A much-anticipated report on the Wisconsin Retirement System cautions that making major changes to the highly rated fund could create greater costs for taxpayers while undermining benefits for hundreds of thousands of current and future retirees.
Authored jointly by Walker administration appointees and the semi-autonomous Department of Employee Trust Funds, the report released Monday morning warns against creating two new alternatives for public sector workers.
Gov. Scott Walker and the Republican-led Legislature last year mandated the study of system finances and structure, including the possible addition of a 401(k)-type option and the option allowing state and local workers to stop paying into the system.
Extensive actuarial studies over the last year indicate that either option would be costly and inefficient, while posing legal problems, according to the report, delivered to the Legislature's powerful budget committee Monday morning.
So what's the response?
Huebsch pointed out a passage in the report pointing out that a defined contribution alternative would decrease risk for taxpayers because it would not guarantee a minimum benefit.
"The state will continue to look at potential options for reforming the current system because the work force of the future may not look like our current work force," Huebsch said.
Leaders of the Legislature's finance committee, Rep. Robin Vos, R-Rochester, and Sen. Alberta Darling, R-River Hills, issued a statement lauding the pension system strengths:
"This review is extremely helpful as we begin to work on the next state budget and continue to make sure our retirement system is fair to the taxpayer and competitive in the global marketplace."
And worst of all...
Earlier this year, Rep. Pat Strachota, R-West Bend, sponsored a bill that would have opened the door to 401(k) option for new hires that she said could make Wisconsin universities more attractive to top academic talent...
Strachota's bill failed to gain support, but she has said she hopes to revive it in the next legislative session.
Someone should start by informing Rep. Strachota that a employee that is covered by WRS but isn't eligible for an annuity is still eligible for a retirement benefit at age 55, and for the vast majority of employees is the equivalent of the value of the employer and employee contributions, plus interest. Unless one is hell bent on self-directing their retirement account, there are no portability issues. The money doesn't go anywhere. There are vesting issues now for new employees - they must spend a minimum of five years in WRS to receive the employer contribution - but those are issues Strachota helped to create by supporting Act 10 and Act 32.
Wisconsin doesn't have a pension problem like other states because, to their credit, Wisconsin politicians have always been smart enough to fully fund the system and, unlike Illinois, never borrowed money to make the state's contributions. Wisconsin also allows retirement benefits to decrease to correct for the market's bad years, which keeps the system from overpaying retirees when the market dips.
It's a good system. Let's see if Wisconsin Republicans are smart enough to allow facts to trump their own blind ideology.