Press Release

For Immediate Release
February 23, 2007

Contact:

Bob Conlin, Director
ETF Communications Office
(608) 261-7940

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 May 1.

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.”

Additional information:

• 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%.