from the top, there is very interesting language that leads to the very important question for Governor Walker. The paragraph mandates that a study of the existing Wisconsin Retirement System be performed and it must “specifically address establishing a defined contribution plan as an option for WRS participating employees” and the deadline for completing this study is June 30, 2012. I don’t think that Walker would be adding  retirement benefits for workers  – so I am wondering if the Republican Governors that are trying to get rid of collective bargaining of retirement benefits, so that they can terminate the existing plans and recover excess assets for their state balance sheets.

If Governor Walker’s bill passes, and collective bargaining of retirement benefits is eliminated, then next year Governor Walker can decide it is in Wisconsin’s best interests to get rid of the existing plan and replace it with something less valuable for the employees. And the employees would have no say and no one can keep Walker from raiding your  retirement savings.

Again, hard-working Americans are getting the short end of the stick. Do you think this is the American Way? We need to ask Governor Walker if he is planning to get rid of the existing Wisconsin Retirement  System and raid your retirement plan!

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Filed under Attacks on Unions Collective Bargaining, Collective Bargaining, Politics, Republicans, Unions

Governor Walker’s designs on the Union Employees Retirement Plans

Found a great document on the Wisconsin State Legislature Website.  It has been hard to obtain information on Governor Scott Walker‘s proposals, and requires a bit of research.  My first post on this issue was about my theory that Governor Walker planned to raid the retirement plans for the union employees.

On the Wisconsin State Legislature Website, I found the Fiscal Estimate for the Budget Repair Bill, also known As Wisconsin Bill AB 11.  Under this bill, the employees contribution to their Pension Plan are increased, to 50% of the actuarial contribution as approved by The Employee Trust Funds Board. Here is the exact language from the Governor Walker’s Bill:

Currently, employer and employee required contributions, and the earnings on these contributions, fund the cost of providing retirement annuities to all public employees who are covered under the Wisconsin Retirement System (WRS).Employer required and employee required contribution rates are set on an annual basis. This bill provides that the employee required contribution rate for general participating employees and for elected and executive participating employees must equal one−half of all actuarially required contributions, as determined by the Employee Trust Funds Board. For protective occupation employees, the bill provides that the employee required contribution rate must equal the percentage of earnings paid by general participating employees.

So, the contribution cost is to be shared 50-50 between the employer and the employees.  The employee cost is supposed to be 5.0%.  The 8 page Fiscal Estimate Narrative states the following regarding the employer contribution to the Pension Plans:

The bill increases the employee’s share of costs for pension and health insurance benefits, brings the retirement benefit calculations for elected officials, executives and appointed employees in line with general employees and teachers.  It also limits collective bargaining for certain public employees to base wages, requires union certification annually, prohibits employer collection of union dues, limits contracts to one year periods,and eliminates collective bargaining for the University of Wisconsin Hospitals and Clinics Authority. The Bill repeals collective bargaining for University of Wisconsin System faculty & academic staff,  childcare and home health care workers.

The bill repeals the University of Wisconsin Hospitals and Clinics Board and eliminates the estimated 2,600 FTE state positions in the clerical, blue collar, trades, security and public safety and technical collective bargaining units. Incumbents in those positions are transferred to the authority of University of Wisconsin Hospitals and Clinic. Estimates of state agency employee compensation savings for fiscal year 2010-11 are based on data from DOA central payroll and UW System payroll. Health insurance premiums are paid two months in advance for central payroll agencies and one month in advance for UW System payroll; the increase in employee contributions will be effective  one month after passage (two months for UW System payroll). The bill directs the Department of Administration to lapse $27,891.400 from GPR and PR appropriations to the general fund related to these savings. The bill also requires that $1,908,600 be lapsed from appropriations to the Courts, Legislature and Governor related to these savings. See attached technical memo for furtherinformation.Estimates of municipal, county and school district compensation savings are based on data from the Department of Employee Trust Funds (ETF) Comprehensive Annual Financial Report (CAFR) for 2009. The proposed 50% employee share of annual Wisconsin retirement system costs (estimated at 11.6% of payroll in calendar year 2011) was applied against covered payroll provided in the ETF 2009 CAFA. For Milwaukee County, savings from employee contributions are based on data from the Milwaukee County CAFR for 2009.For the City of Milwaukee, savings from employee contributions is based on the City of Milwaukee CAFR for 2009. Estimates for municipalities and counties were adjusted to exclude local law enforcement and fire personnel costs. Estimates for state government were adjusted to remove State Patrol troopers and inspectors (see attached technical memo for further information).The bill requires the group insurance board to implement measures, including health risk assessments,wellness programs and employee co-pays, to reduce state employee health insurance cost inflation by 5%,beginning in 2012. Reserves in the health insurance and pharmacy purchasing programs that are in excess of industry standards must be used to reduce premium costs during 2011.

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Filed under Collective Bargaining, Conservatives, Democrats, GOP, Politics, Unions