1995 - 1996 LEGISLATURE
October 12, 1995 - Introduced by Representatives Klusman, Brancel, Hoven,
Wirch, Olsen, Notestein, Dobyns, Goetsch, Grothman
and Kaufert,
cosponsored by Senators Fitzgerald, Andrea and Panzer. Referred to Joint
survey committee on Retirement Systems.
AB617,1,4 1An Act to amend 40.02 (33) (a) 1., 40.02 (33) (b), 40.02 (33) (c), 40.05 (1) (intro.),
240.05 (2) (intro.), 40.05 (2m) and 40.30 (4) (b) of the statutes; relating to:
3calculating an annuity for participating employes under the Wisconsin
4retirement system.
Analysis by the Legislative Reference Bureau
Under current law, the Wisconsin retirement system (WRS), a public pension
plan that covers state and certain local employes, is subject to certain federal laws.
In 1993, the federal government enacted a law that limits the amount of
compensation that may be taken into account for retirement benefit purposes.
Beginning in 1994, the maximum amount of annual compensation that may be
considered for retirement benefit purposes is $150,000, with limited future
indexing. However, federal law provides that a public sector retirement plan, such
as the WRS, may grandfather in participating employes who are hired before
January 1, 1996, at the specified maximum annual compensation limit in state law
as of July 1, 1993. Under the WRS, there is no maximum annual compensation limit.
In order to qualify for this exception for participating employes hired before January
1, 1996, the WRS retirement plan must be amended to specifically exempt these
employes from the 1994 federal law maximum annual compensation limits. This bill
specifically exempts these WRS participating employes from the 1994 federal law
maximum compensation limits for WRS purposes.
This bill will be referred to the joint survey committee on retirement systems
for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB617, s. 1 1Section 1. 40.02 (33) (a) 1. of the statutes is amended to read:
AB617,2,82 40.02 (33) (a) 1. The participant's total earnings received or considered to be
3received under sub. (22) (e) or (em) and for which contributions are made under s.
440.05 (1) and (2) during the 3 annual earnings periods (excluding any period more
5than 3 years prior to the effective date for any participating employer) in which the
6earnings were the highest, subject to the annual compensation limits under 26 USC
7401
(a) (17) for a participating employe who first becomes a participating employe
8on or after January 1, 1996
; by
AB617, s. 2 9Section 2. 40.02 (33) (b) of the statutes is amended to read:
AB617,2,1810 40.02 (33) (b) For a state elected official who is prohibited by law from receiving
11an increase in compensation during the official's term of office and who so elects,
12one-twelfth of the annual salary, subject to the annual compensation limits under
1326 USC 401 (a) (17) for a participating employe who first becomes a participating
14employe on or after January 1, 1996,
which would have been payable to the
15participant during the last completed month in which the participant was a
16participating employe in such a position if the participant had not been prohibited
17by law from receiving an increase in salary during his or her term of office, but only
18with respect to service as a state elected official.
AB617, s. 3 19Section 3. 40.02 (33) (c) of the statutes is amended to read:
AB617,3,320 40.02 (33) (c) For a participant who makes an election under s. 40.30 (2), the
21monthly rate of earnings applicable under par. (a) or (b), increased as provided under

1s. 40.30 (4) (b) but subject to the annual compensation limits under 26 USC 401 (a)
2(17) for a participating employe who first becomes a participating employe on or after
3January 1, 1996
.
AB617, s. 4 4Section 4. 40.05 (1) (intro.) of the statutes is amended to read:
AB617,3,95 40.05 (1)Employe retirement contributions. (intro.) For Wisconsin
6retirement system purposes employe contributions on earnings for service credited
7as creditable service shall be subject to the annual compensation limits under 26
8USC 401
(a) (17) for a participating employe who first becomes a participating
9employe on or after January 1, 1996, and shall be
made as follows:
AB617, s. 5 10Section 5. 40.05 (2) (intro.) of the statutes is amended to read:
AB617,3,1411 40.05 (2)Employer retirement contributions. (intro.) For Wisconsin
12retirement system purposes and subject to the annual compensation limits under 26
13USC 401
(a) (17) for a participating employe who first becomes a participating
14employe on or after January 1, 1996
:
AB617, s. 6 15Section 6. 40.05 (2m) of the statutes is amended to read:
AB617,4,216 40.05 (2m) Benefit adjustment contribution. Except as provided in sub. (2n),
17in addition to the amounts under subs. (1) and (2), a benefit adjustment contribution
18equal to 1% of earnings shall be paid by or for participating employes whose formula
19rate is determined under s. 40.23 (2m) (e) 1. and 3. This contribution shall be
20deducted from each payment of earnings to participating employes unless the
21employer provides through its compensation provisions or agreements that all or
22part of the contribution will be paid by the employer. For benefit purposes, this
23contribution shall be treated as if it were an employer required contribution
24regardless of whether the employer or the employe pays the contribution and, for a

1participating employe who first becomes a participating employe on or after January
21, 1996, shall be subject to the annual compensation limits under 26 USC 401 (a) (17)
.
AB617, s. 7 3Section 7. 40.30 (4) (b) of the statutes is amended to read:
AB617,4,164 40.30 (4) (b) The Subject to the annual compensation limits under 26 USC 401
5(a) (17) for a participating employe who first becomes a participating employe on or
6after January 1, 1996, the
final average salary or final average earnings used in the
7benefit formula computation for each retirement system under par. (a) shall be the
8individual's final average salary or final average earnings under the respective
9retirement system, determined in accordance with the provisions of that retirement
10system based on the earnings covered by that retirement system and on all service
11permitted under that retirement system to be used in determining the final average
12salary or final average earnings, increased by the percentage increase in the average
13of the total wages, as determined under 42 USC 415 (b) (3) (A), between the date on
14which the individual terminated all employment covered by that retirement system
15and the date on which the individual terminated all employment covered by any of
16those retirement systems.
AB617,4,1717 (End)
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