It’s No Accident: WRS is Strong, Healthy
by Bob Conlin, ETF Secretary
Your Wisconsin Retirement System remains in solid financial condition. As you can see from the November edition’s A Look at 2017 WRS Financials, the WRS continues to be very well funded, with more than $100 billion in assets. It is well positioned to meet the benefit promises made to current and former public employees across the state. The WRS remains strong for Wisconsin. Check out ETF’s brochure, Our WRS: Strong for Wisconsin. The solid health of the WRS is no accident.
The strength of the WRS is aided by a unique benefit design in which active and retired members as well as taxpayers share in the risk and reward of investment performance. When performance is good, benefits go up and contributions go down. When performance is poor, benefits go down and contributions go up. This is not the norm in most public pension plans. Recently, the National Association of State Retirement Administrators issued a paper concerning risk sharing features in public pension plans and the WRS was one of nine plans highlighted.
Funding discipline is another important ingredient in the health of the WRS. In Wisconsin, contributions necessary to fund the promised benefits get paid regularly by 257,000 active employees and the 1,499 employers who participate in the WRS. Many states are not so disciplined in their approach, creating large funding gaps that, in some cases, will saddle future generations with higher costs for years to come. Because of this funding discipline, the WRS also enjoys lower and more stable contribution rates than many public pension systems.
Low-cost, professional investment management also gives the WRS a competitive advantage. The State of Wisconsin Investment Board has the flexibility needed to hire high quality staff to manage more money internally, and at lower cost, than most other public pension plans. You can read about some of the talented individuals who manage the WRS assets in Drummond Takes Part in Next CIO Competition and Carpenter Reflects on 30 Years at SWIB.
Lastly, the WRS benefits from strong governance. While many factors contribute to this strong governance (e.g., legislative oversight, strong ethics laws, etc.), special mention should be made of the men and women who volunteer their time to serve on the Boards that oversee the WRS. These folks, toiling out of the limelight, help oversee the operations of ETF and SWIB, make important decisions affecting the finances of the WRS and exercise the duties and responsibilities of fiduciaries who look out for the interests of the beneficiaries of the WRS – your interests.
Since the WRS was formed in 1982, trustees have done an exemplary job of guiding the WRS on the right path. For example, the ETF Board recently approved changing the assumed rate of investment return based on recommendations of its independent consulting actuary. See ETF Board Lowers Investment Return Assumption.