Press Release

For Immediate Release
February 27, 2004

Contact: Pam Henning, (608) 267-2929

Department of Employee Trust Funds Announces Annuity Dividend and Variable Adjustment for Retirees

MADISON -- Eric Stanchfield, Secretary of the Department of Employee Trust Funds (ETF), announced the annual post-retirement adjustments affecting retired members of the Wisconsin Retirement System (WRS). The fixed annuity dividend will be 0% (no increase). If a statutory change is enacted by mid-March, WRS retirees will receive a 1.4% increase in the fixed portion of their payments. The variable annuity adjustment will be 25% -- the second highest variable increase in WRS history. The figures will be applied to retirees’ monthly payments beginning May 1.

Current state law prevents ETF from granting any fixed annuity increase unless there is sufficient funding to provide all retirees with a 2% (or more) increase. The Department’s calculation process this year determined it would be 1.4%; therefore, no fixed annuity dividend can be granted. The proposed legislation, Assembly Bill 692 and Senate Bill 344, would each lower the 2% threshold to .5% (one-half percent). If either proposal becomes law before the current legislative session ends in March, ETF will grant a 1.4% fixed annuity dividend, payable to retirees on May 1.

“We support these bills and are closely monitoring their progress,” said Stanchfield. “These increases are very important to our retired members; we want to provide a fixed annuity increase whenever it is actuarially sound.”

Investment returns of the State of Wisconsin Investment Board (SWIB) influence the fixed annuity dividend and variable annuity adjustment rates, which are computed, set, and paid by ETF. Last month, the State of Wisconsin Investment Board (SWIB) announced fixed trust fund investment returns for 2003 were 24.2 percent. However, the fixed trust fund is still recognizing investment losses from 2000, 2001, and 2002. As a result, investment gains of 24.2% this year are still not high enough to generate a fixed annuity dividend of 2% -- again, the minimum required under current law.

There are approximately 121,000 WRS retirees, all of whom receive their monthly payments in the form of a fixed annuity. Approximately 31,000 of these retirees also participate in the optional variable trust fund.

Additional Background Information:

• Over the past 10 years, the fixed annuity dividend averaged 5.7%; over the past 20 years it averaged 5.9%.

• Over the past 10 years, the variable annuity adjustment averaged 5.3%; over the past 20 years it averaged 6.5%.
• SWIB investment returns influence the fixed annuity dividends and adjustments, which are compiled and set by ETF. In January, SWIB reported final investment returns of 24.2% and 32.7% for the fixed and variable trust funds, respectively.
• Department records indicate the average fixed annuity is currently $1,658 a month, or $19,896 a year. The average variable annuity is about $775 a month, or $9,300 a year.
• The highest variable annuity adjustment in WRS history was 1985’s 26% increase.