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3/16/2009
Retirement from public sector employment in WI
From the Wisconsin Retirement System’s (WRS) list of Frequently Asked Questions:
What is the earliest age at which I can retire?
All employees other than those in the protective category (police, firefighters, etc.) can retire and receive a retirement benefit at age 55; participants who have protective category service (other than purchased service) can retire at age 50. Though retirement payments can start as early as age 50, payments are reduced if one is younger than the normal retirement age (NRA) for a particular employment category and work less than 30 years (25 years for protective service employees, as police and firefighters).
- Age 53 - Protective occupation participants with at least 25 years of creditable service, including creditable military service.
- Age 54 - Protective occupation participants with less than 25 years of creditable service, including creditable military service.
- Age 62 - Elected officials and state executive retirement plan employees.
- Age 65 - General employees, teachers, and educational support staff.
The maximum monthly benefit is 70% of an employee’s final average earnings for all employment categories except employment in a protective category, wherein the maximum is 65% of final average earnings for protective category employees covered under Social Security (Police) and 85% for protective employees not covered under Social Security (Firefighters).
Here’s the current edition of “Calculating Your Retirement Benefits” – it’s written well, in layman’s terms, but is still complex and a ton of information - everything you ever wanted to know about retiring form a State of Wisconsin public sector job. The sample calculation (p.7 and pretty complex) is for a public employee age 59 with final average monthly earnings of $2,000 (low, by half or more) and 25 years of service. Monthly retirement payments until age 62 are $1,253. After age 62, the same total will apply, except part of it will be paid by Social Security. Unlike most private sector pension plans, WRS payments change (mostly, they increase) based on the investment results of the fixed investment trust, though a pension may never be less than its original amount.
In a March column in Governing magazine. Girard Miller talks about NY City Mayor Michael Bloomberg challenging the
"20 and out" mentality of public safety pension plans that allow police and fire employees to draw lifetime pension benefits when they are barely 40 years old, and expected to live beyond 80. If successful, this effort will help restore sanity and sustainability to public pension plans.
Miller’s suggestions for working toward revisions in public employee retirement plans include:
- Link civilian retirement age to Social Security’s eligibility age.
- Start retiree medical benefits at the Medicare age, encouraging public employees to work until they are eligible for Medicare, currently age 65.
- Redefine a full-service career. Require 30 years of service for civilians and 25 years of service for public safety workers.
- Require actuarial neutrality for early retirements, verifying that reduction factors are correct for those who begin drawing benefits before normal retirement age.
- Require actuarial neutrality as well, for dependent benefits (retirement and medical).
As legislators are wont to do, they will continuously tinker with Wisconsin’s retirement system, most typically adding benefits in small degrees and adding workers as protective category employees. With an eye on controlling costs, Wisconsin voters must ask their legislators to be diligent in not expanding – and perhaps modify to eventually reach the Miller plan, above.
Jo Egelhoff. FoxPolitics.net
COMMENTS
Jo: Miller's suggestions are sound, both philosophically and actuarily. In fact, they are consistent with pension design concepts in the private sector. The big difference, however is that private pension design is to replace 33-35% of pre-retirement income at age 65. My recollection is that during "Tommy's" Administration, Wisconsin's Plan was improved at least three times, and moved way out beyond the private sector. This was demonstrated clearly in the Hewitts Study at the time of the last improvement. A big problem in Wisconsin, is there is no Representative of the Public in this process, ie Unions propose; The Legislature approves; The Governor signs! They're ALL covered under the Plan, so, NO ONE IS LOOKING OUT FOR THE TAXPAYER! (I believe Tommy Thompson is the highest paid Beneficiary under our Wisconsin Plan).
GL Schilling (Mon Mar 16 10:42:35 2009)
If true, the practice of "pushing up" employees in the last 3 years of employee service to their highest allowable incomes, thereby insuring a higher retirement benefit, is amongst the most egregious abuses I have been told. Can anyone verify or disprove this practice?
Richard Parins (Tue Mar 17 12:30:34 2009)
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