The Wisconsin Legislative Council’s 2008 Comparative Study of Major Public Employee Retirement Systems
shows a continued growth in the total number of participants in the plans
surveyed, but declining ratios of active to retired participants. The average ratio
of active employees to retired employees in the 87 systems surveyed is 2.
Forty-seven of the systems had an active employees to
retired employees ratio of less than two, while in the 2000 report, 17 of the
systems had an active employees to retired employees ratio of less than two.
This could be due, in part, to the fact that the 2008
Report indicates the return to a trend noted in previous reports that permits
retirement at earlier ages. Between the 2000 and 2004 reports, 10 plans reduced
their early retirement provisions by reducing the minimum age or the number of
years of service required, or both. Between the 2004 and 2006 reports, only two
plans did so, but between the 2006 and 2008 reports, an additional eight plans
reduced their early retirement provisions.
Seventy-five of the 87 plans covered in the 2008 report
permit “early retirement” before the normal age and service requirements of the
plans have been met. Fifty-four of the 87 plans allow early retirement at a
minimum age of 55 or more, and thirteen allow early retirement at a minimum age
of less than 55.
While the number of retirees is growing, funding ratios are
declining. According to the study, funding ratios of more than 100% have
decreased substantially since the 2000 Report. Thirty-three plans had funding
ratios in excess of 100% in 2000, but only 10 plans had funding ratios in
excess of 100% in 2008. However, 33% of the plans studied had funding ratios of
90% or more in 2008. The average funding ratio in 2008 was 81%.
Contributions and Benefits Calculations
The Wisconsin Legislative Council's 2008 Comparative Study of Major Public Employee Retirement Systems shows
employee contribution rates were increased between 2006 and 2008 in 17 of the
87 public plans studied. Employer contribution rates increased for 32 plans
between 2006 and 2008. The report said there were a significant number of rates
that decreased between 2006 and 2008; however, it noted that the majority of
these decreases were due to the adjustment of rates to the normal cost or
statutory rates from prior rates that included actuarial liabilities.
In 2008, a total of 64 plans, or 73.6% of the 87 plans in
the report, require five or less years of service to vest. This is an increase
of one plan since the 2006 report and nine plans since the 2000 report. The
number of plans in 2008 that require 10 years of service to vest has decreased
by eight plans from the 2000 report and by 23 plans from the 1990 report.
Among the 87 plans in the report, 83 are defined benefit
plans in which an employee's retirement benefits are generally calculated by
multiplying the employee's number of years of service times a “formula
multiplier” and multiplying the product of this calculation by the employee's
final average salary. The report indicates that employees of 17 of the 87 plans
are not covered by Social Security, and those plans frequently have a higher
formula multiplier to compensate for the lack of Social Security coverage. The
17 plans in which employees are not covered by Social Security have formula
multipliers ranging between 2% and 3.3% for each year of service. The average
formula multiplier for these 17 plans is approximately 2.3% for each year of
Since the 2006 report, there has been little change in
how any of the plans calculate final average salary. The most common method is
to use a three-year average, which may be required to be consecutive years or
may be required to be years that fall within a given period. Fifty-five of the
87 plans in the report use a three-year final average salary. The next most
prevalent calculation of final average salary is a five-year period -- used by 18
of the plans in 2008.
The trend noted in previous comparisons to increase formula
multipliers has noticeably slowed, the report said. Four of the 87 plans
increased their formula multipliers between 2006 and 2008, compared to thirty-two
of 85 plans that increased their formula multipliers between 1996 and 2000.
Little change has been noted regarding how final average salary is computed or
in the number of plans that cap retirement benefits.
The majority of plans surveyed in the report impose no
maximum benefit limitation, followed by those with a limit of 100% of final
Most of the plans in the report have adopted provisions
in which retirement annuities are annually increased, either by a set
percentage or in response to changes in the consumer price index (CPI).
The study compares significant features of 87 major state
and local public employee retirement systems in the United States, including at
least one statewide plan from each state.