Whenever the Legislature is grappling with the state budget, a major area of concern is always the status of the employee pension systems, in particular the Teachers Retirement System. When I first arrived at the Legislature in 1988, we realized the seriousness of the financial problems within that system and took action to stem the rapidly growing unfunded liability.

Numerous steps have been taken over the years to stabilize the system, and the Legislature has exhibited great fiscal responsibility, the factor that was lacking in regard to the retirement system during the previous two decades.

Among the results have been a strict amortization plan to pay off the $5 billion debt and the closure to new members of the Teachers Retirement System’s defined benefit plan, through which the participants pay a percentage, currently 6 percent, of their monthly salary into the plan. Those participants are guaranteed a certain amount, based on their salaries, upon retirement. Instead, in 1992 new members were enrolled in a defined contribution plan, wherein retirement sums are determined by individual investment income. Participants contribute 4.5 percent of their gross compensation, while the state provides 7.5 percent of their gross compensation.

We created the newer plan because the Legislature needed to ensure the fiscal responsibility which was lacking at that time. It actually costs the state more to fund the newer defined contribution system, and the defined contribution system has shifted the responsibility for investment return on the teachers, rather than on the state.

Unfortunately, the depressed stock market and a lack of investment experience have caused many teachers in the newer plan to suffer what some perceive to be unacceptable losses. During the past decade, the Legislature has also proved to be much more fiscally responsible regarding the pension system. As a result, during the 2005 session the Legislature adopted a law — the Teachers’ Retirement Equity Act — that allowed the participants to vote and decide whether to merge the newer plan back into the older one.

Under the act, the merger of the defined contribution plan into the original retirement system is only allowable after at least one half of the members participate in an election and a majority of those members favor the change. That vote took place, and 56.1 percent of those voting (more than 12,700 members) voted in favor of the merger.

But last week, about 1,000 teachers and other plan participants filed a lawsuit asking Kanawha Circuit Court to declare the merger of the pension plans unconstitutional to temporarily block the move until the change can be reviewed.

According to the lawsuit, some members assert that the merger would be an unjustified taking of their retirement accounts, violates federal laws and would constitute a breach of contract. “Plaintiffs are desirous of preserving and protecting the status quo in this matter until such time as a full and complete judicial review of this matter can be completed,” the lawsuit states.

Regardless of the outcome of the lawsuit, the Legislature remains dedicated to its commitment to pay down the Teachers Retirement System unfunded liability. While last year we appropriated an additional $317 million into our retirement systems, this year we added $385.5 million to the Teachers Retirement System, over and above the originally scheduled debt payment of $333.9 million. We also hope to pay off an additional $267 million in debt at some point this year, a payment which would make the system about 30 percent funded, as compared to 20 percent funded just a few years ago.

— Contact House Speaker Kiss, D-Raleigh, by phone: (304) 340-3210; by writing: Office of the Speaker, Room M-228, Building 1, Capitol Complex, Charleston, WV 25305; or by e-mail: castor@mail.wvnet.edu

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