Wisconsin Legislature: Employe Trust Funds Board; Employe Trust Funds, Department Of; Retirement Systems;

80 Op. Att'y Gen. 101, 112 (1991)

The "early retirement window" and reduction in early retirement penalty (after closure of the window on June 30, 1990) could, by itself, be held sufficient justification for any "forfeiture of specific rights and benefits." Section 40.19(1) states that "[t]his section shall not be interpreted as preventing the state from requiring forfeiture of specific rights and benefits as a condition for receiving subsequently enacted rights and benefits

of equal or greater value to the participant

80 Op. Att'y Gen. 101, 112 (1991)

The Wisconsin courts have not interpreted the term, "participant," as used in section 40.19(1), in regard to whether the offsetting advantage is to be balanced against detriment to the group or to an individual employe. Courts of other states are divided on this question.

See

Singer v. City of Topeka

, 227 Kan. 356, 607 P. 2d 467, 475 (1980) ("[R]easonableness of legislative changes is to be measured by the advantage or disadvantage to the affected employees as a group or groups....") and

Abbott v. City of Los Angeles

, 50 Cal. 2d 438, 326 P. 2d 484, 492 (1958) ("[I]t is by advantage or disadvantage to the individual employes whose already earned and vested pension rights are involved that the validity of attempted changes in those rights depends...."). I have no facts or actuarial studies, before me, that indicate that any individual participant or group of participants is substantially disadvantaged when balancing the advantages against the disadvantages of 1989 Wisconsin Act 13. Without clear indication of a "substantial" alteration of contractual rights without an offsetting benefit, the presumption of constitutionality of legislative acts controls.

80 Op. Att'y Gen. 101, 112 (1991)

A party who challenges the constitutionality of an act carries a heavy burden of persuasion. Our cases make it clear that

80 Op. Att'y Gen. 101, 113 (1991)

"[i]t is not enough that respondent establish doubt as to the act's constitutionality nor is it sufficient that respondent establish the unconstitutionality of the act as a probability. Unconstitutionality of the act must be demonstrated beyond a reasonable doubt. Every presumption must be indulged to sustain the law if at all possible and, wherever doubt exists as to a legislative enactment's constitutionality, it must be resolved in favor of constitutionality."

State ex rel. Hammermill Paper Co. v. La Plante

, 58 Wis. 2d 32, 46, 205 N.W.2d 784 (1973);

County of Portage v. Steinpreis

, 104 Wis. 2d 466, 478, 312 N.W.2d 731 (1981). We affirm our previous statement that:

80 Op. Att'y Gen. 101, 113 (1991)

"If there is any reasonable basis upon which the legislation may constitutionally rest, the court must assume that the legislature had such fact in mind and passed the act pursuant thereto. The court cannot try the legislature and reverse its decision as to the facts. All facts necessary to sustain the act must be taken as conclusively found by the legislature, if any such facts may be reasonably conceived in the mind of the court."

State ex rel. Carnation Milk Products Co. v. Emery

, 178 Wis. 147, 160, 189 N.W. 564 (1922);

State v. Interstate Blood Bank, Inc.

, 65 Wis. 2d 482, 489, 222 N.W.2d 912 (1974).

80 Op. Att'y Gen. 101, 113 (1991)

Treiber v. Knoll

, 135 Wis. 2d 58, 64-65, 398 N.W.2d 756 (1987). Absent any showing that the facts as found by the Legislature are not reasonable, it appears that there is no "substantial" alteration of contract rights not offset by "benefits of equal or greater value." I therefore find no contract clause violation by enactment of 1989 Wisconsin Act 13.

80 Op. Att'y Gen. 101, 113 (1991)

You also ask:

80 Op. Att'y Gen. 101, 113-114 (1991)

Is there authority under Wisconsin law which would allow the Board to add the increased cost to the "unfunded accrued actuarial liability" (UAAL) provided for in s. 40.05(2)(b) through (bw) as proposed by WEAC in its December 14 correspondence?

80 Op. Att'y Gen. 101, 114 (1991)

WEAC suggests that the shortfall resulting from the error in reporting of creditable service to the actuary could be remedied without an increase in the employe contribution rate by increasing the UAAL and amortizing it over a thirty-nine year period (WEAC presentation to ETFB on December 14, 1990 at 1). As you state in explanation of this question at page 3 of your January 7, 1991 letter:

80 Op. Att'y Gen. 101, 114 (1991)

If permissible under the law, the use of the UAAL approach would almost certainly result in an increase in contribution rates but these increases would apply only to employers.

80 Op. Att'y Gen. 101, 114 (1991)

It is my opinion that the authority to adjust the UAAL and establish a new forty-year amortization period, utilized by the ETFB in setting calendar 1990 contribution rates, was a one-time grant of authority and once used could not again be used to reallocate liabilities. The ETFB thus had no statutory authority to adjust the UAAL in setting 1991 or later contribution rates.

80 Op. Att'y Gen. 101, 114 (1991)

The UAAL results from unfunded prior service liability of participating employers, the unfunded costs of system benefit increases (not fully paid for by the enacting legislation) and interest on both of these liabilities. Section 40.05(2)(b) provides:

80 Op. Att'y Gen. 101, 114-115 (1991)

Contributions shall be made by each participating employer for unfunded prior service liability in a percentage of the earnings of each participating employe. A separate percentage rate shall be determined for the employe occupational categories under s. 40.23(2m) as of the employer's effective date of participation. The rates shall be sufficient to amortize as a level percent of payroll over a period of 40 years from the later of that date or January 1, 1986, the unfunded prior service liability for the categories of employes of each employer determined under s. 40.05(2)(b), 1981 stats., increased to reflect any creditable prior service granted on or after January 1, 1986, increased to reflect the effect of 1983 Wisconsin Act 141, increased at the end of each calendar year after January 1, 1986, by interest at the assumed rate on the unpaid balance at the end of the year and adjusted under par. (bw).

80 Op. Att'y Gen. 101, 115 (1991)

In addition, section 47(2) (nonstatutory provisions) of 1989 Wisconsin Act 13 provides:

80 Op. Att'y Gen. 101, 115 (1991)

As of the last day of the first full month occurring after the effective date of this subsection, $500,000,000 shall be distributed from the transaction amortization account of the fixed retirement investment trust to the appropriate reserves of the fixed retirement investment trust in an amount equal to a percentage of the total distribution determined by dividing each reserve's balance on the prior January 1 by the total balance of the fixed retirement investment trust on the prior January 1. The resulting increase in the employer accumulation reserve shall, on recommendation of the actuary, be first applied to funding any liabilities created by this act, and the balance shall be equitably allocated among employers that were participating employers under the Wisconsin retirement system on December 31, 1985, based on each employer's share of the total covered payroll in 1985. The individual employer unfunded prior service liability amounts and rates may be adjusted, a new 40-year amortization period shall be established to reflect this distribution, and liabilities may be reallocated between current and prior service liabilities as recommended by the actuary to meet the objective of stabilizing future total contribution rates.

80 Op. Att'y Gen. 101, 115-116 (1991)

Nonstatutory section 47(2) thus authorized the ETFB to adjust the UAAL to fund any liabilities created by 1989 Wisconsin Act 13 remaining after crediting the indicated portion of the $500,000,000 distribution from the transaction amortization account to the employer accumulation reserve. Based on the general effective date of 1989 Wisconsin Act 13, May 16, 1989, the actuary recommended and the ETFB utilized such a UAAL adjustment in setting the calendar 1990 rates.

See

Wisconsin Department of Employe Trust Funds 8th Annual Actuarial Valuation, December 31, 1988, at 23. The actuary was required to take UAAL adjustment into consideration in recommending the calendar 1990 contribution rate since such rates are "determined on the basis of the information available at the time the determinations are made." Sec. 40.05(2)(am), Stats. I find this action by the actuary and ETFB to be consistent with section 47(2) of Wisconsin Act 13.