Wisconsin's Supreme Court has dismissed a lawsuit brought about by unions, that sought to overturn a law that will increase pension payments for members of the $62bn Wisconsin Retirement System (WRS).
In a five to two verdict, judges dismissed union claims that the 1999 Wisconsin Act 11 was unconstitutional. The two unions that opposed the law, the Wisconsin Professional Police Association (WPPA) and the State Engineering Association (SEA), took issue with the way in which some of the WRS' funds were distributed.
Act 11 will give the state's employees a 10.3% increase in the size of their pension paychecks. It was passed in 1999, and shortly after it was signed into law by the then Governor, Tommy Thompson, the WPPA and the SEA won an injunction halting the bill from being acted upon.
The law will see $4bn of retirement fund cash transferred to the accounts of WRS members, employers and retirees. Benefit formulas used to calculate members pensions will be changed, which will result in an average 10.3% increase in pension money. Current state and local government employees and teachers will benefit from the formula changes, but state or local government workers hired after January 1, 2000 will miss out.
Additionally, $200m was set aside for an employer credit balance account. If an employer is paying a monthly contribution for their actuarial accrued unfunded liability, that contribution is deducted from the employer's account until the liability is paid or the balance is exhausted. The WPPA and the SEA felt that this provision in Act 11 gave employers, including the state of Wisconsin, a $200m holiday from their required contributions to the WRS.
They also disputed the validity of Act 11, as it failed to pass the Wisconsin legislature by a three-quarters vote of all the members elected to both houses of the legislature. The unions also argued that it fails to provide sufficient state funds to cover the cost of increased benefits as required by the state’s constitution.
By Geoffrey Ho
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