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Bullet Point Summary of 2005 AB 361
as Affected by Assembly Amendment 1 (LRBa0520/1)
Under the Wisconsin Retirement System, annuity benefits are calculated
two different ways. One method –– called the “money
purchase” calculation –– is based on the accumulated
balance of the employee’s contributions into the retirement
system and the employee’s life expectancy. The other method
is based on a formula involving creditable service and the three
highest years of earnings. A WRS annuitant is entitled to the higher
result of the two calculations.
2005 AB 361 (LRB-2400/1) – as amended by Assembly Amendment
1 – would affect eligibility for all WRS pensions, regardless
of the method by which they were calculated by:
- Increasing the WRS minimum retirement age for all participants
who are not protective occupation participants from age 55 to
age 59.5, effective immediately. The minimum retirement age for
protective occupation participants (generally police officers
and fire fighters) would remain age 50.
Assembly Bill 361 as amended by AA1 would affect only the ‘formula”
method of calculating WRS retirement benefits by doing all of the
following:
- Reducing formula annuity benefits by increasing the actuarial
adjustment for annuities that begin before the normal retirement
age, except for protective occupation participants. Normal retirement
age is 65 for most WRS participating employees and age 62 for
elected officials and executive participating employees. This
actuarial adjustment is currently one of the four factors used
to calculate so-called “formula” annuities. The other
three factors are final average earnings, years of creditable
service and a multiplier based on category of employment. AB 361,
as amended by AA1, would eliminate a current law that reduces
the actuarial adjustment based on accumulated creditable service.
It is this provision, for example, that currently allows a teacher
with 30 years of creditable service to receive an unreduced formula
annuity as early as age 57. Under AB 361 as amended by AA 1, the
earliest a teacher could retire would be age 59.5 and the WRS
formula benefit would be reduced by 26.4% at that age, regardless
of the number of years of creditable service accumulated by the
teacher. The earliest a teacher or other “general”
category employee could receive an unreduced formula benefit would
be age 65.
- Eliminating the current authorization for employers to enter
into agreements with their employees under which the employer
would pay off the actuarial cost of early retirement so that the
employee could receive an unreduced formula annuity.
In addition, other provisions of the bill would do the following:
- Prohibit collective bargaining on the minimum retirement age
for Wisconsin Retirement System pensions.
- Reduce the number of survivors of deceased WRS participating
employees (other than protective occupation participants) eligible
for the so-called “special death benefit” ––
a potentially higher- than-ordinary death benefit. The special
death benefit is generally payable as the result of the death
of a participating employee who had reached minimum retirement
age but continued to work. Under this bill, the deaths of participating
employees over 55 but under 59.5 would no longer trigger payment
of special death benefits.
- Push back the age deadline for applying for a separation benefit
from age 55 to age 59.5, for participants who terminate participating
employment after the effective date of the legislation. By taking
this benefit, which is a lump sum payment of the accumulated employee
contributions, a vested participant forfeits at least half of
the individual’s potential retirement benefit.
- Delay a participant’s access to his (or her) own voluntary
contributions (i.e., those deposits that were made over-and-above
statutorily required contributions) until at least age 59.5.
Drafted by Robert Weber, DETF Chief Counsel
May 3, 2005
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