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Milwaukee's Model Pension Plan


We’ve devoted ample time on this blog to the cities and states who have grossly mismanaged their pension plans, and for good reason: there are far too many of them. But while the big messes get all the press, there are some cities that have been doing it right. They deserve a shout-out once in awhile. Milwaukee is a good example of a high performer; its pension fund has been fully funded—or close to it—for nearly a quarter century.

How did the city pull off a feat that has proven so difficult for so many others? As one person told NPR, “it’s not rocket science”:

“They pay their annual required contribution very consistently,” Kellar says. “So that means in good years or bad, they’re maintaining a very good discipline.”

Even when the pension had surplus funds and Milwaukee wasn’t required to make a contribution, officials here did so anyway. In contrast, Kellar says, other cities couldn’t resist raiding pension money when the economy blew up and they needed it for other expenses.

“Certainly you can understand if, on an occasional basis, you can’t make your contribution,” Kellar says. “But if that’s your normal practice, you’re not going to have the money there when people need it to retire.”

Indeed, it’s the simplicity of the solution that makes the failure of other cities so disappointing.

Meanwhile, Milwaukee looks likely to continue its hot streak; the mayor plans to scale back pension benefits for new workers in an effort to keep the fund on firm footing.

We wish more cities would follow suit. As long as you don’t wait until the last minute, it’s not that difficult.

[Milwaukee sign image courtesy of Shutterstock]

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  • Clayton Holbrook

    Good for them for keeping the pensions funded at least, as opposed to other places that have completely mismanaged pension funds. But it’s still troublesome to me that in effort to keep the funds solvent they’re cutting positions and scaling back future benefits. These are prudent measures, but it shows that the promises once made came at a price. And that price is perhaps less city services and scaled backed retirement benefits for future workers. So current and near retirees get their pensions and reaped the benefits of more funded city services while younger folks have to sacrifice.

    • Bruce

      Timing is everything. There have been a couple generations that reaped goodies far beyond what was reasonable or payable. But they were alive at the right time (assuming you get gratification for accepting benefits that aren’t sustainable to your progeny). Very few generations have had the luxury of early retirement and it’s turning out that in many cases it was hollow promises that allowed it.

  • tarentius

    This article is inaccurate and fails to mention the real reason that Milwaukee’s pension fund is in such good shape compared to most of the municipal pension funds in this country. A key feature of the Wisconsin retirement system – unique compared with the rest of the country – is that when investments in the fund do well, payments to retirees can go up. But when investments suffer losses, payments to retirees can decline.
    And just how many municipal employees unions will accept that in this country?

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