The Department of Employee Trust Funds has released the Comprehensive Annual Financial Report of the Wisconsin Department of Employee Trust Funds for the year ended December 31, 2018. This report provides comprehensive information about ETF, the Wisconsin Retirement System, and other benefit programs administered by ETF. The WRS paid approximately $5.6 billion in benefits in 2018. The WRS funding ratio calculated in accordance with accounting standards was approximately 96.5% as of December 31, 2018. Sound funding and plan design principles continue to keep the WRS financially strong.

Complete WRS financial statements, with notes and supplementary information, can be found in ETF’s 2018 Comprehensive Annual Financial Report.

WRS Assets and Reserves

As of the end of 2018, the WRS had net assets of approximately $97 billion, a decrease of $7 billion from 2017. These assets are invested in a balanced portfolio of equities, fixed income and other investments managed by the State of Wisconsin Investment Board.

Wisconsin Retirement System
Summary of Net Position and Reserves (millions $)

 

 

2018

Net Position

 

Equities

$54,850

Fixed Income Investments

31,739

Other Investments

21,724

Other Assets

8,569

Liabilities

(20,145)

Total Net Position

$96,737

 

 

Reserves

 

Annuity Reserve

$60,236

Employer Reserve

22,729

Employee Reserve

18,456

Market Recognition Account

(4,729)

Other Reserves

45

Total Reserves

$96,737

$60.2 billion of reserves are set aside to pay monthly benefits to over 209,000 retirees and beneficiaries; the average annual benefit is $25,893. The annuity reserve, increased by 5% annual interest, is sufficient to pay lifetime benefits without any additional contributions.

The employer and employee reserves include contributions made by and on behalf of non-retired participants. While the employee reserve is made up of over 400,000 individual participant accounts, the employer reserve is a single comingled account with no separation of individual employer contributions. At the time a participant retires, the present value of their annuity is transferred to the annuity reserve from the employer and employee reserves. These reserves 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. Investment income that exceeds or is less than the assumed investment return of 7.0% is spread over five years. As of December 31, 2018, the WRS has $4.7 billion in past investment losses that will be used to offset investment income over the next four years.

Wisconsin Retirement System
 Summary of Changes in Net Position (millions $)

 

2018

Revenues

 

Net Investment Income (Loss)

$(4,050)

Employer Contributions

1,030

Employee Contributions

973

Other Income

1

Total Revenues

$(2,046)

 

 

Expenses

 

Annuities

$5,516

Separation Benefits

40

Administration

32

Total Expenses

5,588

Loss due to Impairment of Capital Assets

(25)

Decrease in Net Position

$(7,659)

 

 

WRS Revenues and Expenses

Investment income is the largest source of revenue for the WRS. Investment income accounts for approximately 79% of the WRS revenues over the past 10 years.

Employer contributions are paid by WRS employers and are held in the employer reserve until transferred to the annuity reserve to fund new annuities.

Employee contributions are primarily paid by WRS participants and 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 $5.6 billion to combined employee and employer contributions of $2.0 billion, the importance of a strong investment program to make up the difference is clear.

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