Wisconsin Coalition for Retirement Security: Possible changes to WRS may have unintended consequences
Strong state pension is the result of consistency, careful plannng
MADISON, WI - The fully- funded WRS is one of the best retirement systems in the world. Yet, some politicians are inexplicably trying to change it.
Senator Duey Stroebel has proposed companion bills to change how benefits are calculated and to arbitrarily raise the retirement age. Perhaps, AFSCME Council 32's new Executive Director, Rick Badger, said it best "these are solutions in search of a problem."
Pension systems can experience unintended consequences when changes are made without thorough study and deliberation. Sen. Stroebel's approach does neither. That raises the question- why tamper with a fully- funded system that that is servicing taxpayers and retirees well. Unfortunately, Senator Stroebel's proposal relies on bumper-sticker slogans, but not the facts.
Fact 1: Wisconsin has some of the lowest pension costs in the US (to workers and tax payers). [i]
Fact 2: The WRS is 100% funded and has been for over a decade. The WRS is projected to be fully funded until at least 2061, and costs to continue funding it are expected to be steady or decline in the coming decades.[ii]
Fact 3: A fraction of WRS participants retire in their first two years of elibility and those that do so receive a reduced benefit (due to "the age reduction factor"), thus ensuring the system stays fully funded. Raising the retirement age is unlikely to impact the system's funding in any way.[iii]
Fact 4: Changing the method of calculating benefits is also unlikely to yield savings, but it may make the WRS resemble a cash balance, defined-contribution style system, which provides less retirement security for the same cost.[iv]
The Wisconsin Retirement System is like a "Swiss watch", it is carefully constructed and changes to one part can cause damage throughout the system, harming taxpayers and future retirees.
The state has many pressing problems that need to be addressed. The fully funded retirement system is not one of them. WCRS and its constituent organizations urge lawmakers to exercise caution and not to make any changes to the WRS unless and until those changes are analyzed from an actuarial perspective.
[i] NASRA, "Issue Brief: State and Local Spending on Public Employee Retirement Systems " February, 2015. 2015 http://www.nasra.org/files/Issue%20Briefs/NASRACostsBrief.pdf
[ii] Wisconsin Department of Employee Trust Funds(ETF), "Study of the Wisconsin Retirement System", June 30, 2012 http://etf.wi.gov/publications/wrs-study.pdf (pages 36-39)
[iii] ETF "2013 Comprehensive Annual Financial Report"http://etf.wi.gov/about/2013-cafr.pdf (page117)
[iv] National Institute on Retirement Security, "Still a Better Bang for the Buck", December, 2014 http://www.nirsonline.org/storage/nirs/documents/Still%20a%20Better%20Bang/bangforbuck_2014.pdf
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