Mannix Porterfield
Register-Herald Reporter
March 03, 2008 10:27 pm
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CHARLESTON — A new Senate plan to provide West Virginia school teachers a better retirement is worlds — and millions of dollars apart — from a House plan that needs $78 million in tax dollars to work.
Under the Senate version whipped up Monday through its finance committee, all the state would need to put up is about $19 million, provided 70 percent of teachers locked into the 401 (k)-style plan approve the switch.
If 80 percent of the 19,100 active teachers agree to join the old, defined contribution plan, the state would have to provide a mere $3 million, Sen. Dan Foster, D-Kanawha, told the panel.
“Those are the actuarials we got,” Foster told reporters afterward.
The House plan needs $78 million from taxpayers if the required 75 percent of the teachers make the move, Foster said, but the Senate is moving in the direction of what Gov. Joe Manchin had in mind.
“The buy-back provisions are different,” he explained, when asked why the disparity in money the state must fork over.
“Ours uses what is called an actuary reserve which is more for the older people and less for younger people because of the time value of money.”
Foster said the Senate version, as contained in a “strike and insert” amendment into the House bill, contains incentives for teachers. And, he said the newer approach is more specific on the educational process and in the use of schools to maximize the number of those taking part.
“We’re trying to make it as simple as possible,” said Foster, who chairs the Senate Pensions Committee.
“We fear that if we make it too complicated, people will get confused and say, ‘I don’t want to fool with it.’”
Foster said one goal was to have the Senate deal with it quickly, allowing more time for an anticipated House-Senate conference committee to get differences ironed out.
“The better the participation, the better off we’re all going to be,” Senate Finance Chairman Walt Helmick, D-Pocahontas told fellow panelists.
Under the plan, teachers would decide the pension question between April 1 and May 12.
Sen. Vic Sprouse, R-Kanawha, voiced concern that the switch to the old system, away from the 401(k)-styled plan, is going against the grain of modern retirement plans.
“We’re going the opposite way of most companies out there,” he said.
“Most private companies are not going to where they are responsible for pensions.”
Helmick said the newer plan ran afoul when teachers “jumped out” of the system.
“And when that happened, it went south,” he added.
The American Federation of Teachers in West Virginia and West Virginia School Service Personnel provided a fact sheet showing why the $78 million state contribution is needed.
For a teacher whose average final salary was $50,000, it said, the monthly benefit under the old plan is $2,500, but to get there, the employee would need $430,823 in annuity in the new plan to equal that amount.
A teacher earning $35,000 at retirement would get $1,750 a month, but only if the annuity in the newer system had reached $301,727.
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