My column for the West Bend Daily News is online. Here it is:
State Sen. Duey Stroebel, R-Saukville, is planning to propose two changes to the Wisconsin Retirement System to help keep it solvent for years to come. Although some of the public employee union bosses are already grumbling, Stroebel’s proposed reforms make imminent sense.
The WRS is the primary retirement system for most of Wisconsin’s state and local government employees. It is funded by a public employee trust fund with the stated purpose of “promoting economy and efficiency in public service by facilitating the attraction and retention of competent employees, by enhancing public morale, by providing for the orderly and humane departure from service of employees no longer able to perform their duties effectively …” In other words, the WRS is an employee benefit designed to benefit the citizens by attracting and retaining good employees. It is not a right and it is not immune from modification as the citizens deem necessary and prudent.
The first change that Stroebel is proposing is to increase the early retirement age by two years. Currently, most public employees can retire with partial benefits beginning at the age of 55, while police and firefighters can do so at the age of 50. Stroebel would increase the minimum ages to 57 and 52, respectively. The age to receive full retirement benefits would be left unchanged at 65.
For some perspective, the retirement age for the WRS has not been adjusted for at least 34 years, while the average life expectancy for Americans has risen to almost 79 years old. That means that the statistical average retiree on the WRS could receive early retirement benefits for 24 years after having worked as little as 10 years. Even if the minimum age required to be eligible for this benefit is raised by two years, it is still an incredibly generous benefit as compared to what is available in the general employment marketplace and still fits the mission to help attract and retain good employees.
But more study is needed before arbitrarily raising the age for early retirement. When an older employee retires, it makes room for a younger, less-expensive employee to get a job, thus leaving the taxpayers paying for the retiree and the less-expensive employee. But older employees are also more likely to become injured or disabled, thus increasing the costs for disability and other expenses. Employee Trust Fund staff has also stated that the costs for the reduced benefits paid to early retirees are not fully covered.
The actuaries and accountants should spend some time analyzing Stroebel’s proposal to see if the taxpayers would actually benefit from raising the eligibility age for early retirement before the legislature votes on it. I suspect the taxpayers would benefit, but there is time to make sure.
The second change that Stroebel is proposing is simple and should be passed forthwith. Under current law, a retiree’s retirement benefit is calculated using the three highest years of salary. Stroebel’s proposal would change it to the five highest years of salary.
The problem Stroebel is seeking to mitigate is where public employees manipulate the system to balloon their pension payouts. For decades, in a “take care of our own” system, some public employees would be moved to a highly paid job when they were within a couple years of retirement age in order to increase the retirement payouts. By lengthening the period used for the calculation to five years, it dissuades this behavior and allows for a more-accurate picture of an employee’s compensation level when calculating retirement benefits.
The protectors of the status quo are already ramping up their rhetoric opposing these proposals, claiming they are an attack on public employees. Nothing could be further from the truth. The retirement benefits offered to public employees are generous and will remain generous if these changes are enacted. Continually adjusting employee benefits to reflect the realities of the world we live in today is the duty of our elected officials.
Frankly, Republicans should scrap the entire public employee pension plan and replace it with a defined contribution plan like most other American employees have, but Wisconsin is not yet progressive enough for such positive reforms.