Sen. Kohl to Geithner - "I want a Sweet deal"

Senator “Herb” Kohl is the senior senator from the state of Wisconsin. He’s a democrat. He was first elected to office way back in 1988. Twenty-two years in the senate comes with some important responsibilities. The good senator is on the Appropriations, Judiciary, and Banking Committees. He is the Chairman of both the Special Committee on Aging and the Agricultural Appropriations Committee.


Bottom line; Herb Kohl has clout in D.C. He is one of America’s elder statesmen. So when he asks for a favor it’s very hard to say “no”. I wonder what Tim Geithner is going to do with Herb’s recent letter asking for a change in the rules for retirement ages for cops and fireman from the great state of Wisconsin and every other state in the Union. Here’s what Senator Kohl is asking for:

I ask that you amend the regulations to make clear that the public safety employees safe harbor apply to WRS protective occupation participants. These participants put their lives on the line every day to protect our citizens and they deserve to retire with full benefits at the ages of 53 and 54.

I’ve got nothing against cops and I’ve always liked fireman. It’s not that I don’t think this group of people shouldn’t get a leg up. But at whose expense? What about those nurses, EMT folks, and ER Docs? What about everyone else?

The country is about to increase the Social Security retirement age and push back eligibility for Medicare to 67. And Kohl wants to cut the cops a sweetheart deal where they can retire with full benefits 12 years before anyone else.

We have two classes of workers in the USA; those that work for government and those in the private sector. There are two different sets of rules. The differences are in the number of holidays, benefits (far superior health care), job security and retirement benefits. Senator Kohl’s proposal makes the gap even larger.

Senator Kohl needs to understand that America is not the rich country that it once was. Our states, cities and municipalities simply can no longer afford the largess proposed by Kohl. The rules that he suggests are fair and reasonable actually aren’t fair or reasonable at all.

Senator Kohl is not blind. Nor is he uninformed. He must know that a suggestion like this is going to be received very badly by the folks who have to pay for it. That said, watch out for this one. Kohl’s clout makes even this proposal a possibility.

It’s an even money bet that this will happen. Special interest politics is the way of the land these days. But here’s my bet for the Senator: Those cops and fireman who will get this benefit will never see those checks. The government promises they are relying on will be broken at some point in the future. America does not have the resources to make these promises anymore. We will go broke because so many of these special interest promises have been made.

We can hope and even expect that our political leaders will do the “right thing” in these difficult times. There is a broad awareness that everyone is going to have to do a bit more and get a bit less in the New America. But that does not seem to be the case with this Senator. He is working against the best interests of the country. In the end, those that he is trying to curry favor from will be the losers. I suspect the Senator knows this. He doesn’t care.

The full letter from Senator Kohl to Tim Geithner:

United States Senate
Special Committee on Aging
Washington, DC 20510-6400
(202) 224-5364

April 21, 2011

Honorable Timothy J. Geithner
Secretary
United States Department of Treasury
1500 Pennsylvania Avenue
Washington, DC 20220

Dear Secretary Geithner:

The purpose of this letter is to express my concern regarding the impact of certain Treasury regulations on the normal retirement age (“NRA”) of protective occupation participants, including police officers and fire fighters, in the Wisconsin Retirement System (“WRS”). I ask that you modify your regulations to ensure that these public safety employees can maintain their current NRA under the WRS.

Background

In 2007, the Treasury Department issued final regulations on NRA in pension plans (the “NRA Regulations”)(1.401(a)-1(b)). NRA is a term referring to the earliest age at which a pension plan participant can retire with an unreduced benefit from their plan.

In general, the NRA Regulations provide that, “normal retirement age under a plan must be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.” The regulations go on to provide that a NRA of 62 or older would meet this requirement. However, whether an NRA of ages 55 to 62 meets the general rule would be based on all of the relevant facts and circumstances - and an NRA that is less than 55 years is presumed to be unreasonable (unless determined otherwise by the IRS Commissioner).

The NRA Regulations are not effective for governmental plans until plan years beginning on or after January 1, 2013.

Wisconsin Retirement System (WES)

Under the WRS, all state employees are in the same plan. General employees constitute about 90.7 percent of the plan's active participants - and protective occupation participants make up about 8.7 percent. Protective occupation participants under the WRS include those employees whose principal duties involve active law enforcement or active fire suppression or prevention, frequent exposure to a high degree of danger or peril and a high degree of physical conditioning. Protective occupation participants include police officers and fire fighters.

NRA for WRS Protective Occupation Participants

The NRA for general employees under the WRS is age 65. However, the NRA age for protective occupation participants in the WRS is age 53 with 25 years of service or age 54 with less than 25 years of service.

Because the NRA for WRS protective occupation participants is less than 55 years, under the NRA Regulations, there would be a negative presumption that the age is unreasonable. And if the NRA is deemed unreasonable, the age may need to be raised to comply with the regulations.

Most public safety employees in other state pension plans avoid this result through the public safety employees safe harbor in the NRA Regulations. Under the safe harbor, a NRA under a plan that is age 50 or later would meet the requirements of the regulations if substantially all of the participants in the plan are qualified public safety employees. However, even though WRS protected occupation participants are qualified public safety employees, this safe harbor may not apply to them. This is because they participate in the same plan as general employees and do not constitute a majority of the total active membership. Therefore, protective occupation participants within WRS may not meet the “substantially all” requirement of the safe harbor.

I ask that you amend the regulations to make clear that the public safety employees safe harbor apply to WRS protective occupation participants. These participants put their lives on the line every day to protect our citizens and they deserve to retire with full benefits at the ages of 53 and 54. Furthermore, these participants were promised these benefits and relied on these promises. Therefore, it's unjust to cut their benefits after the fact.

I look forward to working with you to address this problem. Should you have any questions, please contact Ashley Carson at 202-224-5364 or Kristen Kreple at 202-224-3406.

Sincerely,

Herb Kohl
Chairman

cc: J. Mark Iwry, Senior Adviser to the Secretary, Deputy Assistant Secretary for Retirement and Health Policy, United States Department of Treasury

George H. Bostick, Benefits Tax Counsel, United States Department of Treasury