78% of West Virginia educators decided to "switch back" to the defined BENEFITS retirement...and, with good reason! You can't retire with peanuts!?

From John Curry, June 17, 2008

I'll bet the banks, brokerage houses, and their lobbyists in West Virginia are "singing the blues" right about now! Their loss is the retirees' gain.....and then some! John

Charleston Daily Mail: "The average teacher had saved just $33,944 in his or her TDC retirement account, according to state data. Of the 1,100 enrollees age 60 or older, only 23 had more than $100,000. None had more than $157,000."

Tuesday June 17, 2008
Will teachers retirement switch cause a flood of departures?
by Kelly Holleran
Daily Mail staff

School administrators are still trying to estimate how many teachers in the state will decide to retire this year after a change in state law will allow them to switch retirement plans.

"We haven't been able to actually see," Kanawha County Superintendent Ron Duerring said of the number of teachers who plan to retire.

All school staff who plan to retire by September 1 must notify school administrators by June 30.

In Putnam County, too, it has been difficult to predict how many teachers will retire or are considering it.

"I've had one teacher inquire, but we could very well have several," said Barbara Brazeau, director of personnel for Putnam County schools. "Hopefully we'll have better data in the next couple of weeks."

About 5,404 teachers and administrators in West Virginia are eligible to retire this year, but that does not mean all will.

"It's always a possibility," said Liza Cordeiro, spokeswoman for the Department of Education. "I'm not going to speculate on the number of teachers who will."

In 2009 an additional 1,091 teachers will be able to retire and 1,094 more could retire in 2010, Cordeiro said.

About 15,000 West Virginia school employees chose to transfer from the new Teachers Defined Contribution system, a 401(k)-type retirement savings program, into the old Teachers Retirement System, a program that guarantees a pension benefit based on their salaries.

The average teacher had saved just $33,944 in his or her TDC retirement account, according to state data. Of the 1,100 enrollees age 60 or older, only 23 had more than $100,000. None had more than $157,000.

The Legislature tried to solve the problem in 2005 by letting school workers vote on whether to return to the traditional retirement system. There was a requirement that if the majority voted to do so, all would be required to make the switch.

That didn't go over well with many teachers.

A lawsuit was filed, and the requirement was overturned in Kanawha Circuit Court. Plaintiffs successfully argued that the state was proposing an illegal taking of retirement savings from those who wanted to stay in the defined-contribution plan.

Under this year's legislation, at least 65 percent had to vote in favor of transferring for school employees to have been allowed to switch back to the old retirement plan. A majority of employees -- 78.3 percent, or 14,871 -- voted in favor of the switch by the May 12 deadline.

In the defined contribution plan, employees were required to contribute 4.5 percent of their earnings, while those in the defined benefit system were required to contribute 6 percent.

Therefore, those who opt to switch to the older plan must pay an amount equivalent to 1.5 percent of their salary for every year spent in the defined contribution plan, plus 4 percent interest.

That is a substantially lower cost than what they would have been forced to pay had fewer than 75 percent of employees voted in favor of switching.

Employees who want to switch to the older plan but don't have the money may elect to receive only 75 percent of the normal benefit without paying the buy-in cost.

Duerring said he has his doubts that many Kanawha County teachers will choose to retire this year. He thinks many may have voted in favor of switching back to the TRS so they would be guaranteed an opportunity to retire in the future, not necessarily so they could immediately retire.

Still, he said he can't be too sure.

"We won't have the numbers until the end of summer," he said.