For Immediate Release
February 6, 2004
Contact: Pam Henning, (608) 267-2929
Department of Employee Trust Funds Announces Effective
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,
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%.