Department of Employee Trust Funds
March 13, 2018
ETF Announces WRS Annuity Adjustments
ETF announced that Wisconsin Retirement System retirees will receive annuity increases (dividends) beginning May 1. The Core annuity adjustment is 2.4% and will be provided to all 203,000 WRS retirees. In addition, about 41,000 retirees will see the Variable portion of their annuities increase by 17.0%.
Strong investment performance in 2017 generated the dividends.
The WRS by design does not provide guaranteed cost of living adjustments, or COLAs. Rather, annual annuity adjustments are based on trust fund investment returns and the funding needs of the WRS. This design feature contributes to the strong financial position of the WRS, which is nearly 100% funded.
WRS assets are managed by the State of Wisconsin Investment Board, which in January reported 2017 investment returns of 16.2% for the Core Trust Fund and 23.2% for the Variable Trust Fund.
Core vs. Variable
SWIB invests the Core Fund in a significant amount stocks, but also has holdings in bonds, real estate and private equity. It is a fully diversified, balanced fund. Gains and losses are spread (smoothed) over a five-year period to help keep annuity adjustments and WRS employer and employee contribution rates stable. All WRS members participate in the Core Fund.
The Variable Fund is only invested in domestic and international stocks. Gains and losses are not smoothed. As a result, WRS members who opt to participate in the Variable are exposed to a higher degree of risk.
- Approximately 75% of revenues needed to fund the WRS comes from investment earnings.
- The WRS paid nearly $5.2 billion in retirement benefits in 2017.
- More than 85% of WRS retirees live in Wisconsin, pay taxes and buy goods and services.
- With approximately $108 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 0.5%, or reduced if there is an annuity reserve shortfall of at least 0.5%.
Average WRS Annuity Adjustments
(Annualized as of December 31, 2017)
|Change in CPI*
*Consumer Price Index