WRS News Online

ETF Board Lowers Investment Return Assumption

The Employee Trust Funds Board, acting on the recommendations of its independent consulting actuary, recently updated key economic and demographic assumptions used to value the liabilities of the Wisconsin Retirement System.

The new assumptions will be used in the 2018 WRS actuarial valuation, which is used to set contribution rates for 2020. Specifically, the Board:

  • reduced the assumed rate of return for WRS investments from 7.2% to 7.0%;
  • reduced the wage growth expectation, which is used to project a member’s wage at the time of retirement, from 3.2% to 3.0%; and
  • adjusted mortality assumptions to better reflect WRS participant experience 

The investment return assumption change will have little to no effect on future required contributions for most employees. The change in mortality assumptions is due to increased longevity. Lower mortality rates translate to a slight decrease in Money Purchase factors and slightly higher option conversion factors because the member and their survivor are expected to live longer. The changes will go into effect on January 1, 2020.

Nationally, investment return assumptions have been steadily declining over the last decade. The median assumption nationally among major public pension plans is 7.38%, according to a report by the National Association of State Retirement Administrators.


Funds to pay WRS benefits come from three sources: investment returns and employer and employee contributions. In general, lowering the assumed rate of return would put upward pressure on employer and employee contribution rates to fund benefits.

By law, the assumptions that are used to value the liabilities and assets of the WRS are reviewed every three years. This systematic review is called an “experience study” and is used to ensure the assumptions that underlie the WRS’s funding plan are suitable. Continued use of outdated figures, for example, could result in understating or overstating the overall cost of benefits.

While the ultimate cost of the pension plan is determined by what actually transpires, the assumptions are used to set rates in order to ensure adequate funds are available for current and future benefits. The most recent actuarial analysis supported lowering both the investment return assumption and wage expectations. 

For More Information

Review the consulting actuary’s full report and presentation to the Board.