Department of Employee Trust Funds
March 14, 2017
ETF Announces WRS Annuity Adjustments
Core Fund: 2.0%
Variable Fund: 4.0%
ETF announced annuity increases for the nearly 200,000 retirees of the Wisconsin Retirement System today. The Core annuity adjustment is 2.0% and the Variable annuity adjustment is 4.0%, effective May 1.
This is the fourth consecutive year of positive Core annuity adjustments.
By design, the WRS does not provide guaranteed cost of living adjustments, or COLAs. Instead, annual Core annuity adjustments (dividends) are based on trust fund investment performance and actuarial assessments to fund current and future WRS retirement benefits.
The State of Wisconsin Investment Board reported final investment returns for 2016 of 8.6% for the Core Fund and 10.6% for the Variable Fund. Approximately 75% of WRS benefits paid come from investment earnings generated by SWIB, which manages WRS trust fund assets.
To limit wide swings in retiree pensions from year to year, gains and losses in the Core Trust Fund are spread ("smoothed") over a five-year period. This year's 2% Core annuity adjustment reflects investment results from 2012-2016. Smoothing also helps keep annual changes in WRS employer and employee contribution rates stable.
- The WRS paid nearly $4.9 billion in retirement benefits in 2016. More than 85% of WRS retirees live in Wisconsin.
- The average annual pension of WRS retirees is approximately $24,700, as of December 31, 2016.
- With approximately $98 billion in assets, the WRS is the 9th largest U.S. public pension fund and the 25th largest public or private pension fund in the world.
- Core annuities will be increased if there is an annuity reserve surplus of at least a 0.5% increase, or reduced if there is an annuity reserve shortfall of at least a 0.5% decrease.
- Annualized annuity adjustments for the Core and Variable Trust Funds, as of December 31, 2016, are as follows:
- Core, 5-year: 1.4%
- Core, 10-year: 0.5%
- Core, 20-year: 2.6%
- Variable, 5-year: 6.5%
- Variable, 10-year: 0%
- Variable, 20-year: 1.5%
- 5-year: 1.4%
- 10-year: 1.8%
- 20-year: 2.1%
- ETF will present projections for future Core annuity adjustments and effective rates (applied to active employee accounts) to the ETF Board on March 23.