For Immediate Release
February 13, 2007
Bob Conlin, Director
ETF Communications Office
Department of Employee Trust Funds Announces Effectives
Rates of 9.8% and 18%
MADISON, Wis. – Eric Stanchfield, Secretary
of the Department of Employee Trust Funds (ETF), announced the effective
interest rates credited to the retirement accounts of employed Wisconsin
Retirement System (WRS) members and eligible inactive members. For
2006, the Core (formerly Fixed) effective rate is 9.8% and the Variable
effective rate is 18%. The rates apply to the retirement accounts
of the 262,000 state and local government workers covered under
the WRS, including teachers, law enforcement officers, firefighters,
and University of Wisconsin employees.
The Department expects to release information on the Core dividend
and Variable adjustment, applied annually to WRS retiree pension
payments, in the coming weeks.
ETF calculated the effective rates based on finalized State of
Wisconsin Investment Board (SWIB) investment results for 2006, which
were 15.8% for the Core Fund and 17.6% for the Variable Fund. The
agency earlier stated it exceeded established Core Fund benchmarks
for the fourth consecutive year. “This is very good news for
our members,” said Stanchfield, “SWIB’s investment
professionals have done a terrific job investing the trust funds;
their success is a direct result of following a carefully-designed,
long-term approach to preserving the financial stability of the
At the same time, however, Stanchfield noted that the trust funds
are still recognizing losses from 2002. That is because Core Trust
Fund investment gains and losses are “smoothed” over
a five-year period, and 2002 is the last year for which losses from
the bear market of 2000-2002 will be a factor in the rates. As a
result, the calculation of this year's Core effective rate includes
nearly $1.8 billion in losses from 2002. The Core annuity dividend
calculation, which is derived from the effective rate calculation
process that precedes it, will also reflect that loss.
Additional background information:
- The ten- and five-year (compounded) average annual Core Trust
Fund effective rates are 10.5% and 7.4%, respectively.
- The ten-and five-year (compounded) average annual Variable Trust
Fund effective rates are 8.9% and 8.2%, respectively.
- The Core Fund (or balanced fund) is the larger of the two trust
funds of the WRS. It is a balanced fund of diversified holdings
in domestic and international stocks, bonds, loans, real estate
and private equity.
- 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. Those who have elected this option
can experience significant gains, but they also risk significant
losses from unfavorable stock market performance. About 28% of
the 262,000 WRS active employees participate in the Variable Fund.
- Inactive participants are those who have left public service
but still keep their retirement accounts open. About 45% of the
retirement system's 123,000 inactive members qualify for effective
rate interest crediting. The rest by law receive a 5% increase.