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Press Release

For Immediate Release
February 29, 2008


Matt Stohr, Director
ETF Communications Office
(608) 266-3641

Department Announces 6.6% Core Annuity Dividend

MADISON, (Wis.) –- David Stella, Secretary of the Department of Employee Trust Funds (ETF), announced that retired members of the Wisconsin Retirement System (WRS) will receive a Core annuity dividend (increase) of 6.6% this year. The Variable annuity adjustment rate is 0.0%. The Core increase has an affect on the pensions of approximately 141,000 WRS retirees, 90% of whom reside in Wisconsin.

The rates, recommended by the Department’s consulting actuary and approved by the ETF Board chair and Secretary Stella, take effect with the May 1 pension payments.

All WRS retirees receive their monthly pension payments in the form of a Core annuity. However, approximately 35,000 annuitants also participate in the optional and more volatile all-stock Variable Trust Fund. The 0.0% Variable adjustment means this portion of their annuities will not be adjusted this year.

“We are pleased to be able to grant retirees an increase this year,” said Secretary Stella. By law, the actual Core Trust Fund investment gains and losses must be smoothed over a five-year period. The intent of the smoothing process is to limit wide swings in dividends due to market volatility.

The Trust Funds endured market losses from 2000 to 2002, Stella explained. “Due to the risk- and gain-sharing nature of the WRS, participants felt the effects of these losses,” he said. “However, because of smoothing the Core Fund, we were still able to provide modest increases to retirees in most years.”

Stella noted that in 2002 no increase was provided and in 2003 and 2005 the increases were less than 1.5%. “Those losses are behind us now – the smoothing process helped provide protection from the down markets,” he said. “As we head into uncertain economic conditions, it should give retirees some comfort to know that the system is working as designed.”

Additional information:

  • WRS pension adjustments are not automatic. Whether they are granted depends on the investment performance of the pension funds invested by the State of Wisconsin Investment Board (SWIB), and the current and projected WRS funding needs. SWIB recently reported 2007 investment returns of 8.7% for the Core Trust Fund and 5.6% for the Variable Trust Fund. Increases from previous years can be reduced if the fund experiences poor investment performance.
  • By law, ETF may pay Variable annuity increases only if there are enough Variable Trust Fund gains to pay all retirees an increase of 2% or higher. No increase will be granted this year.
  • In 2007, the Department paid $3.45 billion in retirement benefits to more than 141,000 retirees. The majority of these payments come from investment gains.
  • The ten-year (compounded) average annual Core annuity dividend is 4.67%; the five-year (compounded) average is 2.86%.
  • The ten-year (compounded) average annual Variable annuity adjustment is 1.39%; the five-year (compounded) average is 8.67%.
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