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WRS News Online Vol. 5, No. 1 - January 2019

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Important News About Delta Dental Supplemental Insurance Select Plan

State employees who have the Delta Dental Supplemental Insurance Select Plan: Make sure your dentist is a PPO provider. If your dentist is not a PPO provider (for example, a Premier provider), the new Select Plan will not cover your visits to that dentist.

To see a Premier provider, members must have the Delta Dental PPO Plus Premier-Select Plus Plan. This plan allows members to visit both PPO and Premier Providers.

To check if a dentist is a PPO or Premier provider, see the Delta Dental printable Dentist Directory available online.

ETF is offering an opportunity to switch from the Select Plan to the Select Plus Plan until January 31, 2019. Contact your employer's payroll or benefits office to request this plan change.

After January 31, 2019, a plan change will only be allowed if there is a qualifying life change event. Please note the premium difference between the Select Plan and the Select Plus Plan.

For More Information


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It’s No Accident: WRS is Strong, Healthy
by Bob Conlin, ETF Secretary

Robert Conlin

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.


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SWIB Remains Positioned for Future Success
by David Villa, SWIB Executive Director and Chief Investment Officer

David Villa

In 2006 the trustees of the State of Wisconsin Investment Board set out on a mission to transform the agency into a premier asset management firm. By building on past success with an eye toward continuous improvement, SWIB has become a recognized world-class investment manager.

In 2007 the Board hired me to help them meet their goals. It has been a tremendous honor to be a part of the journey to this point as SWIB’s chief investment officer. With the addition of the responsibilities of executive director, I am looking forward to leading a strong and talented team of dedicated professionals who will continue implementing the long-term vision of the Board.

But what does this mean for you? It means SWIB will work to implement a robust and sophisticated investment strategy designed to meet the challenges of the financial market head on, while helping grow and protect the Wisconsin Retirement System assets you count on for a more secure financial future.

Since the Great Recession, the financial markets have transitioned from an extremely accommodating to a more normal monetary policy. Going forward we see a tightening monetary policy, which means it will become more challenging to make money. Over the past several years, SWIB has put in place a relatively conservative investment strategy that is designed to provide the trust funds with moderate protection from another dramatic downturn while still earning reasonable returns.

To meet the market challenges we see coming in the next five to seven years, we will be relying on more robust and complex investment strategies. To continue to manage risk and optimize costs, SWIB will strengthen its already award-winning staff to deal with the complexity of managing assets in a more challenging environment. We will also continue to build out the infrastructure and technology needed to support the investments we are making on behalf of more than 632,000 WRS participants.

Actively managing the trust funds in a diversified portfolio is vital to the long-term success of SWIB and the WRS. Despite the challenges presented by the financial markets at times over the past ten years, the Core Trust Fund has generated a very reasonable return of 8.8%, which is ahead of the 7.0% target of the WRS.

Further, when looking over a 20-year period through December 31, 2018, SWIB’s active management has generated $43.7 billion for the Core Trust Fund above what we would have earned by simply investing in a low-cost passive portfolio consisting of 60% global equities and 40% global sovereign bonds, assuming no contributions or withdrawals.

To help SWIB continue its mission, the Board has put into place a robust leadership structure that will keep SWIB well-governed and positioned for continued success. The Board has created a management council that will advise me in connection with leading SWIB. The council consists of Rochelle Klaskin, deputy executive director/chief administrative officer; Mike Jacobs, agency business director; the newly created chief technology and operations officer; and one person representing investments, appointed by me for a rotating six-month term, initially Nick Stanton, head of multi asset strategy.

Together, Rochelle and Mike bring more than 50 years of investment and management experience to their positions. Nick, who brings 18 years of investment experience to the council, has served as the leader of the multi-asset division since it was created in 2015.

Later this year we will hire a chief technology and operations officer, who will be responsible for overseeing our operational processes and technology infrastructure. The advisory management council will allow leadership to collaborate and discuss ideas and, determine how to best implement those ideas to achieve SWIB’s goals.

The future of SWIB and the WRS is bright. SWIB has a great team and I am excited to lead it and continue our mission to keep the WRS among the best-funded public pensions in the country.

SWIB Management Council members are (back, left to right)
Nick Stanton and Mike Jacobs; and (front) Rochelle Klaskin and David Villa.


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ETF Projections for Effective Rates, Annuity Adjustments

The State of Wisconsin Investment Board has announced preliminary 2018 investment returns for the Core Trust Fund and the Variable Trust Fund. How will this affect your Wisconsin Retirement System account?

Based on these preliminary figures, the Department of Employee Trust Funds is anticipating a Core effective rate in the range of 4.8% to 5.2%. In addition, those participating in the optional Variable Trust Fund will likely see a negative Variable effective rate – somewhere between -6.0% and -10%.

Please note the actual effective rates will not be known until after Core and Variable investment returns have been finalized and an actuarial analysis conducted.

Effective rates are applied to your WRS account balances and appear on your annual WRS Statement of Benefits. Watch for announcements in February (effective rates) and March (annuity adjustments). ETF will distribute statements in April.

Note: Investment returns also affect annual adjustments to WRS retirees’ monthly pensions. Based on the 2018 preliminary returns, the Core annuity adjustment will be either 0% (no change) or a -0.5% (a decrease); the Variable annuity adjustment is projected to be -10% to -14%.

Plan Ahead
No matter your timetable for retirement, it's important that you fully understand your WRS benefits and how they work for you. We suggest learning about the following, so that you make the right decisions at the right time:

  • How trust fund investment performance affects contributions both you and your employer pay into your retirement account;
  • How effective rates and annuity adjustments for retirees are determined;
  • How WRS retirement benefits are calculated and the role that investment returns play in your benefit amount;
  • How you can enhance your eventual retirement benefit by making additional contributions, which annually are credited with the effective rate of interest each year; and
  • How participation in the Variable Fund affects your WRS benefits, both as an active employee and as a retiree.

For more information:

To receive immediate notification about WRS effective rates, annuity adjustments and other benefit-related news, sign up for ETF E-Mail Updates or follow ETF on Twitter.


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Webinar: How Rates and Adjustments Determined

Take in this Department of Employee Trust Funds webinar to learn more about how Wisconsin Retirement System effective rates and annuity adjustments are determined and how they affect your WRS benefits. You can watch and listen to the webinar, but feel free to ask questions at the end, too! Sessions are scheduled through March. Register now. Review all ETF webinars and topics.


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Update: 2019 Life Insurance Premium Rates and Cancellation Change

The Group Insurance Board recently approved life insurance premium rates for all employees who participate in the group life insurance program.

Local government employees: Effective July 1, premium rates will remain at current levels. Spouse and dependent premium rates remain unchanged as well.

State employees: Effective April 1, rates will increase 5%—the first premium increase the plan has experienced in 60 years. The rates for state employee spouse and dependent coverage will remain unchanged.

Coverage Cancellation
Beginning January 1, employees who cancel life insurance coverage will have their coverage cancelled at the end of the month in which they cancel the coverage. Previously, employees would have to wait an extra month for a life insurance cancellation to take effect.

The Department of Employee Trust Funds worked with the Legislature on a bill that made this change to the life insurance program and it was eventually signed into law as 2017 Wisconsin Act 362.

For More Information
Frequently Asked Questions: Group Life Insurance


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Telemedicine: Health Care in Your PJs

Telemedicine services through your health plan are covered at 100% for non-High Deductible Health Plan (HDHP) options. If you're on an HDHP, you will pay the full cost of the telemedicine services until you meet your deductible. Once you hit the deductible, services will be covered at 100%. The good news is even if you are paying for telemedicine appointment out-of-pocket, it is typically cheaper than an office visit. Check out this fun, one-minute video, Healthcare in Your PJs, to learn how to obtain health care using telemedicine.


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WDC Program News

FDIC Bank Option Moved to Johnson Bank
In November the Deferred Compensation Board approved moving the FDIC Bank Option from Nationwide Bank to Johnson Bank. Nationwide Bank exited the banking business and could no longer support the Wisconsin Deferred Compensation Program’s FDIC Bank Option. On December 14, 2018, assets in the FDIC Bank Option were moved from Nationwide Bank to Johnson Bank. Johnson Bank was chosen as the successor bank to Nationwide. FDIC insurance will remain the same. If you have money in the FDIC Bank Option and wish to stay in the fund, no action is required on your part. If you wish to transfer assets to or from the FDIC Bank Option, log in to your WDC account or contact the WDC at 1-877-457-9327.

Changes Coming to Investment Lineup
The WDC will discontinue offering the Federated US Gov’t 2-5 Year Institutional Fund to participants. Participants with assets in this fund will have until November 1, 2019 to redirect contributions to another investment option. May 1, 2020 is the deadline for moving balances from this fund to another investment option. If you would like to transfer assets from the Federated US Gov’t 2-5 Year Institutional Fund, log in to your WDC account or contact the WDC at 1-877-457-9327.


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Know Your Benefits: Am I Eligible for the Sick Leave Program?

An important benefit the state provides its employees is the sick leave benefit. Each pay period, employees receive sick time. If they don’t use the sick time, the time is saved and converted to credits to pay for health insurance upon retirement. The sick leave credit program is run by the Department of Employee Trust Funds.

We occasionally see cases where an employee thought they were eligible to convert unused sick leave, but later found out they didn’t meet eligibility rules. To convert your unused sick leave hours, you must:

  • be in the group health insurance program at the time of retirement and
  • retire on an immediate retirement annuity, a disability annuity or a lump-sum benefit.

There is an exception for employees who terminate employment with 20 years of Wisconsin Retirement System creditable service and do not take an immediate retirement benefit from ETF.

The sick leave program is a state program so sick leave accumulated from a local unit of government does not count toward sick leave credits. Many local employers have their own sick leave programs, but these are not connected to ETF’s program.

Find out if you are eligible for this benefit before you retire. If you have questions about your eligibility, please contact your employer’s payroll or benefits office.

For More Information:


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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. 


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ETF Website Redesign Project Under Way

The Department of Employee Trust Funds is redesigning its website to make it easier for you to find information and learn about your ETF-administered benefits. Earlier this month we gave board members of one of our stakeholder groups, the Wisconsin Coalition of Annuitants, a preview of the new site’s modern look and feel.

When the new website launches later in 2019, it will have a mobile-friendly design and improved navigation and search capabilities. The site was last fully redesigned in 2003.

Our goal is to have the right information in the right place when you need it. To ensure the website is effective, we’re involving members in the redesign process. Last fall we surveyed more than 1,500 members to identify site "pain points" and gleaned valuable feedback from interviews with employers and agency staff. ETF and its website design vendor compiled 371 tasks or reasons why members come to the website. With member input, the list was culled to about 62 top tasks that will be used to develop the new site.

Thank you to the hundreds of Wisconsin Retirement System employees, employers and retirees who have already participated in surveys and testing of website content and organization. Stay tuned for updates on our progress.


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Well Wisconsin Webinar: 2019 Program News and Highlights

Join us Wednesday, February 13 at 12:00 noon to learn about the 2019 Well Wisconsin Program and resources available to help you reach your well-being goals. These include health coaching services, online challenges and more. This webinar will also cover what is new for the 2019 well-being activities and details for earning your $150! Sign up via the Well Wisconsin Program portal.


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SWIB Wins Allocators’ Choice Award

SWIB has long been recognized as an investment leader because of its success in maintaining the WRS and for the highly-qualified staff overseeing the retirement trust funds. That recognition continued in 2018 with a pair of honors.

For the second time in as many years, SWIB was chosen by its peers as an Institutional Investor Allocators’ Choice Award winner. SWIB brought home top honors in the category of Change Maker of the Year. At last year’s inaugural Allocators’ Choice Awards, SWIB won the Team of the Year and Technology User of the Year awards.

SWIB was recognized this year for the work staff is doing to generate returns above the market through active management. SWIB’s work is starting to influence the way other public pension funds are investing. In voting for the Change Maker of the Year award, industry peers acknowledged SWIB’s strategy could be a model for other public pension systems.


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SWIB’s Drummond Takes Part in Next CIO Competition

Derek Drummond

Competing under challenging circumstances is nothing new for Derek Drummond. As a SWIB investment manager, Drummond is constantly challenged to find investments across traditional and alternative strategies that will benefit the Wisconsin Retirement System and its members.

As a veteran triathlete, Drummond challenges himself through each tough endurance race to achieve a personal best time. Being an investment professional and a triathlete requires the ability to think clearly under pressure, rely on information from past experiences, and excel under different, and sometimes difficult, conditions.

Recently, Drummond faced a different kind challenge—one that allowed him to utilize some of those skills as a top investment manager and a triathlete. The newest challenge was on a stage in front of more than 200 asset allocators, investment consultants, and money managers as part of Institutional Investor’s Next CIO competition.

Over a series of three fast-paced rounds, 32 senior investment staff who work at endowments, foundations and pensions answered pressing institutional investing questions in a competition set in Chicago.

Participants did not know the questions in advance, had only two minutes to answer, and were voted on by their peers in real time. Drummond’s quick thinking and thorough answers helped him advance to New York City, where he competed against five participants in the competition’s final round in early December. Although he didn’t win the overall competition, Drummond said taking part was a learning experience.

“We have a stellar reputation across the board and this just solidifies SWIB as a thought leader and it helps keep our network fresh,” Drummond said. “Taking part in something like this connects me to my peers. I get to hear the thoughts and ideas from some of the best and brightest people in the industry. I can take what I have learned and incorporate it into what I am doing daily. It is a tremendous benefit.”

This is not the first time Drummond, who joined SWIB in 2010, has been recognized by his peers. In 2012, he was named a Rising Star of Public Fund Management by Investment Management Network. Institutional Investor named in a Rising Star in 2014, and he was named to Chief Investment Officer magazine’s list of “40 Under 40.”

So, what is more stressful: Finding new investments, competing on the triathlon course, or squaring off against your peers in a pressure packed competition? “The competition, by far,” Drummond said with a smile. “You are in a room with some of the brightest people, your peers in the industry, and you have two minutes to say something insightful. Finding new investments for the WRS isn’t stressful, it is our bread and butter.”


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Carpenter Reflects on 30 Years at SWIB

Chuck Carpenter

Numbers are a big part of Chuck Carpenter’s job at SWIB. As the managing director of the Private Markets and Funds Alpha Division, Carpenter spends a lot of time reviewing investment returns and portfolio projections. As Carpenter prepares to retire in April, he reflected on another number, 30 years at SWIB, Carpenter said there is only one figure that is truly the most important to him: The more than 632,000 members of the Wisconsin Retirement System.

“WRS members are why each one of us at SWIB comes to work every day, Carpenter said, “to do what we can to have a positive impact on their lives today and in the future.”

Carpenter’s journey to SWIB started at Yale University, where he earned his undergraduate degree. He then earned a master’s degree in real estate appraisal and investment analysis from the University of Wisconsin-Madison. Carpenter arrived at SWIB in 1988 and now, three decades later, oversees the private equity, real estate, hedge funds, externally managed active accounts, private debt, and venture capital portfolios. Carpenter is responsible for investment strategy, review and approval of all new investments, and management of four teams of portfolio managers and analysts.

Things have certainly changed over Carpenter’s 30 years at SWIB. The amount of money managed by SWIB has increased from approximately $18.2 billion to more than $116 billion today. As the amount of assets under management has increased and more is managed internally, the staff has grown. Carpenter points to a decision by the Board of Trustees in 2001 to delegate investment discretion to staff and incorporating the “prudent investor standard” into state statutes as two significant changes he has seen during his career at SWIB.

“I think the biggest changes have involved governance,” he said. “Previous statutes and investment policies made it more challenging to address certain attractive investment opportunities. Those changes have helped in allowing SWIB to grow and successfully manage the trust funds.”

Despite all the changes, Carpenter said his main goal remains the same: make money for the WRS. “That means battling in the market to invest in deals that positively benefit the retirement funds,” he said. “I do what I can to enable my team to reach their full potential in maximizing returns to SWIB and reach our overall goal.”

Carpenter is not sure what the next 30 years will bring for him. For now, he is still dedicated to working on behalf of the participants of the WRS and helping SWIB prepare for the next 30 years and beyond. Carpenter is looking forward to the next chapter in his life, but for now, he is still dedicated to working on behalf of the participants of the WRS.


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New ETF Drop Box for Documents

Employee Trust Funds has installed a drop box for members who simply need to drop off a document or form – no need to bring it up to our 8th floor reception desk! Look for this secure, locking drop box outside the Visitor’s entrance to the Hill Farms State Office Building.

Here’s what you should know about this convenient new service:

  • Please deposit only ETF documents.
  • ETF date stamps all forms and empties the drop box daily. Forms submitted after 3:00 p.m. may not be date stamped until the next business day.
  • Bring time-sensitive documents to our 8th floor reception desk, which is staffed from 7:45 4:30 p.m., Monday through Friday. Stop at the security desk in the lobby obtain a visitor security badge.

If you have questions, please contact ETF at 1-877-533-5020 or send us an email.


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Video: How to Use Opioids Safely

Medications are generally good for you, but some, if taken incorrectly, can be harmful. Navitus, the pharmacy benefit manager for the state's group health insurance program, developed an informative three-minute video full of tips for ensuring you or a loved one are using prescription opioids safely.


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ETF Seeks Individuals with Abandoned Accounts

Every January ETF publishes a notice of individuals age 70 or older who have abandoned WRS accounts. Members or their heirs have 10 years after published notification to apply for the benefit. Find the current list of individuals with abandoned WRS accounts and their benefit application deadlines on our website.


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Upcoming Board Meetings

The next Group Insurance Board meeting is set for February 20. The ETF Board, Teachers Retirement Board, and Wisconsin Retirement Board will meet on March 21. All meetings will be held at the Hill Farms State Office Building. Find the board meeting agendas and materials here.

The SWIB Board of Trustees will meet on March 12-13 at SWIB’s office building at 121 E. Wilson Street, Madison. Find the board meeting agendas and materials here.



Last Revised: January 23, 2019
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