Lawmakers Reach Compromise on Pension Merger

By Phil Kabler

philk@wvgazette.com

Legislators Sunday night approved a compromise plan intended to allow teachers and school personnel stuck with severely underfunded 401(k)-style pension funds to switch to the Teachers Retirement System.

Delayed in passage by eight days from the end of the 2008 regular session, the compromise bill addresses concerns raised by Gov. Joe Manchin, who wanted assurances that the plan would not burden state taxpayers – or hurt the state’s bond ratings on Wall Street.

A hybrid of previous House, Senate, and administration versions of the bill, the proposal adopted Sunday evening requires at least 65 percent of 19,100 active participants in the Teachers Defined Contribution plan to switch for the transfer to go through.

The compromise provides a base benefit equal to 75 percent of a TRS pension, with options to buy-in for a full TRS pension that will vary, depending on what percentage of TDC participants opt to switch.

If more than 65 percent, but less than 75 percent of TDC participants elect to switch, the buy-in would be the full actuarial cost, which could be as much as $30,000 or more for teachers and administrators who are close to retirement age.

If more than 75 percent switch, the buy-in would drop to 11/2 percent of earnings plus 4 percent interest, dropping the buy-in to a few thousand dollars for those near retirement age.

Representatives of the three state teachers and school service personnel associations all voiced support for the bill.

“It’s a compromise version. We’ve all participated and worked a long time to get a bill we think we can sell to our members,” said Bob Brown, executive secretary of the state School Service Personnel Association.

“We’re committed to providing every resource possible to make sure we reach the required threshold,” added Josh Sword, with the West Virginia Federation of Teachers.

David Haney, executive director of the West Virginia Education Association, said the WVEA also is committed to promoting the TDC/ TRS merger plan.

Legislators also approved a $24.5 million supplemental appropriation to cover potential up-front costs to the state from the TDC/TRS merger.

Senate Finance Chairman Walt Helmick, D-Pocahontas, said that’s the estimated cost to the state under the worst-case scenario in this compromise version of the bill, where only those nearest retirement age or with the lowest-funded accounts switch over to TRS.

That’s compared to the worst-case scenario cost of up to $78 million in the bill House-Senate conferees had agreed to on the last day of the regular session.

At that point, Manchin called a time-out on the legislation, in order to give financial experts time to analyze its impact on the state’s budget, as well as its bond ratings.

Legislators also appropriated $2 million for the costs of a statewide educational campaign for TDC participants, who could elect to switch plans during a six-week “window” this spring.

Sen. Ed Bowman, D-Hancock, questioned the expense, contending that the state’s teachers and school service associations have an obligation to educate their members about the transfer plan.

“To me, the unions need to step up to the plate a little bit for these educational costs,” he said.

Sen. Andy McKenzie, R-Ohio, also wanted assurances that younger TDC participants would get a true assessment of the pros and cons of switching, and not just be pressured to switch.

“My concern is we’re going to give a sales pitch to these young teachers who have a great opportunity to amass some wealth [in the TDC],” he said.

A Senate amendment adopted Sunday evening requires that all TDC participants receive figures showing both what their pension benefits would be in TRS, and what they can reasonably expect to earn if they stay with the TDC plans.

Also in the one-day special session Sunday, the Legislature passed bills to:

* Give one-time $600 bonuses to about 3,400 retired state employees, teachers and school personnel with 20 or more years of service who currently receive pensions of less than $600 a month.

“This is just a little shot in the arm to maybe help them out with buying two tanks of gas,” Helmick commented.

Cost is estimated at $2.24 million.

* Require that the governor and legislative leadership be notified of any lawsuits that have the potential to provide settlement money to the state.

The legislation was nicknamed the “Darrell McGraw bill,” given the history of the attorney general’s office to enter into settlements where the court orders specify how the settlement funds are to be allocated.

House Judiciary Chairwoman Carrie Webster, D-Kanawha, explained that the bill requires advance notice, but does not give the Legislature authority to appropriate the settlement funds.

“The provisions of this deal precisely and narrowly with notice,” she said.

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

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