Changing the past or predicting the future with certainty is not possible. But, learning from the past and preparing for what the future may bring plays a key role in making sure the Wisconsin Retirement System remains healthy.
The WRS is one of the few fully funded public pensions in the country, due in part to SWIB’s strong investment management. Because of the unique shared risk design of the WRS, investment returns directly impact annuity adjustments for retirees and contribution rates for employees and employers. The challenge is finding the right balance between taking enough risk to make sure the WRS is providing the benefits promised to its participants while avoiding taking too much risk that could cause volatile swings in those annuity adjustments and contribution rates.
By implementing a sophisticated investment strategy, SWIB has helped position the WRS for a strong future, despite the volatility that has been a part of the financial markets over the past few years. Staying well-positioned means constantly re-evaluating and preparing for what the future might bring. To help design a successful investment strategy, SWIB’s internal investment professionals partner with Gabriel, Roeder, Smith and Company (GRS), the independent actuaries for the WRS.
SWIB’s work with GRS is an important part of the asset allocation process, which is reviewed and approved annually each December by the SWIB Board of Trustees. Through robust stress testing of the pension system, SWIB is able to evaluate past investments and assess retirement trends to strengthen long-term investment returns.
“Our work is focused on helping SWIB understand the effects of investment volatility and asset allocation on the benefits of current and future retirees and on future contributions to be made to the WRS by current and active participants,” Brian Murphy, senior consult with GRS, said.
In addition to working with SWIB, GRS’s annual work with ETF includes actuarial evaluations for funding the benefits of the WRS and separately for financial reporting.
The goal is to keep the WRS positioned as one of the premier public pensions in the country.
“Ultimately, the unique design of the Wisconsin Retirement System, its consistent level of contributions and persistent fully funded status makes it the envy of many statewide retirement systems,” Jim Anderson, senior consultant with GRS, said. “I can't tell you how many state executive directors have reached out to me and say, ‘Hey, can you make us work like Wisconsin?’ I say, well, let's go back to 1979 and design the program like it was back then and then live the next 40 years. We might get there.”
To learn more about how GRS works with SWIB and ETF, check out episode 18 of The SWIB Podcast at www.swib.state.wi.us/podcasts.