Some Teachers Fearful of Manchin’s Retirement Merger Proposal

By KELLY HOLLERAN

At least some teachers across the state are against Gov. Joe Manchin’s proposed legislation to merge one teacher’s retirement system into another.

Judy Wagoner, a teacher at Hayes Middle School, has taught for 21 years. She said she wants state officials to devise a plan that would not penalize the more than 19,000 teachers involved in the Teacher’s Defined Contribution Plan, which is much like a 401(k).

The average teacher has saved just $33,944 in that retirement account. Of the 1,100 enrollees age 60 or older, only 23 have more than $100,000. None has more than $157,000, according to state data.

Wagoner opted into the plan when it was started in 1991, but said she did not know at the time what she was getting into. Now she wants to switch back into the Teacher’s Retirement System, a program that guarantees a pension benefit based on final salaries and total years of service.

She says a new plan proposed by Manchin earlier this month that would allow school employees to switch back into the old system won’t do a lot to financially help people like her.

Under the governor’s plan, employees can switch retirement plans if they don’t have enough money in their defined contribution accounts, but they would only receive 75 percent of the guaranteed benefits, said Lara Ramsburg, spokeswoman for the governor.

In the defined contribution plan, teachers were only required to contribute 4.5 percent of their earnings, while those in the retirement system were required to contribute 6 percent.

In order for the governor’s proposal to be feasible, at least 70 percent of those active in the defined contribution plan must vote for and participate in the merger, she said.

That part of the proposal is what upsets Wagoner most.

She thinks back to 2005 when a vote was held and a majority of workers voted to return to the traditional retirement system.

As a result all participants were required to do that.

That law was later overturned in Kanawha Circuit Court after some participants argued that the state illegally took money away from people who wanted to stay in the defined contribution plan.

Wagoner said she fears the same thing would happen this time.

“Do the lawmakers not understand they repeat the same mistakes over and over?” she said. “They spent how much money on the original vote, and that got thrown out the window.”

Ramsburg said the administration would like to allow any willing participants to switch into the old retirement system without holding back any benefits. But she said that’s not something the state can afford.

If the merger goes through with 70 percent of employees backing it, the state would take on a $92 million liability that would be managed over 27 years. The state would eventually break even, she said.

“Obviously we’d love to be able to help them in whatever we can,” Ramsburg said. “We also have to balance that desire to help with our budget and our state finances. We want to be compassionate, but we also want to make sure we respect our taxpayers and keep ourselves from getting back in the hole we’ve been trying to get out of.”

Wagoner said she feels she was tricked into entering the defined contribution plan in the first place.

“I was told the old system was going bankrupt,” she said. “I’ve lost sleep. I didn’t realize what I had done.”

Now she said she thinks it is the state’s responsibility to fix the mess.

“I think the governor’s plan is not adequate,” she said. “What the governor needs to understand, this is our financial future. If it went the other way and those of us who have $40,000 or $50,000 – we’re going to work until we’re 80 years old.”

Ed Burns’s wife, Diana, is one of a few school employees who has more than $100,000 in her defined contribution plan. But the Raleigh County teacher said she would still like to switch back into the retirement system.

She had invested in a couple of high-risk investments and now has $118,000 in her account, Ed said.

When she was diagnosed with multiple sclerosis two years ago, she attempted to retire then, Ed said.

But when she saw her monthly payment would only be $505, not including her $300 per month health insurance cost, she knew she couldn’t afford it, Ed said.

“It’s criminal,” he said.

Burns said he looks at the money his wife could have collected if she had stayed in the old retirement system – about $2,000 per month after 30 years of service.

“Unless you have a degree in finance or you were well aware of the financial market, you would have no idea what you were going to draw,” he said.

Teachers should switch over to the retirement system while they can, he said.

“If that’s the best plan the governor can come up with, the teachers better jump on it,” he said. “Some of the younger teachers are sitting back and waiting, thinking, ‘I still have 10 years.’ They think that because they have $40,000 or $50,000 in their account, they consider that a lot of money.”

Steve Shamblin, a teacher at Nitro High School, said he is happy to be part of the defined contribution plan and has no plans to switch over.

He had worked in other jobs in higher education for a number of years before he began teaching high school students, and he said he doesn’t want to have to work for a set number of years in order to get his full retirement benefits under the old system.

“I was very pleased because that gives me flexibility with my retirement,” he said. “I don’t have to work 30 years to get my full retirement.”

And this way, Shamblin is assured he will get his money when he retires.

“I don’t trust the state,” he said. “Unless the state changes something, it’s the worst-funded teacher’s retirement system in the United States. I’d rather have my money.”

The only complaint Shamblin has about the defined contribution plan is that he wants the state to increase the 4.5 percent teachers are allowed to contribute.

“It’s no wonder those funds didn’t grow as quickly,” he said.

Susan McCracken, who works in payroll at Kanawha County Schools’ central board office, said she remembers being approached in the early 1990s about switching to the defined contribution plan.

She called a financial adviser, who told her not to join the program, she said.

She said she’s now glad she followed that advice.

She said she thinks it makes sense that people in the defined contribution plan will make less in retirement because they have been paying less into the system.

“They get more in their paychecks than I get in mine,” she said.

Contact writer Kelly Holleran at kellyh@dailymail.com or 348- 1796.

Originally published by DAILY MAIL STAFF.

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