Thompson Will Sign Pension Improvement bill

Update: The governor will sign the pension bill in a ceremony at 3:30 p.m. today (Thursday, December 16) at the AFSCME offices in Madison.

Gov. Thompson will sign the 1999 pension improvement bill, his press secretary said Thursday (December 2, 1999).

Press Secretary Darrin Schmitz confirmed the governor will sign the highly anticipated legislation within the next few weeks. He will sign the bill as is, with no vetoes, Schmitz said.

The bill has been on the governor's desk since it passed the Legislature in early October. Thompson's staff have been reviewing financial and legal issues surrounding the bill, and thousands of people have been anxiously awaiting his decision. Hundreds of WEAC members have contacted the governor's office by e-mail, letter and telephone urging him to sign the bill.

The legislation is expected to be challenged in court. The bill itself urges the Wisconsin Supreme Court to review any constitutional questions before the law is implemented.

Current and future retirees stand to reap big benefits from the measure (AB-495).

Increases formula factor

For most general employees (almost all WEAC members) the bill increases the formula factor from 1.6% to 1.765% for all service prior to January 1, 2000. This will result in an increase of more than 10% in initial pension calculations.

For service on or after January 1, 2000, the formula factor will revert to 1.6%. You do not need to retire before January 1 to receive the higher credit for prior service. The higher value is maintained in your account.

Repeals earnings cap

The measure also repeals the 5% earnings cap on money purchase accounts. All participants hired on or after January 1, 1982, have had their money purchase accounts fixed at 5% per year. The bill does not, however, change this calculation for years of service from January 1, 1982, until the effective date of AB-495.

Reopens Variable Fund

The Variable Fund will reopen on January 1, 2001. The Variable Fund has been closed to new participants since April 30, 1980. All participants will have a one-time election during 2001 and will be able to allocate up to 50% of future contributions to the Variable Trust starting January 1, 2001. No rollovers from existing accounts will be allowed. The Variable Trust is 100% invested in stocks, while the Fixed Trust is invested approximately 60% in stocks and 40% in bonds, cash and real estate. Participants will also be able to make additional contributions to the Variable Trust.

Changes death benefit

AB-495 eliminates the requirement that a beneficiary must be a spouse or dependent child in order to receive a full death benefit. From the effective date of AB-495, any beneficiary will receive the full death benefit.

Benefits current retirees

The bill benefits people who have already retired by providing an enhanced dividend adjustment. The Department of Employee Trust Funds Board (ETF) makes a yearly adjustment to dividends. Next year, retirees will receive their normal adjustment plus their 40% share of the transfer of dollars in this bill. The media has speculated this could mean as much as a 15% dividend adjustment for retirees next year.

Maintains integrity of system

In early November, Thompson received a comprehensive actuarial study that indicated the measure is financially sound and will not threaten the integrity of the Wisconsin Retirement System. The improvements are funded by cashing in $4 billion in stock market gains.

Posted December 2, 1999