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News

Press Release

For Immediate Release
February 6, 2004

Contact: Pam Henning, (608) 267-2929


Department of Employee Trust Funds Announces Effective Rates

MADISON, Wis. -- Eric Stanchfield, Secretary of the Department of Employee Trust Funds (DETF), announced the effective interest rates credited to the retirement accounts of working Wisconsin Retirement System (WRS) members and eligible inactive members. For 2003, the fixed effective rate is 7.4% and the variable effective rate is 34% -- the largest variable increase in WRS history. The rates affect more than 269,000 actively employed state and local employees, including teachers and University of Wisconsin employees.

The Department expects to announce the fixed annuity dividend and variable annuity adjustment for the system’s 120,000 retirees in a few weeks.

“We are extremely pleased that employees will receive such impressive effective rate increases this year,” said Stanchfield. “Overall, the Fixed Trust Fund is still experiencing the effects of poor investment market performance from 2000 through 2002. However, the significant rebound in the markets was a major factor behind these rates,” he said.

Stanchfield lauded the State of Wisconsin Investment Board (SWIB) for its investment strategies. “As a result of decisions made during the Board’s asset allocation process last fall, the investment portfolios were positioned to take full advantage as the economy recovers. The last two quarters were extremely strong.”

The record-setting variable effective rate is especially good news for the 72,000 employees and inactive members participating in the optional variable trust fund. “The 34% increase will have a substantial, positive impact on the account balances of our variable participants,” said Stanchfield.

SWIB investment returns influence the effective rates, which are computed and set by ETF. In January, SWIB reported final 2003 investment returns of 24.2% and 32.7% for the fixed and variable trust funds, respectively.

Additional Background Information:

  • The Fixed Fund (or balanced fund) is the larger of the two trust funds of the WRS. It has diversified holdings in domestic and international stocks, bonds, loans, real estate and private equity. According to SWIB, the market value of the Fixed Fund on December 31, 2003, was $56.8 billion.
  • The Variable Fund was created as an option for members to have a portion of their benefit based on the performance of a broadly diversified stock portfolio. It is primarily invested in common stocks with annuities that fully reflect the gains and losses of the investments. While due care and prudence are exercised in the investment of the Trust, those who have elected this option risk the possibility that unfavorable stock market performance could result in losses. According to SWIB, the market value of the Variable Fund on December 31, 2003, was $5.9 billion.
  • Over the past ten years, the average annual fixed effective rate has been 11.3%; the average annual variable effective rate has been 11.1%.

 

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