For state employees ones compensation is a combination of wages and benefits. Historically public employees have negotiated to have increases in compensation come in the form of improved benefits. These benefits include a pension to be paid when you retire.
As part of your compensation, your employer contributes a percentage of your salary to the pension fund. The percentage of your salary they contribute can vary depending on what is negotiated. This is much like an employer contributing to your 401K or 403B. But, instead of you deciding where the money will be invested a professional group invests all the contributions from all the employees. This results in a very large sum of money. These pension monies are not mixed with other state funds. These are not state funds. These monies belong to the employees, as part of their compensation.
When you retire, the size of your pension is determined by the number of years you have worked for the company (the more years you have worked, the more you have contributed), what your final years salary was and another factor that is set based on actuarial numbers. Pension fund professionals have developed a formula regarding payout so that the fund will always have funds available for future generations of employees. Your payout does not come from the state budget funds. The pension monies are separate.
If someones pension seems large it is because they have worked for many years and the professionals who have been investing the money have done a good job.
The State of Wisconsin Public Employee Pension fund is very well managed. It is very healthy. Some state's pension funds are not healthy. There are legitimate concerns. But again this is not the case in Wisconsin.
To be clear, when the governor proposed to reduce state funding for pensions and health insurance, he was essentially cutting the pay of state employees. He was cutting the total compensation--wages and benefits. I know that most state employees understand that they need to make a sacrifice when revenues are down. Unfortunately someone who is earning $20,000 will see a larger pay cut because their insurance premium is the same as someone who is earning $50,000. Perhaps a more fair way would be to negotiate a % reduction in pay, perhaps even a higher reduction for those who make over a certain amount.
There has been talk that the public employees should switch to a 401K or 403B type of arrangement where individuals decide where to invest the money. Suffice it to say--this is a horrible idea. I am not an investment professional. Even investment professionals have not done as well as the Wisconsin Retirement System. The current State of Wisconsin Retirement plan is a tremendous success. Not because the state has made exhorbitant contributions, but because it is very well managed and well structured. The large number of individuals that participate allow for the risks to be spread out over a long period of time and many people.
It would be a great idea to let others invest in this fund.
A few facts about public employee pensions.
For state employees ones compensation is a combination of wages and benefits. Historically public employees have negotiated to have increases in compensation come in the form of improved benefits. These benefits include a pension to be paid when you retire.
As part of your compensation, your employer contributes a percentage of your salary to the pension fund. The percentage of your salary they contribute can vary depending on what is negotiated. This is much like an employer contributing to your 401K or 403B. But, instead of you deciding where the money will be invested a professional group invests all the contributions from all the employees. This results in a very large sum of money. These pension monies are not mixed with other state funds. These are not state funds. These monies belong to the employees, as part of their compensation.
When you retire, the size of your pension is determined by the number of years you have worked for the company (the more years you have worked, the more you have contributed), what your final years salary was and another factor that is set based on actuarial numbers. Pension fund professionals have developed a formula regarding payout so that the fund will always have funds available for future generations of employees. Your payout does not come from the state budget funds. The pension monies are separate.
If someones pension seems large it is because they have worked for many years and the professionals who have been investing the money have done a good job.
The State of Wisconsin Public Employee Pension fund is very well managed. It is very healthy. Some state's pension funds are not healthy. There are legitimate concerns. But again this is not the case in Wisconsin.
To be clear, when the governor proposed to reduce state funding for pensions and health insurance, he was essentially cutting the pay of state employees. He was cutting the total compensation--wages and benefits. I know that most state employees understand that they need to make a sacrifice when revenues are down. Unfortunately someone who is earning $20,000 will see a larger pay cut because their insurance premium is the same as someone who is earning $50,000. Perhaps a more fair way would be to negotiate a % reduction in pay, perhaps even a higher reduction for those who make over a certain amount.
There has been talk that the public employees should switch to a 401K or 403B type of arrangement where individuals decide where to invest the money. Suffice it to say--this is a horrible idea. I am not an investment professional. Even investment professionals have not done as well as the Wisconsin Retirement System. The current State of Wisconsin Retirement plan is a tremendous success. Not because the state has made exhorbitant contributions, but because it is very well managed and well structured. The large number of individuals that participate allow for the risks to be spread out over a long period of time and many people.
It would be a great idea to let others invest in this fund.