For Immediate Release
February 23, 2007
Bob Conlin, Director
ETF Communications Office
Department Announces Pension Increases
MADISON, (Wis.) –- The 137,000 retired state and local government
employees covered under the Wisconsin Retirement System (WRS) will
receive a pension increase this year, Secretary Eric Stanchfield
has announced. The Core annuity dividend is 3.0% and the Variable
annuity adjustment is 10%. All WRS retirees receive their monthly
payments in the form of a core annuity; about 25% of them also participate
in the more volatile variable option. The rate increases are effective
Pension adjustments under the WRS are not automatic. Whether adjustments
are made depends upon the investment performance of the pension
funds invested by the State of Wisconsin Investment Board (SWIB)
and the current and projected funding needs of the WRS. The increases
were recommended by the Department of Employee Trust Funds’
(ETF) consulting actuary and approved by the ETF Board.
“We are pleased to provide increases to retired public employees,”
said Stanchfield. “SWIB continues to do an excellent job of
investing the assets of the pension fund and keeping the WRS on
solid financial ground.”
However, despite strong investment performance in 2006, Stanchfield
noted that the amounts were reduced by the system’s future
funding needs due to the increased life expectancy of retirees,
and nearly $1.8 billion in losses from 2002 that are still being
recognized in the system’s trust accounts.
Core Fund investment gains and losses are distributed over a five-year
period to help avoid wide fluctuations in pension adjustments. The
almost $1.8 billion in losses was part of the loss incurred by the
Core Fund during the down markets that stretched from 2000 to 2002.
Both the Core Fund and the Variable Fund have experienced gains
every year since 2003.
“The market losses suffered early in the decade are behind
us now,” said Stanchfield. “It was a difficult time,
but we made it through with no pension cuts and in very sound financial
condition. This shows that the funding methods used by the WRS are
well designed and working as expected.”
- In 2006, the Department paid out $3.2 billion in retirement
benefits to over 137,000 retired members.
- The ten-year (compounded) average annual Core annuity dividend
is 4.78%; the five-year (compounded) average is 1.55%.
- The ten-year (compounded) average annual Variable annuity adjustment
is 3.08%; the five-year (compounded) average is 2.04%.