Report warns against changes to Wisconsin Retirement System
Post by Emily Mills on 7/2/2012 12:00pm
The Wisconsin Retirement System is fully funded and changes should not be made to it at any time in the near future, reads a newly released report.
The study, commissioned by Gov. Scott Walker as part of Act 32, was conducted jointly by the Department of Administration, the Department of Employee Trust Funds, and the Office of State Employment Relations - with help from independent consulting actuary firm Gabriel, Roeder, and Smith.
Walker and the Republican-led Legislature last year required that a report fully examine the viability of the finances and structure of the WRS, including two proposed changes: a 401(k) option, and giving state and local workers the option of not paying into the system at all.
The report strongly cautioned against both changes: "Analysis included in this study from actuaries, legal experts, financial experts, and information from similar studies conducted in other states show that there are significant issues for both study items in terms of the actual benefit provided and the potential for negative effects on the administrative costs, funding, long term investment strategy, contribution rates, and individual benefits."
Allowing employees to opt-out of the system entirely raised concerns about IRS tax qualification issues.
A Pew Center study from earlier this year showed that Wisconsin's pension system was the only one in the country that was fully funded.
The report's Executive Summary also explained that implementing a 401(k) style plan would likely result in higher costs for both employees and administrators, while providing decreased benefits.
Both proposed changes would also require that employees purchase additional death and disability benefits prior to retirement in order to receive benefits equal to the current WRS plan.
"Neither an optional (defined contribution) plan nor an opt-out of employee contributions should be implemented in Wisconsin at this time," the report states.
In a letter at the beginning of the report DOA Secretary Mike Huebsch states a commitment to ongoing studies of the WRS for any future problems or changes that might need to be made.
"Wisconsin does not operate in a labor bubble," writes Huebsch. "Taxpayers deserve to have the best and hardest working employees working for them. The state employee workforce of the 21st century may be more attentive to the portability of benefits and freedom offered by other retirement options. We need to be aware of the competition for an excellent workforce from other public and private employers. We should regularly review our retirement system to be certain we provide benefits that serve the taxpayers as well as attract and maintain a high quality workforce."
Emily Mills is Editor-At-Large for Dane101, as well as Editor of Our Lives Magazine. She is also a freelance writer, photographer, actor, and musician (drummer and singer in local band Little Red Wolf). Originally from several states up and down the Midwest Emily has called Madison home since 2000. Contact her at