Neenah Teachers Sue Over Change in Retirement Benefits
I don’t know if they have a case or not, but I certainly see why they are upset.
For years, Neenah’s teachers enjoyed one of the most generous retirement plans in Wisconsin. Many who were hired in the 1990s could retire at age 55 if they had 15 years with the district and get big stipends on top of their regular state retirement, plus health care coverage until they were eligible for Medicare.
The payment was based on 10 annual payments of one-half the starting teacher salary in the district, which last year was $34,319, or about $170,000. Teachers hired after July 1, 1998, had to work 20 years and reach age 57 to collect eight annual payments. Those hired after 2003 were eligible for less lucrative retirement enhancements.
Even after Act 10, the Neenah Joint School District promised it would keep that benefit, telling teachers it was “cut and pasted” into the new employment handbook directly from prior contracts, according to the teachers.
But in October, the School Board eliminated the long-standing early retirement plan and replaced it with one offering much smaller payments into health reimbursement accounts. The previous retirement benefits cost $5 million a year, and represented an unfunded liability of $185 million over the next 25 years, according to district projections. A similar early retirement plan for administrators was also drastically cut back.
On Tuesday, the board denied a group of 260 teachers’ claim to restore them to the original early retirement deal, meaning they will now file a class-action lawsuit. The suit will seek payments of about $205,000 or $257,000 for each teacher for a total of about $61 million. According to the notice of claim, teachers were induced to join and remain at the district at discounted salaries in reliance on the deferred compensation they would collect at retirement. Faculty attracted by the retirement plan helped Neenah schools earn high rankings in the state and nation, according to the notice.
It was a ridiculous benefit in the first place, but the district did promise it - and then retract it. A word for the wise when it comes to compensation… cash in hand is always more important than promises of cash in the distant future.
Another word to the wise: No legislature can tie the hands of a future legislature. Laws that they make, they can unmake. Contracts may be sacred, but only for their duration.
As for me, the teacher’s unions have overseen an increase in teacher pay, and a decrease in the quality of education. If they lose their cushy jobs, just watch me weep for them. I feel a tear coming any day now.
Posted by .(JavaScript must be enabled to view this email address) on February 24, 2013 at 0030 hrs
If this was a verbal promise then they have no case.
Posted by .(JavaScript must be enabled to view this email address) on February 24, 2013 at 0722 hrs
I have a problem with this. Yes the benefits are outragous, but that was the deal. There are private companies that do this also. They promise 6 or 8 weeks of vacation time after so many years, then when you have put your 20 years in they change the policy to 4 weeks max. When you take a job you compare the benefits from one job to another to make your decision.
They should stick to what they promised.Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 0626 hrs
I have no problem with this. They promised themselves benefits, failed to pay for the benefits because they didn’t want to suffer the economic consequences of doing so, failed to save for the benefits and now want someone else to foot the bill. There’s a lot of that going around these days and more to come.
They had a deal? Not with this generation.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 0758 hrs
Depends…
If we are talking about current employees, future retirees, the district can probably do whatever.
If we are talking about current retirees who fulfilled the terms of a contract to receive a benefit that was then granted, there is a completed contract for a specific benefit. Failing to abide by the terms of that contract would constitute a breach.Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 0956 hrs
So I guess you would have no problem If your life insurance company collects your premuim for 30 years and then says Oh we are going to change the agreement instead of paying $100,000 when you die we have set a max payout of $20,000 so thats all your getting.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1002 hrs
The insurance company, reaper, is forced to accrue assets to offset payments. In addition they are required to use accounting methods that attempt to accurately portray their financial situation. In any event they can in fact go bankrupt and leave policy holders with nothing, Them’s the breaks.
Of course, that’s not what we’re talking about here. What we’re talking about here is a situation where they didn’t collect a premium to cover the expenditure. That would have been too painful. They merely promised themselves the benefit.
It’s a nice microcosm of what we’re experiencing at a national level.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1045 hrs
This is really about contract law. If a contract can be broken for any reason and there are no consequences for the person breaking it then our economic system is doomed. contracts are a legal and binding obligation. It does not matter if it is for insurance or to buy a car from a dealer or to pay back a loan.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1557 hrs
Are you claiming the right to contractually obligate minors and the unborn? They had a contract with themselves.
Bankruptcies and the possibility of nonpayment alter and break contracts every day.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1618 hrs
Who said anything about minors and the unborn? This is about two groups that enter into a negotiation and sign a contract the obligates both sides to provide some form of consideration that the other side does not have a right to. The teachers agree to give their work and the district agrees to provide retirement benefits.
Bankruptcies and the possibility of nonpayment alter and break contracts every day.
True, but there are consequences for those individuals. Here the district and teachers negotiated in good faith and now the district, at least in some cases, seems to be operating not in good faith.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1641 hrs
As ‘Jackson’ noted, an elected body cannot make a promise that is binding on its successor.
Thus a legislature could not change the terms of employment as it formerly existed, but it surely could change the terms going forward. If a legislature (or other elected body) had formerly offered a defined-benefit pension plan it could still switch all current employees to a defined-contribution plan (401k type) going forward.
But if it did so it would still owe current employees the vested present value of that deferred compensation. For example, if you had formerly needed 15 years for full retirement benefits yet to date you had only completed 5, then you’d be owed the deferred compensation for those five years- but your employer would not be obligated to continue the plan going forward.
In any case, we still need to determine (1)what (if any) contractual promises were actually made, and (2)whether the person(s) making them had the authority to do so.
In any case, here’s hoping the lawsuit fails. Why? Because if union-friendly school boards can obligate future school boards to rich benefits, we wind up with a ratchet whereby whenever a union-friendly Board gets elected it can “give away the store,” yet subsequent school boards can never take it back.Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1748 hrs
Who do you suppose is going to be asked to pay that benefit Kris Beaver? The people that voted themselves the benefit or people who were minors and even unborn at the time?
There was no good faith at all by either party. The teachers and the district at the time negotiated a deal to steal the money of future generations. The future has arrived and the future says no.
Posted by .(JavaScript must be enabled to view this email address) on February 25, 2013 at 1804 hrs
“Are you claiming the right to contractually obligate minors and the unborn?”
Yeah, actually government does have the right to do this, no different than we have an obligation not to default on the trillions in debt accrued before us. Otherwise, where does it end? You’re effectively suggesting that government tomorrow can unilaterally rewrite an agreement it signed today because it no longer wishes to honor the financial terms of that agreement.
We might hate the terms of the agreement but once government starts treading down this slippery slope of convenience, it makes it awfully hard for anyone - an employer, a vendor, whoever - to agree to provide a good or service to government in exchange for payment later.
It’s not the teachers’ job to look out for anyone but themselves. To believe otherwise is to misunderstand the nature of a labor negotiation. The school district obligated future taxpayers (which is their legal right as the elected representatives of the taxpayers), and there’s no getting them off the hook. The district’s going to eat it on this one, and then rack up a bunch of legal fees to boot.
Posted by Recess Supervisor on February 25, 2013 at 2156 hrs
No, government doesn’t have the right to do that, RS. Otherwise where does it end? You’re effectively suggesting government can sign an exclusive million year deal with someone to provide everything the government buys in the future.
Government can and should unilaterally rewrite agreements. To argue otherwise is to argue that future generations can legally be enslaved by present generations; that is, deprived of their possessions without their consent.
Posted by .(JavaScript must be enabled to view this email address) on February 26, 2013 at 0641 hrs
There was no good faith at all by either party. The teachers and the district at the time negotiated a deal to steal the money of future generations. The future has arrived and the future says no.
This is the most ridiculous thing I have ever heard. Absolutely stupid. The board and teachers negotiated, in good faith, a two year contract that included the benfits described. Every two years after that the deal was renegotiated. If the language was left in then it was a part of the contract that again was negotiated in good faith. Just because you don’t like unions that does not mean that the contract was not done in good faith. If a contract was actually calling for theft, your words not mine, then it would have been void.
Back to my original point. Union or no union if people or companies are allowed to break contract with out consequence then our system of business is doomed.
BVB
Recess Supervisor is correct and you are wrong. You may not like it but you are wrong.Posted by .(JavaScript must be enabled to view this email address) on February 26, 2013 at 1312 hrs
What do unions have to do with it?
People have a right to alter their government. You cannot usurp that power via a contract with a private entity.
Suppose the district decides to lower its’ taxes and has does not have the money to pay the benefit. What then? Do you contend the contract obliges a tax upon people?
The consequences of government being able to terminate contracts are negligible. Everyone already engages in contracts that are and can be terminated by one party with no consequences. They deal with it.
Posted by .(JavaScript must be enabled to view this email address) on February 26, 2013 at 1347 hrs
BVB,
Read what RS said and then acknowledge that you are incorrect.
We might hate the terms of the agreement but once government starts treading down this slippery slope of convenience, it makes it awfully hard for anyone - an employer, a vendor, whoever - to agree to provide a good or service to government in exchange for payment later.
This is the key statement here.
Then for the fun of it, give an example where contracts of any consequence are broken and there is not a consequence for the person breaking the contract.
Posted by .(JavaScript must be enabled to view this email address) on February 26, 2013 at 1428 hrs
Government is an employer in this instance, no different than a business is an employer. If a business wishes to absolve itself of obligations that have already been incurred, it has a path to do that - it files for bankruptcy. Short of that, it’s on the hook to paid what is owed or to negotiate a mutual settlement with the person holding the obligation.
For a guy who talks such a conservative game, it’s funny how BVBigBro and some of his cohorts are so quick to throw basic tenets of contract law under the bus.
I wonder how taxpayers would feel right now if the federal government issued a release that was titled “IRS Says F@% It: No Refunds For Anyone”? You overpaid and want your money back? Tough beans. You should have adjusted your withholding. But since you didn’t, we unilaterally have the power to adjust the terms of our agreement.
Posted by Recess Supervisor on February 26, 2013 at 1621 hrs
Again Recess is correct, but BVB lets here a snappy comeback or better yet a concrete example of how you are correct.
Posted by .(JavaScript must be enabled to view this email address) on February 26, 2013 at 1640 hrs
The federal government can do precisely that, RS, though we may think it a bad idea.
Government is not a business. It is not subject to any number of laws which must be followed by business for precisely the reason that the public interest should not be co-opted by private interests.
I’ve given you a concrete example, Kris Beaver and RS. Do you believe a contract with a governmental body for some future benefit obligates that body to collect a tax? If not, how do you propose to collect the benefit? If yes, how do you propose to collect?
Posted by .(JavaScript must be enabled to view this email address) on February 27, 2013 at 0847 hrs
It obligates the government to pay the commitment. The mechanism by which government chooses to do so is immaterial. It’s like saying you can pay off your credit card faster by either working more (and earning extra money) or by cutting other areas of your budget (and reallocating that spending to debt payment). Or, as we’ve seen all too often with the federal government, it either prints more money or issues more bonds.
We both agree that government can default, just like a business. Our difference seems to be that you think government can constantly operate in some kind of nebulous middle ground, whereby it can capriciously free itself of incurred obligations at will.
Posted by Recess Supervisor on February 27, 2013 at 1328 hrs
No. It is more like paying your neighbor’s credit card.
Posted by .(JavaScript must be enabled to view this email address) on February 27, 2013 at 1429 hrs
basic tenets of contract law
OK RS, I understand the implied societal agreement, but let’s be honest about the real contract. The contracts between school districts and unions have typically been for two years. While the unions assumed they implied a long term commitment, they didn’t really.
Posted by Charlie Hillman on February 27, 2013 at 1522 hrs
Exactly Charlie. The contracts are negotiated in good faith and should be honored. They can and should be changed with each new negotiation and the changes in economic conditions.
BVB,
RS has explained this to you now several times. Is it sinking in?Posted by .(JavaScript must be enabled to view this email address) on February 27, 2013 at 1643 hrs
Charlie, I hear you. But my understanding is that what we’re talking about is the district attempting to unilaterally change the value of benefits that have already been accrued - or at least, that’s where the legal argument will be focused. Does the agreement to provide compensation (in the form of cash or benefits) at certain levels after retirement constitute deferred compensation, which by definition is earned at the time the work is done?
Of course, Act 10 certainly liberates the district to do just about anything it wants on this front going forward. What it probably does not do, in my opinion, is liberate districts to change things going backward.
Posted by Recess Supervisor on February 27, 2013 at 1854 hrs
You can’t answer the question, can you Kris Beaver or RS?
The feds can print money, but it then loses its’ value. State and local governments have no mechanism that does not eventually involve taxation. A private entity cannot compel taxation. Is it sinking in Kris Beaver?
Government can operate in that nebulous middle ground forever. It can choose to pay whatever bills it feels it should. It fortunately usually doesn’t, and most peopel wouldn’t be stupid enough to continue to voluntarily do business with said government, but don’t confuse that with the inability to do so. We have a federal executive right now contemplating which bills to pay and which not to pay should we again reach a debt limit and it is entirely proper that he do so. And he can operate that way indefinitely.
Posted by .(JavaScript must be enabled to view this email address) on February 27, 2013 at 1903 hrs
I answered your question in #21. Contrary to what most ideologues believe, not liking the answer or disagreeing with the answer doesn’t mean the question wasn’t answered.
Posted by Recess Supervisor on February 28, 2013 at 0915 hrs
BVB,
See comments 18, 21 and 27. Those answer your points completely.
For my part, I will say this again. This is an issue of contract law. There are always consequences if a contract is broken.
You have not answered this question: give an example where contracts of any consequence are broken and there is not a consequence for the person breaking the contract.Do you believe a contract with a governmental body for some future benefit obligates that body to collect a tax?
For the legal duration of the contract, yes or they can borrow the money. Forever and ever, no. RS is correct it does not matter where the government gets the money taxes or borrowing as long as they honor the contract.
Again you may not like these answers, but it does not mean that the question was not answered.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1253 hrs
Finally, you answer the question. You believe that a private contract can compel taxation in the future. That is, you believe a contract today can be used to deny people in the future their natural rights. No, it can’t. You have no means to compel payment of the benefit.
There are a whole bunch of government entities with underfunded liabilities and this is exactly how some of them are going to address them. They are going to simply not pay and continue their operations as before. Get ready for it because it’s coming.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1426 hrs
Here’s one right here for you Kris.
http://heraldbulletin.com/crime/x253548489/Judge-invalidates-part-of-firefighter-contract/print
Note the only justification they needed was “economic need”.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1449 hrs
Did you read the article? It did not fail to fulfill the contract. Only part was voided. Not the entire contract.
As far as comment #29. Yes for the duration of the contract. Contracts are not written forever. They are for a defined amount of time. At the end of the contract the obligation expires or is renegotiated. Seriously, are you that dyed in the wool, brain washed on this topic that you are unwilling to acknowledge simple contract law?
Show some government units that are going to simply not pay for their unfunded liabilities. Most are changing the defined benefit and eliminating the liability rather than not paying.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1458 hrs
Did you read the article? They violated the contract to their hearts content. Government did what it wanted with the contract and there were no consequences because you cannot contract away citizens rights, including their right to determine their level of taxation and debt. If they had decided to layoff 10 more people, or all of them, they would have the right to do that, too.
A government contract is what the people, that is, the government, decides it is.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1734 hrs
Circuit Court Judge Dennis Carroll on Tuesday invalidated part of a union contract
They didn’t violate the contract they had part of it voided.
Later he noted:
Carroll did not side with the city completely.He upheld binding arbitration requirements in the contract. He also ruled that the agreement’s parity provision, which says if a raise negotiated with another city union is more than one granted firefighters, then they, too, will be entitled to the higher raise.
One example of part of the contract that was upheld and is still a valid contract.
The bottom line in your example is that if the city had violated the entire contract the consequences would have been a long legal battle and in the end likely the city would have had to make employees that were harmed whole again in whatever way the court determined.
Honestly, I have read your comments on this blog before and thought you were relatively articulate, well read and thought out your positions. Clearly i was incorrect. As incorrect as you have been on this topic. RS has answered your points and you will not see anything but your preconceived ideas. Sad.
Posted by .(JavaScript must be enabled to view this email address) on February 28, 2013 at 1826 hrs
Now that we’ve gone all-in on BVB’s usual “government end times” nonsense, I don’t have much use in continuing this discussion. No surprise, I guess. Give it enough time and it usually ends up there. Pardon me if I’m not out stocking up on bottled water and canned goods.
I would, however, point out in terms of that article from Indiana that BVB is still talking about apples and oranges. Anderson deals with staffing levels on a forward-looking basis. The Neenah case, depending on how the court sees it, is dealing with an accrued benefit.
So on the one hand, we’re talking about eliminating an employee’s ability to earn future compensation in a particular job. On the other hand, we’re talking (potentially) about the refusal to make good on compensation that an employee has already accrued for work already performed. I will hazard to say that, absent a bankruptcy filing by the affected unit of government, a court is going to view those two things very, very differently.
Posted by Recess Supervisor on March 01, 2013 at 0004 hrs
Competent ideas imo, lets see how things change in the next few years though!
Posted by Masini de Spalat on March 04, 2013 at 0911 hrs
wow very nice and so informative post and all the comments are awesome. i love to read it. retirement have such are good benefits.
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