For Immediate Release
February 29, 2008
Matt Stohr, Director
ETF Communications Office
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.”
- 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%.