Wisconsin Legislature: Trust Funds; Wisconsin Retirement System;

78 Op. Att'y Gen. 198, 209-210 (1989)

A statute that seeks to modify, by the invocation of the police power, a constitutionally guaranteed right, such as the right of contract, should be carefully drawn to show that the use of such power is necessary and exigent and serves a vital purpose of government. While courts are willing to indulge any reasonable presumption to sustain police-power-type legislation, they ought not be asked to speculate or conjure up possible explanations to support a legislative act.

78 Op. Att'y Gen. 198, 210 (1989)

State ex rel. Bldg. Owners v. Adamany

, 64 Wis. 2d at 303. It is, therefore, my opinion that lacking any showing of exigent circumstances that require a remedy necessary to protect the vital interests of the state, the TAA transfer suggested in your first question would be violative of the contract clauses of the United States and Wisconsin Constitutions.

78 Op. Att'y Gen. 198, 210 (1989)

Your next question is:

78 Op. Att'y Gen. 198, 210 (1989)

2. Same as Question (1) except the amount transferred would be used to reduce the present employer-required current service contribution rate?

78 Op. Att'y Gen. 198, 210 (1989)

It is my opinion that a similar violation of contract rights would occur if the amount transferred from the TAA were transferred to reduce required employer current service contributions required by section 40.05(2).

78 Op. Att'y Gen. 198, 210 (1989)

Section 40.05(2) states in part (as amended by 1989 Wisconsin Act 13):

78 Op. Att'y Gen. 198, 210 (1989)

(a) Each participating employer shall make contributions for current service determined as a percentage of the earnings of each participating employe, determined as though all employes of all participating employers were employes of a single employer, but with a separate percentage rate determined for the employe occupational categories specified under s. 40.23(2m). A separate percentage shall also be determined for subcategories within each category determined by the department to be necessary for equity among employers.

78 Op. Att'y Gen. 198, 211 (1989)

(am) The percentage of earnings under par. (a) shall be determined on the basis of the information available at the time the determinations are made and on the assumptions the actuary recommends and the board approves by dividing the amount determined by subtracting from the then present value of all future benefits to be paid or purchased from the employer accumulation reserve on behalf of the then participants the amount then credited to the reserve for the benefit of the members and the present value of future unfunded prior service liability contributions of the employers under par. (b) by the present value of the prospective future compensation of all participants.

78 Op. Att'y Gen. 198, 211 (1989)

This hypothetical legislation would transfer approximately $1,374,297,000 (the amount of the unfunded actuarial liability) to the employer accumulation reserve to reduce the present employer-required current service contribution rate. The projected employer contributions for year 1988, the most recent available, is in the amount of $380,052,738.

See

Wisconsin Department of Employe Trust Funds 1985-87 Biennial Report Summary dated March 1989 at 3. It appears that by virtue of the required-computation language of section 40.05(2)(am), the crediting of the amount of the unfunded actuarial liability to the employer accumulation reserve would fully fund the employer contribution for more than three and one-half years. The period would exceed three and one-half years since the $380,052,738 includes prior service liabilities and your question relates only to payment of "current service contributions." During that period of time all employer contributions would be paid by this TAA transfer.

78 Op. Att'y Gen. 198, 211-212 (1989)

Since your question does not propose payment from the TAA of unfunded prior service liability, I need not consider the question of constitutionality of unequal treatment between participating employers who have prepaid their prior service costs and those who have elected to amortize prior service costs into the future. Sec. 40.05(2)(b), (bg), (bm) and (br), Stats. My opinion regarding the constitutionality of a proposed statute, as described in your second question, is, therefore, based on the effects on contractual rights of annuitants and active employes similar to those discussed in answering your first question.

78 Op. Att'y Gen. 198, 212 (1989)

A transfer of TAA monies in the amount of the unfunded actuarial liability would have the same effect on active employes and annuitants regardless of whether it is credited to the unfunded actuarial liability or to the employer annuity reserve (with the purpose of reducing employer-required current service contributions). Annuitants would not benefit from the transfer but would sustain substantially lower potential for annuity increases from favorable investment experience. Active employes would sustain a reduced value of the purchase money annuity option at retirement and an increased danger of higher employe contributions.

78 Op. Att'y Gen. 198, 212 (1989)

Similar to question one, these potential violations of contractual rights appear to be substantial and not based upon a showing by the Legislature of exigent circumstances that require this remedy to protect the vital interests of the state. The proposed legislation described by your second question would, therefore, appear to violate the contract clauses of the United States and Wisconsin Constitutions.

78 Op. Att'y Gen. 198, 212 (1989)

Your next four questions are interrelated to the extent that they are properly answered together. Those questions state as follows:

78 Op. Att'y Gen. 198, 212 (1989)

3. If you conclude that the actions suggested under Questions (1) and (2) are not possible, is there any constitutional or contractual right bar which would prevent the Legislature from directing that the full balance in the TAA be distributed in the same manner as the current annual distribution of investment earnings to the employer, employe and the annuity reserves under s. 40.04 (4), (5) and (6) with the amount credited to the employer accumulation reserve being used to reduce the WRS unfunded liability?

78 Op. Att'y Gen. 198, 213 (1989)

4. Same as Question (3) except the amount credited to the employer accumulation reserve would be used to reduce the present employer-required current service contribution rate.

78 Op. Att'y Gen. 198, 213 (1989)

5. Same as Question (4) plus using the amounts credited to the employe accumulation reserve to reduce the employe-required contribution rate.

78 Op. Att'y Gen. 198, 213 (1989)

6. Same as Question (5) plus directing that the amounts credited to the annuity reserve be placed in a contingency reserve to offset any future adverse actuarial experience with a simultaneous temporary increase in the assumed benefit rate to 10%. The change in the required reserve amount due to the new assumed benefit rate would also be placed in the contingency reserve. The assumed benefit rate would revert to 5% when and if the contingency reserve had been reduced to the level that would leave no surplus at the 5% rate. I understand that the effect of the change in the assumed benefit rate would be a significant reduction in future required transfers from the employer reserve to the annuity reserve and therefore a reduction in employer costs (plus much smaller "dividends" increasing annuities under s. 40.27).

78 Op. Att'y Gen. 198, 213-214 (1989)

Distribution of the entire TAA to the employer accumulation, employe accumulation and annuity reserves would obviate the potential violations of constitutional rights discussed under questions 1 and 2. Since the TAA monies would be divided between the three accounts in proportion to each account balance (section 40.04(3)(a)) employers, employes and annuitants would benefit from the TAA transfer. Annuitants would potentially receive increased annuities from the transfer and the additional monies in the employe accumulation reserve would provide the potential for an increased money purchase option value and lessen the potential for increased employe contributions. This result would occur regardless of whether the TAA portion credited to the employer accumulation reserve is used to reduce the WRS unfunded actuarial liability (question 3) or the employer-required current service contribution rate (question 4).

78 Op. Att'y Gen. 198, 214 (1989)

Inasmuch as the proposed statutes described under questions 3 and 4 would not impair the contractual rights of WRS participants, they would be constitutional. Any such proposed legislation which affects a change in the employer or employe contribution rate, however, would have to mesh with newly enacted section 40.05(2n), which requires that any increase or decrease in contribution rates be split between employer contributions and employe benefit adjustment contributions. 1989 Wisconsin Act 13, section 18.

78 Op. Att'y Gen. 198, 214 (1989)

Legislation mandating use of the TAA portion credited to the employe accumulation reserve to reduce the employe-required contribution rate (question 5) could be subject to objection on constitutional grounds since an active WRS participant could potentially be negatively affected.

78 Op. Att'y Gen. 198, 214 (1989)

A separate account is maintained within the employe accumulation reserve for each employe, which account is credited with all employe contributions (whether made by the employe or by the employer on the employe's behalf), plus interest from investment earnings. Sec. 40.04(4)(a), Stats. Employe-required contributions that are paid by the employer on the employe's behalf are the property of the employe. As stated at section 40.05(1)(b):

78 Op. Att'y Gen. 198, 214 (1989)

In lieu of employe payment, the employer may pay all or part of the contributions required by par (a) [required employe contributions], but all the payments shall be available for benefit purposes to the same extent as required contributions deducted from earnings of participating employes.

78 Op. Att'y Gen. 198, 214-215 (1989)

Using the accelerated TAA distribution pass-through to the employe accumulation reserve as the basis to reduce employe-required contributions would lessen the value of employe accounts. In most cases, the collective bargaining agreements, personnel policies or section 40.05(1)(b) have committed the employer to pay employe contributions. The TAA monies thus used to lower employe contributions do not increase the various employe accounts since those contributions are already employer obligations. Loss of the benefit of increased interest crediting, which presently occurs if the TAA distribution is credited to the current income account (section 40.04(3)(a)), would lower the value of the purchase money option and separation benefit (for post-January 1, 1982, WRS participants). While it appears that the present level of employer-paid employe contributions can be changed without violating contractual rights, it does not follow that the TAA can be used for that purpose.

78 Op. Att'y Gen. 198, 215 (1989)

Using the TAA-generated increase to lower employe contributions, rather than crediting the individual accounts with interest from those monies, would thus potentially impair contract rights. Sec. 40.19(1), Stats. Whether the impairment is substantial enough to constitute a violation of constitutional prohibitions cannot be determined without facts indicating the magnitude of the effect on individual employes. Moreover, the section 40.19(1) grant of contract rights allows the state to require "forfeiture of specific rights and benefits as a condition for receiving subsequently enacted rights and benefits of equal or greater value to the participant." Legislation using TAA monies to reduce employe contributions could contain other benefits ameliorating any potential contract infringement. The facts provided are, therefore, insufficient to enable me to determine whether proposed legislation described in question 5 would or would not violate the contract clauses of the United States and Wisconsin Constitutions.

78 Op. Att'y Gen. 198, 215-216 (1989)

Then you ask (question 6) whether there is any constitutional problem if legislation were enacted which provided that the TAA monies credited to the annuity reserve were placed in a newly-created contingency reserve (maintained to offset any future negative investment experience) and not paid out as increased annuities under the present section 40.27(2) surplus distribution procedure. In addition, this legislation would raise the "assumed benefit rate," (for determining the present value of the transfer from the employe and employer accumulation reserves to the annuity reserve on commencement of an annuity) from five percent to ten percent. The employer accumulation account present value transfer would, however, be based upon the five percent rate with the difference also going into the newly-created contingency reserve. This contingency reserve would fund possible annual losses in the annuity reserve resulting from unfavorable investment experience and costs resulting from lower than expected mortality. When and if this contingency reserve were reduced by unfavorable investment and mortality experience, from ten percent to the level that would leave no surplus at a five percent assumed benefit rate, that rate would revert to five percent.

78 Op. Att'y Gen. 198, 216-217 (1989)

When a WRS participant applies for a retirement annuity, there is transferred to the annuity reserve "amounts equal to the present value [of the annuity] as of the date of commencement." Sec. 40.04(6), Stats. The "assumed benefit rate" (assumed rate of return on investment) used to determine such present value is statutorily established at five percent. Sec. 40.02(6), Stats. Whatever balance the annuitant has in the employe accumulation reserve is credited to the annuity reserve. Sec. 40.04(4)(a)3., Stats. The remaining balance necessary to fund the present value after deducting the annuitant's employe accumulations reserve account is transferred from the employer accumulation reserve. Sec. 40.04(5)(c), Stats. Thus, raising the interest assumption to ten percent would cause a significant reduction in the amount of the transfer from the employer accumulation reserve and of future employer costs as suggested in question 6. This effect would not occur under the described legislation, however, since you specify that "[t]he change in the required reserve amount due to the new assumed benefit rate would also be placed in the contingency reserve." There would be no saving to the employer accumulation reserve, from raising the assumed benefit rate, since the difference in present value would still be transferred to the contingency reserve of the annuity reserve.

78 Op. Att'y Gen. 198, 217 (1989)

You also suggest (question 6) that creation of the contingency reserve would cause "much smaller 'dividends' increasing annuities under s. 40.27." Whether the hypothetical legislation would have this effect would depend on the wording of the legislation. Section 40.27(2) in its present form provides that "[s]urpluses in the fixed annuity reserve shall be distributed by the board if the distribution will result in at least a two percent increase in the amount of annuities in force, on recommendation of the actuary." A contingency fund has thus been statutorily created to the extent of up to two percent of the amount of annuities in force. Question 6 does not specify the point at which the newly-created contingency reserve would be used. Therefore, all that can be said with any degree of certainty is that placing the transferred TAA monies into the newly-created contingency reserve would (if the existing statute was so amended to provide) prevent those amounts from being passed on to annuitants as dividends. This contingency reserve buffer could potentially cause a reduction in future annuity increases if the twenty percent TAA transfer to current income (section 40.04(3)(a) as amended by 1989 Wisconsin Act 13) is by legislation prevented from reaching the annuitant. If the effect of the hypothetical statute is to phase out the TAA without increasing surplus distributions to annuitants, the validity of constitutional objections on contract infringement grounds would be based on the effect on individual annuitants weighed against whether the newly-created contingency fund is "useful in achieving the fund's purposes, or necessary to protect the interests of the participants or the future solvency of the fund." Sec. 40.04(1), Stats. The Legislature has in section 40.04(1) granted this account-creating authority to the Department of Employe Trust Funds and thus presumably could exercise similar authority on its own.

78 Op. Att'y Gen. 198, 218 (1989)

There are insufficient facts to provide me with the basis to render an opinion on the constitutionality of the hypothetical legislation described in question 6. All laws are presumed constitutional and one attacking a statute must prove that statute unconstitutional beyond a reasonable doubt.

Cannon

, 111 Wis. 2d at 552-53. Section 40.19(1) provides, however, that "benefits accrued to an employe under this chapter for service rendered shall be due as a contractual right and shall not be abrogated by any subsequent legislative act." The section 40.27(2) fixed annuity reserve surplus distribution appears to be a benefit accrued by annuitants. Minimal alteration of contract rights does not constitute a constitutional impairment nor would an impairment which results from a necessity to protect the interests of the participants or future solvency of the fund. These factors cannot be sufficiently analyzed as the basis for an opinion without the specific details of the proposed statute.

78 Op. Att'y Gen. 198, 218 (1989)

Next you ask:

78 Op. Att'y Gen. 198, 218 (1989)

7. Would s. 40.19 (1) present a constitutional bar to the Legislature limiting future interest credits to participant accounts and the annuity reserve to the present assumed rate (7-1/2%) and the present assumed benefit rate (5%), respectively?

78 Op. Att'y Gen. 198, 218 (1989)

It is my opinion that section 40.19(1) does not preclude the Legislature from prospectively limiting future interest crediting for that portion of a participant's account contributed after enactment of the limiting statute. Such statutory section does preclude the Legislature from limiting interest crediting for contributions made prior to the enactment of the limiting statute.

78 Op. Att'y Gen. 198, 218-219 (1989)

Section 40.19(1) provides vested contract rights "for service rendered" during employment. One of the contractual rights accrued "for service rendered" by WRS participants is the right to fixed annuity reserve surplus distributions. Section 40.19(1) was enacted effective January 1, 1982. Ch. 96, Laws of 1981. Participants who retired since that date probably have a contractual right to annuity increases based on distribution of fixed annuity surpluses. Participants employed by WRS participating employers after January 1, 1982, and not yet retired, may also have a contractual right to future annuity increases based on "benefits accrued... for service rendered." That contractual right would continue until prospectively abrogated by the hypothetical legislation.

78 Op. Att'y Gen. 198, 219 (1989)

While section 40.19(1) authorizes "forfeiture of specific rights and benefits" that have vested, such forfeiture must under that statute be based upon the participant "receiving subsequently enacted rights and benefits of equal or greater value." Your question contains no

quid

pro

quo

for those WRS participants who are affected by the interest credit limitation, so this method of requiring forfeiture of vested rights appears inapplicable.

78 Op. Att'y Gen. 198, 219 (1989)

Section 40.19(2m) also specifically guarantees to a WRS participant, who was a participating employe during the period January 1, 1982 to March 9, 1984, the right to have his or her retirement benefit determined under the statutes in effect on his or her termination. Such section states as follows:

78 Op. Att'y Gen. 198, 219 (1989)

Any person who is a participant in the Wisconsin retirement system

before March 9, 1984

, and who is not subsequently a participating employe in the Wisconsin retirement system shall continue to have the amount of, and eligibility for, the person's benefits determined in accordance with the statutes in effect on the date the person terminated as a participating employe.

78 Op. Att'y Gen. 198, 219 (1989)

Fixed annuity reserve distribution as mandated in section 40.27(2) is an element of "benefits determined in accordance with the statutes in effect on the date the person terminated as a participating employe." Section 40.19(1) precludes abrogation of that contractual right "by any subsequent legislative act."

78 Op. Att'y Gen. 198, 219-220 (1989)

Even those WRS participants who were not participating employes after January 1, 1982, and thus not covered by the vesting language of section 40.19(1), may be held to have vested rights abrogated by the interest limitation. Section 40.19(3), applying to WRS participants who were not participating employes after January 1, 1982 (the date of merger of the retirement systems), limits the benefit vesting to "the statutes in effect on the date the person terminated." Such section states:

78 Op. Att'y Gen. 198, 220 (1989)

Any person who is a participant in the Wisconsin retirement fund or a member of either the state teachers retirement system or the Milwaukee teachers retirement fund

prior to January 1, 1982

, and who does not subsequently become a participating employe in the Wisconsin retirement system, shall continue... to have the amount of and eligibility for the person's benefits determined in accord with the statutes in effect on the date the person terminated as a participating employe.

78 Op. Att'y Gen. 198, 220 (1989)

The statutory benefits which vested on termination of employment prior to January 1, 1982, also included annuity improvements from distribution of annuity reserve surpluses.

See

secs. 41.20(1)(a) and 42.357(5), Stats. (1979). Statutes in effect prior to January 1, 1982, further provided that annuity reserve surplus distributions "shall not be offset against any other benefit received but shall be paid in full, nor shall any other benefit being received be reduced by any such distribution."

See

sec. 40.70(3), Stats. (1979). It, therefore, appears that pre-1982 annuitants may have vested rights to annuity increases from annuity reserve surpluses that would be infringed by the subject interest limitation.

78 Op. Att'y Gen. 198, 220-221 (1989)

The degree of impairment determines the level of scrutiny by the courts. If there is substantial impairment, the courts will carefully examine the nature and purpose of the legislation. Whether there is a substantial impairment is not limited to the amount of money involved but takes into consideration whether "the legislation in question nullified an express term of the contract which was bargained for and reasonably relied upon by the parties."

Cannon

, 111 Wis. 2d at 558. Active employes and annuitants are and were employed during times when the statutes vest in them the right to unlimited annuity improvements based on surpluses in the annuity reserve. It was not unreasonable for participants to expect such unlimited interest crediting to annuity reserve accounts to continue for past service. While the severity of the impairment is not indicated, I assume that it would be severe if the hypothetical statutes were enacted in this session given the accelerated pass through by 1989 Wisconsin Act 13 at sections 9 and 47(2).

78 Op. Att'y Gen. 198, 221 (1989)

It, therefore, appears that the impairment is severe and proscribed by the United States and Wisconsin Constitutions unless there "exist[s] a significant and legitimate public purpose behind the legislation," which purpose should be "directed towards remedying a broad and general social or economic problem."

Chappy v. LIRC

, 136 Wis. 2d 172, 187-88, 401 N.W.2d 568 (1967), "[I]t seems clear that, for the police power of the state of Wisconsin to affect the constitutionally protected right of contract, there should be evidence that the legislation is necessary for the vital interests of the state."

State ex rel. Bldg. Owners v. Adamany

, 64 Wis. 2d at 300. Limiting of the interest crediting to annuitants does not appear to rise to the magnitude of "remedying a broad and general social or economic problem" nor would it seem to be "necessary for the vital interests of... the state."

78 Op. Att'y Gen. 198, 221 (1989)

There is nothing in question 6 which indicates such a public purpose. Saving and transfer of revenues to other purposes does not in itself indicate such a "vital interest."

78 Op. Att'y Gen. 198, 221 (1989)

A government entity can always find a use for extra money, especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.

78 Op. Att'y Gen. 198, 221 (1989)

United States Trust Co. v. New Jersey

, 431 U.S. 1, 26 (1977). (Footnote omitted.)

78 Op. Att'y Gen. 198, 222 (1989)

State ex rel. Bldg. Owners v. Adamany

, 64 Wis. 2d at 303.

78 Op. Att'y Gen. 198, 222 (1989)

Present statutes allow "equitable" distribution of annuity surpluses.

See

sec. 40.27(2)(b), Stats.

78 Op. Att'y Gen. 198, 222 (1989)

[A] State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives. Similarly, a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well.

78 Op. Att'y Gen. 198, 222 (1989)

United States Trust Co. v. New Jersey

, 431 U.S. at 30-31. It should be noted that the Legislature has chosen a more moderate course in the past by limiting interest crediting to employe accumulation accounts on a prospective basis.

See

section 40.04(4)(a)2. which limits interest to the assumed benefit rate and section 40.04(4)(a)2m (as created by 1989 Wisconsin Act 13) which prospectively limits separation benefit interest to three percent. I therefore conclude that legislation limiting interest crediting to annuity reserve accounts, for contributions made before the enactment of the limiting statute, would probably be held unconstitutional.

78 Op. Att'y Gen. 198, 222 (1989)

Your eighth question states:

78 Op. Att'y Gen. 198, 222-223 (1989)

8. If a negative answer to any of the previous questions is based on the fact that many participants have made additional contributions to the WRS over and above the legally-required contributions, would the answers become positive if the statutory changes in each case specified that the full investment earnings credit would be added to all such additional contribution amounts while limiting or directing the credits to required contribution accounts as previously noted?

78 Op. Att'y Gen. 198, 223 (1989)

None of the negative answers to previous questions is based on participants' rights generated from making additional deposits or being the beneficiary of additional deposits made by employers. Employes and employers (on behalf of employes) may make additional contributions to the WRS. Sec. 40.05(1)(a)5. and (2)(g), Stats. "[A]dditional employer contributions shall be available for all benefit purposes [except separation benefit] and shall be administered and invested on the same basis as employe additional contributions...." Sec. 40.05(2)(g), Stats. A participant's account in the employe accumulation reserve is credited with both employer and employe additional deposits. Thus participants who have additional deposit credits have, as a minimum, the contractual rights of participants arising from required employe deposits.

78 Op. Att'y Gen. 198, 223 (1989)

The Legislature has apparently recognized greater rights resulting from additional deposits. Section 40.04(4)(a)2., which limits interest crediting to employe accumulations accounts to the assumed benefit rate (five percent) for participants after December 31, 1984, does not include "employe and employer additional contribution accumulations" within such interest limitation. Similarly, the section 40.04(4)(a)2m. (as created by 1989 Wisconsin Act 13) limitation of interest to three percent for separation benefit purposes for those terminating covered employment on or after January 1, 1990, does not apply to additional contributions. While there are indications that there may be other bases for objection to statutes infringing on rights resulting from additional contributions, a discussion of such bases is unnecessary here absent specific statutory language for analysis.

78 Op. Att'y Gen. 198, 223 (1989)

Your final question states:

78 Op. Att'y Gen. 198, 224 (1989)

9. Is there any constitutional bar to the Legislature closing the present WRS and creating a new retirement system applicable to all future service of existing and future employes using the present WRS assets to fund all benefits accrued to the date of closing and applying the "excess" assets to reducing taxes?

78 Op. Att'y Gen. 198, 224 (1989)

It is my opinion that the Legislature can, without violating contract rights, close the present WRS and create a new retirement system for future service if it does not abrogate the various rights vested on the date of terminating the WRS. One of those vested rights is that of fixed annuity reserve surplus distributions under section 40.27. A second vested right is that of choosing the alternative purchase money form of annuity under section 40.23(3). A third right vested is that of a pre-1982 participant, applying for a separation, to have the effective rate of interest (including TAA increases to the current income account) credited in determining the amount of the separation benefit. Secs. 40.25(2) and 40.04(4)(a)2., Stats. I, therefore, have no basis upon which to assume that there would be any "excess assets" available on the hypothetical closing of the WRS since these vested rights have substantial claims on the trust funds.

78 Op. Att'y Gen. 198, 224 (1989)

Section 40.19(1) explicitly provides that "[r]ights exercised and benefits accrued to an employe under this chapter for service rendered shall be due as a contractual right and shall not be abrogated by any subsequent legislative act." Such statute continues by stating that the system can be repealed at any time and "there shall be no right to

further

accrual

nor to future exercise of rights for service

after

... repeal." This contractual right based on service rendered includes benefits determined by and based upon monies in the TAA.

78 Op. Att'y Gen. 198, 224-225 (1989)

The Wisconsin Supreme Court has held, in the case of teachers, that certain benefits vested at commencement of teaching service. In

State ex rel. Stafford v. State A. and I. Board

, 219 Wis. 31, 33, 261 N.W. 718 (1935), the court held that a legislative enactment that required payment from the contingency fund of the State Retirement System (for teachers) to one not belonging to the group entitled to a benefit violated the contractual rights of the teachers participating in the fund. The court stated:

78 Op. Att'y Gen. 198, 225 (1989)

The conceded facts show the nonexistence of a right or claim in this particular fund in Mr. Stafford at the time of his death. It therefore follows that the attempt to place within the reach of Stafford's estate or of his beneficiary this fund, or any portion of it, results in the invasion of the rights of others, because it is a direct impairment of contractual rights of teachers entitled to participate in said fund under a contract between them and the state.

78 Op. Att'y Gen. 198, 225 (1989)

219 Wis. at 33. There was no showing, in the case, that employed teachers' ultimate annuities would be affected other than by a potential lessening of the "distribution of gains and savings" authorized by section 42.34, Stats. (1935).

78 Op. Att'y Gen. 198, 225 (1989)

Similarly in

State ex rel. O'Neil v. Blied

, 188 Wis. 442, 447, 206 N.W. 213 (1925), an attempt by the Legislature to repeal, retroactively, a death benefit provision of the 1921 Teachers Retirement Act was held to be an unconstitutional impairment of teachers employment contracts. Repeal of the death benefit was held constitutional, however, for teachers hired after the effective date of the repealing act.

78 Op. Att'y Gen. 198, 225 (1989)

State Teachers' Retirement Board v. Giessel

, 12 Wis. 2d 5, 9-10, 106 N.W.2d 301 (1960), the court stated:

78 Op. Att'y Gen. 198, 225-226 (1989)

It is argued that the plaintiff board is required to pay out funds according to law and appropriations from the earnings of the fund have been made by law each year, and therefore there is no vested right in the gross earnings of the fund. We do not agree. The teacher's right, based on contract, extends to the retirement system. The earnings on investments, part of which represent contributions made by the teachers and part contributed by the state under the contract with them, constitute assets of the system. The reserve for contingencies set up by the board is a part of the system.