WRS News Online

Trust Fund Investment Performance Affects Rates and Annuity Adjustments

How will recent investment performance affect your Wisconsin Retirement System account balances next spring? The effective rates will be announced in late February, once final investment returns for calendar year 2016 and the results of an actuarial analysis are determined.

In the meantime, the Department of Employee Trust Funds continues to advise all members to prepare for an extended period of investment market volatility and low returns. For employees, this may mean relatively modest or low effective rate interest crediting. For retirees, this may mean flat — or perhaps negative — Core annuity adjustments.

An article we ran in the May 2016 edition of WRS News Online pointed out projected Core effective rates and annuity adjustments based on three different scenarios. These projected rates and adjustments are presented in the table below:

Projected WRS Core Effective Rates and Annuity Adjustments

 

2016 Core Fund Net Investment Return

Projected 2017 Core Effective Rate

Projected 2017 Core Annuity Adjustment

Scenario 1

7.2%

7.4% to 7.8%

1.2% to 1.6%

Scenario 2

0.0%

6.0% to 6.4%

0.0%

Scenario 3

-3.8%

5.2% to 5.6%

-0.5%

Keep in mind these are projections only, we still have four more months to go in the calendar year, and no one has a crystal ball. As of July 31, preliminary investment returns for the trust funds were 7.0% for the Core and 6.7% for the Variable.

Despite an extended volatile market, SWIB’s 20-year return for the Core Fund is 7.4%, which is higher than the expected rate of return of 7.2%.

The median investment return assumption among U.S. public employee pension plans is 7.7%. Some industry experts, however, believe the next few years will bring returns averaging approximately 6% a year.

Stay informed: Find out about preliminary investment returns for the trust funds on a monthly basis by monitoring our website, signing up for our free e-mail notification service, ETF E-mail Updates, or following ETF on Twitter. We usually communicate this news by the 10th business day of each month.

For more information

  • See Core Fund Annuity Adjustment Projections, a March 2016 presentation to the governing boards of the WRS. This presentation, updated annually by ETF, reviews a range of projected Core effective rates and annuity adjustments using several Core Trust Fund investment return scenarios.
  • Review this table, which shows the relationship between Core and Variable Trust Fund investment returns and effective rates and annuity adjustments since 1986.
  • Find all of our webinars, videos and e-learning presentations on the Member Education web page.