Says Gov. Scott Walker is "openly" backing a move to abolish the state retirement system and convert it to a 401(k)-style plan that will reduce pensions "by at least a third" for current and retired public employees
Wisconsin public employees, already feeling bruised from past battles, now fear Gov. Scott Walker is planning to strip away their guaranteed pension benefits. A chain email that has rapidly been making the rounds among Democrats and public employees claims Walker is "openly" backing a move to abolish the Wisconsin Retirement System in favor of a system that will cut pensions. The retirement system has 430,000 members, including retired and active teachers, state and municipal employees. So that’s a lot of potential interest in the topic. We have received a dozen or more requests to check it out. Here are some of the key points from the chain email, including its tortured syntax: "Walker is saying that after he wins the recall election, he plans to push thru the legislature a plan to abolish the state retirement system and convert everyone to 401 K which will reduce our pensions by at least a third," the email says. "Tell everybody you know, included those already retired, because if Walker wins we are all in big trouble…. This is not a rumor, he is openly talking about it in Madison, it just isn't being publicized. Remember how nobody thought he would do anything to the union." The email is built around its own contradiction: Walker is "openly talking about it" yet "it just isn’t being publicized." It’s just one tack taken by those claiming Walker is out to gut the pension system. More than 32,000 people have signed a Move.On.org-sponsored online petition that opposes an alleged Walker plan to "radically alter" the retirement system. And the state teachers union is organizing a March 1, 2012 meeting on what it what it termed Walker’s plan to "seriously undermine" retirement security. "If you think that you are safe because you are retired, THINK AGAIN," says a flier from the Wisconsin Education Association Council. The concerns did not develop out of thin air. They date to early 2011, after Walker’s budget repair bill called for a study of the 401(k)-style concept. That study was later approved in the 2011-2012 budget. The budget calls for a study to be completed by June 30, 2012 of "establishing a defined contribution plan as an option for participating employees." "Defined contribution" refers to a 401(k)-style concept. (A second study topic is allowing employees to opt out of making contributions). The study comes after last year’s changes that required most public employees to contribute 5.8 percent of their pay toward their pension. Walker's administration, in response to the growing public profile of the issue, sent a letter to all WRS participants on Feb. 24, 2012 outlining the study's rationale. How does the pension system work? The current WRS is a modified version of a "defined benefit" system. It offers a guaranteed pension funded mostly from pooled investments in which risk is shared between the employer and the employees. Pension are based mainly on years of service and final salary. In contrast, under a "defined contribution" system, future benefits are not guaranteed at a specific level and workers bear the investment risk in an individual account. There’s actually precedent for this kind of system in Wisconsin: Before 1966, then-separate funds for teachers and state workers were of the defined-contribution type, according to a history done by the nonpartisan Legislative Fiscal Bureau. Experts told the Journal Sentinel at the time that Walker’s study, along with the governor’s ultimately successful move to eliminate of collective bargaining over pension changes, could herald an eventual conversion to a 401(k)-type plan. But the chain email makes a different, much bolder claim: That the decision to abolish the system has already been made and, indeed, Walker is "openly" backing such a move. In fact, little has been written or said about even what the study is looking at. We asked Mike Huebsch, secretary of the state Department of Administration, if the study would look at putting future hires into a 401(k)-style plan, as Michigan did. We also asked about "hybrid" systems, which combine the traditional guaranteed pension with a 401(k)- type program, such as in Indiana. And we asked if the study included a purely voluntary option where employees could choose to participate in a 401(k)-type program. Huebsch said all three approaches would be studied but "there is no intent at this point of forcing anybody into a system they wouldn’t want to be part of." He said he was aware of the outcry in other states when workers were forced into a 401(k)-style plan. "That’s why we would give them the option," Huebsch said. Walker recently commented on the study in an interview with WISC-TV in Madison, saying that alternatives would be evaluated according to "a balance of protecting hardworking taxpayers and providing whatever we might provide in a respectful and responsible way." Walker also said: "Despite all the hype and rumors out there, for people in the pension system right now, I can't anticipate anything in the future that wouldn't allow them to continue in that pension system if that's what they prefer to do." That contradicts the idea that Walker is openly touting elimination of the system. Walker spokesman Cullen Werwie reiterated that Walker would await the study to determine if any changes needed to be made. No specific options are under active consideration, he said. Wisconsin already has a slight flavor of a defined-contribution plan, in that annual growth in retirees’ basic pension varies with state pension-fund earnings. Still, retirees are guaranteed a pension no lower than the level when they retired, unless they pick a high-risk option. Huebsch said that far from "abolishing" the retirement system, the goal is to determine how the Wisconsin system can remain stable and avoid the massive shortfalls facing other states’ pension funds. Experts say the Wisconsin pension fund is one of the healthiest in the United States, offers a relatively modest benefit and costs taxpayers less as a share of governmental spending than plans in nearly all other states. One of the email’s most provocative suggestions is that existing employees -- and even those already retired -- would see major benefit reductions. But legal experts say retirees almost certainly would be unaffected by any changes under discussion. Courts, they say, have consistently protected benefits already earned by retirees and current workers as a property right -- though governments are increasingly testing that principle. In contrast, judges have blessed changes that affect new hires who have never been under an existing system. Huebsch made clear how he viewed Wisconsin law: Changing any benefits already earned would be illegal. Could the state leave their previously accrued pension benefits in place but change them for future earnings? Some states, including Rhode Island, have required current employees to participate in "hybrid" pension plans that combine elements of both types of plans. Workers are suing over cuts in what they will receive. Wisconsin state statute 40.19 says "Rights exercised and benefits accrued to an employee under this chapter for service rendered shall be due as a contractual right and shall not be abrogated by any subsequent legislative act." But the statute also speaks of the state’s right to change benefits going forward. The state Employee Trust Funds department, which administers the pension fund, said in a statement on its website that any changes "could only apply to the accrual of future benefits." That leaves open changing benefits going forward for current employees. Our conclusion A chain email making the rounds claims Walker is "openly" backing a move to abolish the state retirement system. While a study of the system is under way, the email’s claim jumps the gun and goes way too far. We don’t yet know the study’s conclusions, and Walker’s administration says no decisions have been made on making any changes at all. What’s more, legal experts say in all likelihood any changes would have to be going forward -- and retirees have the most protection. We rate the email’s claim False.
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