2022 WRS Finances in Good Standing Despite Tough Markets

Approximately $7 billion in benefits were paid by the WRS in 2022, based on the Annual Comprehensive Financial Report recently released by ETF.

The report also shows that the WRS funding ratio calculated in accordance with accounting standards was approximately 96% as of Dec. 31, 2022. This implies that sound funding and plan design principles kept the WRS financially strong during this period.

Below are highlights of the 2022 financial report.

Assets and Reserves

As of the end of 2022, WRS had net assets of approximately $118 billion, a decrease of $24 billion from 2021. These assets were invested in a balanced portfolio of equities, fixed income, and other investments managed by WRS.

$76.5 billion of reserves were set aside to pay monthly benefits to over 232,000 retirees and beneficiaries, with an average annual benefit of $29,889. The annuity reserve, increased by 5% annual interest, was sufficient to pay lifetime benefits without any additional contributions.

The employer and employee reserves, worth $26 billion and $22.3 billion, respectively, include contributions made by and on behalf of non-retired participants.

The employee reserve is made up of over 445,000 individual participant accounts, while the employer reserve is a single comingled account with no separation of individual employer contributions.

When a participant retires, the present value of their annuity is transferred to the annuity reserve from the employer and employee reserves. These are also used to pay separation and death benefits.

The Market Recognition Account is used to smooth the effects of investment gains and losses on the WRS Core Trust Fund. Investment income that exceeds or is less than the assumed investment return of 6.8% is spread over five years. As of Dec. 31, 2022, the WRS had $6.8 billion in past investment losses that will be added to investment income over the next four years.

Revenues and Expenses

In 2022, WRS incurred an investment loss of $18.7 billion. This was attributed to less favorable market conditions across several asset classes during 2022. Investment income accounts for approximately 78% of the WRS revenues over the past 10 years.

Combined member and employer contributions generated $2.3 billion.

Employer contributions are paid by WRS employers and held in the employer reserve until transferred to the annuity reserve to fund new annuities. On the other hand, member contributions are primarily paid by active employees. These are held in individual accounts for the participant until retirement, or paid as a separation benefit if the employee leaves covered employment and chooses to withdraw contributions.

When one compares total WRS expenses of $7.0 billion to combined member and employer contributions of $2.3 billion, the importance of a strong investment program to make up the difference is clear.