Two Plans Become Clear in Teacher Pebsion Battle

By Phil Kabler

Schedule

Senate

9:30 a.m.: Finance Committee

10 a.m.: Judiciary Committee

11 a.m.: Floor session

1 p.m.: Health and Human Resources

2 p.m.: Banking and Insurance, Education committees

3 p.m.: Finance, Judiciary committees

5 p.m.: Education Committee

House

8:30 a.m.: Government Organization Committee, joint Health, Judiciary committees

9 a.m.: Finance Committee

11 a.m.: Floor session

2 p.m.: Education Committee

philk@wvgazette.com

After Wednesday’s action in the House, the lines are drawn for two distinct plans to bail out 19,100 teachers and school service personnel whose 401(k)-style retirement plans are seriously underfunded:

* Gov. Joe Manchin’s proposal to give participants in the Teachers Defined Contribution Plan a one-time opportunity to switch to the Teachers Retirement System. That plan would not cost taxpayers anything, but would force teachers to either accept pensions at 75 percent of normal TRS levels, or pay lump-sum buy- ins that could reach $30,000 to $40,000 for those at retirement age.

* The Legislature’s plan, which would let TDC participants buy in to a full TRS pension at a lower rate (equal to 1.5 percent of career earnings), but would require the state to come up with a subsidy of $78 million to make up the difference.

On Wednesday, the House Pensions Committee amended the Legislature’s version of the plan into the governor’s bill (HB4492).

Besides the multimillion-dollar cash infusion – which legislative leaders have proposed funding from $364 million of budget surplus – the House bill makes other changes to the governor’s merger bill:

* 75 percent of all TDC participants would have to vote to go into TRS, up from 70 percent in the governor’s plan, for the merger to proceed.

The higher threshold reduces the odds that only those teachers closest to retirement age or those with the worst investment accounts would transfer – something that would leave the state with a much higher liability.

“If I’m about to retire, under this bill, the state is going to have to cough up $200,000 to $300,000 for me,” explained Harry Mandel, actuary for the state Consolidated Public Retirement Board.

If only retirement-age employees opted into TRS, “the cost per participant becomes astronomical,” he said.

Under the proposal, the expense of subsidizing older teachers and service personnel would be offset by the numbers of younger employees joining the plan, who will have years to pay into the pension plan.

* Low-interest loans of up to $20,000 would be available to cover buy-in payments. The loans would be repaid through payroll deductions. The governor’s bill does not have any loan provisions.

Lobbyists for state teachers and school service personnel said Wednesday they favor the legislative option.

Bob Brown, executive director of the West Virginia School Service Personnel Association, called it a “win-win” scenario. He said it would not only assure adequate pensions for the 19,100 caught in the TDC, but ultimately would lower the unfunded liability for the Teachers Retirement System.

“It’s a good thing for participants in both plans, because it lowers the unfunded liability,” he said.

Mandel explained that, while the merger initially would increase the unfunded liability of TRS by $176 million, to $3.6 billion, contributions by the new participants, as well as investment earnings on funds “swept” from the TDC accounts ultimately would put TRS closer to the black.

The plan is about 51.3 percent funded, while the merger would push it to somewhere between 53.9 percent and 54.5 percent, he said.

Meanwhile, Manchin spokeswoman Lara Ramsburg said the governor’s office is monitoring changes to the bill.

At the moment, she said, the administration’s priority is to assure that legislators have access to all the information they need on the proposed merger options.

“More than anything right now, they need to have the facts and figures, and we’re working to help them get the information from the retirement board,” she said.

The bill goes on to the House Finance Committee.

To contact staff writer Phil Kabler, use e-mail or call 348- 1220.

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