Protecting the WRS Fighting for Retirement Security for All Workers

Adapted from Susan McMurray and Keith Roberts

WAW September 22, 2012

Not the full pension presentation

The glowing WRS study

Right Wingers Foiled, now regrouping

What your union is doing

Sen. Dave Hansen’s retirement security legislation

Outline of remarks

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?

Active Employees: 266,629 Annuitants 155,775 Inactive Employees 149,815

Total 572,219

Two Kinds of Pensions

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

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

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 pensions to become Defined Contribution Plans.

Wisconsin Employee Pension Contributions

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?

The ALEC Business/Industry co-chair for Wisconsin is Lobbyist Amy Boyer.

Some of her clients are: Koch Industries Walmart Xcel Energy

WRS Study Issues

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

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! 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.

Teresa. Ghilarducci, Chair of Economic Policy Analysis,

New School for Social Research

“Given the current financial health and unique risk-sharing 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 pension study findings:

some good news, for a change!

The “solid foundation upon which the WRS has been built means it is well-positioned to fulfill its intended purposes long into the future”

The ETF study also said:

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

Red Alert!

They’ll have to build a case for the need for “reform”

How will they try to dismantle one of the best run pension systems in the United States?

They can’t claim the WRS is underfunded!

In Rhode Island, Illinois, California and other places - pensions have been underfunded

Red Alert!

“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

They’re already making the case for pension and WRS

reforms

“we cannot afford the government we have” ◦ Lies

“liberals must see the light on smaller government” ◦ Rhetoric

“Public workers are the ones who are rich”

◦ Madison Isthmus, June 2012

Quietly building a case for pension “reform”

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…with misleading, inflammatory

stories

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)

Setting the stage: geeky policy arguments

GASB 0r Government Accounting Standards Board new rules for state and local governments.

If applied here, WRS would look less than fully funded, but still good: from nearly 100% fully funded to 93.9%

Unclear whether Wisconsin will adopt GASB but some zealots in the legislature may push it

Lobbing more geeky arguments

Attacks will come on many fronts

The right-wing already has started

Letters to the editor, columns, think tank pieces

Bottom Line: Be Prepared !!

AFSCME, other unions formed the “Wisconsin Coalition for Retirement Security”

Two goals: Protect the WRS, make retirement security a reality for all

Working with local grassroots coalitions

Yes, more pension presentations!

What are we doing about it?

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 we’re doing: setting up grassroots coalition

meetings

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

What your union is doing to protect your pension

and the WRS:

Don’t dismantle the world class WRS: create a dialogue, and press for a society where every worker has retirement security!

Create a parallel, sister pension plan for workers in the private sector

Working with Green Bay Democratic Senator Dave Hansen on legislation

We’re shifting the debate!

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!

Retirement security for EVERYONE

We need strong pensions to keep the best workforce

Next legislative session starts Jan 7, 2013

State of the State speech – third Tuesday in January

Budget address – third Tuesday in February

Budget deliberations – March thru June

Timeline

Higher pension contributions - driven by actuarial projections (from 5.9% to 6.4-6.85%) – recommended by ETF

Possibly tinker with pension contributions –politically driven increases

Possible raise the age of retirement (55 to 59.5, as suggested in 2005 AB 361)

So what proposals might we expect in 2013?