The Department of Employee Trust Funds has released the Annual Comprehensive Financial Report for the year ended December 31, 2021. The Wisconsin Retirement System paid approximately $6.4 billion in benefits in 2021. The WRS funding ratio calculated in accordance with accounting standards was approximately 106% as of December 31, 2021. 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 2021 Annual Comprehensive Financial Report.
WRS Assets and Reserves
As of the end of 2021, the WRS had net assets of approximately $142 billion, an increase of $17 billion from 2020. These assets are invested in a balanced portfolio of equities, fixed income and other investments managed by the State of Wisconsin Investment Board.
$75.5 billion of reserves are set aside to pay monthly benefits to more than 226,000 retirees and beneficiaries. The average annual benefit is $27,810. The annuity reserve, increased by 5% annual interest, is sufficient to pay lifetime benefits without any additional contributions.
Wisconsin Retirement System
Summary of Net Position and Reserves (millions $)
| 2021 | |
|---|---|
| Net Position | |
| Equities | $83,779 |
| Fixed Income Investments | 48,219 |
| Other Investments | 9,937 |
| Other Assets | 18,802 |
| Liabilities | (45,463) |
| Total Net Position |
$141,848 |
| Reserves | |
| Annuity Reserve | $75,530 |
| Employer Reserve | 26,406 |
| Employee Reserve | 22,469 |
| Market Recognition Account | 17,039 |
| Other Reserves | 404 |
| Total Reserves |
$141,848 |
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 436,000 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 6.8% is spread over five years. As of December 31, 2021, the WRS has $17.0 billion in past investment gains that will be added to investment income over the next four years.
WRS Revenues and Expenses
Investment income is the largest source of revenue for the WRS. Investment income accounts for approximately 84% 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.
Member 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 $6.4 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.
Wisconsin Retirement System
Summary of Changes in Net Position (millions $)
| 2021 | |
|---|---|
| Revenues | |
| Net Investment Income (Loss) | $ 21,056 |
| Employer Contributions | 1,165 |
| Member Contributions | 1,087 |
| Total Revenues | $23,308 |
| Expenses | |
| Annuities | $6,353 |
| Separation Benefits | 42 |
| Administration | 31 |
| Other Expenses | 0 |
| Total Expenses | 6,426 |
| Increase in Net Position |
$16,882 |