Six statutory boards have been appointed with the responsibility of executing programs that are operated by the Employee Trust Funds Department (ETF) for Wisconsin. These boards are:
- State and Public Employees Trust Funds Board (Wisconsin Retirement System)
- Teachers Pension Board
- Group Insurance Board
- Deferred Compensation Board
- Health care Coverage Board
- Local Firefighters Board
The largest member group is the Wisconsin Retirement System for State and Public employees. This is the ninth largest fund for public pension in the United States of America. It is also the thirtieth largest public fund in the whole world.
Administration of the Employees’ Trust Fund
The thirteen-member Board for the Employees’ Trust Funds looks after the general administration of the Trust Fund Department. Investing the assets of the Wisconsin Retirement System has been assigned to the Investment Board of the State of Wisconsin (SWIB). Individual accounts are supervised by the Employee Trust Funds Department (ETF). The funds that are accumulated in the trusts created by the retirement system in Wisconsin are utilized to take care of the pension benefits.
The investments done by the Investment Board are managed by its Trustees’ Board. The Retirement System of Wisconsin channels its contributions into two funds.
- Core Fund – This is a diversified account. It is made up of the pension contributions that are made by the participants in the System and the earnings made on investments on those particular contributions. The main objective is to achieve an optimum return on a long term basis while taking minimum and reasonable amount of risk. This makes up for eighty per cent of the contributions.
- Variable Fund – This is an all-equity fund. About twenty per cent of the participants are contributing to this fund. The objective of this fund is to get returns that are similar or higher to that of parallel equity portfolios in the market during a particular investment cycle.
Features of the WRS
The required contributions to be made by the State general employees are 6.65%. The participating employer contributions are also at 6.65% of the employee’s gross salary. The Wisconsin Retirement System is a defined benefit scheme with the calculation done generally by taking into account the average final compensation, the number of years of earned credit service and a multiplier factor. The formula multiplier is 1.6.
An employee can get vested into the retirement system after completing five years of earned creditable service.
Retirement Schedule and Benefits
All State employees can retire normally at the age of 65 with thirty years of credited service. Employees can retire early at age 54 with twenty five or more years of earned credit service. There are two kinds of benefits that an employee can opt for.
- Maximum Benefit with Limitation – This is a benefit which is formula based and payable in the form of a straight life annuity throughout the life of the employee. It cannot exceed 70% of the final average compensation worked out for an employee. This limitation does not apply to the extra annuity benefits that can be derived from the Variable Fund.
- Benefit based on a Formula – This is worked out as the product of the number of years earned credit service and average final compensation and multiplied by the factor of 1.6%.
Annuity Payments – The monthly pension benefits have to begin a month after the employee makes out an application for the release of the annuity payment. This benefit is always paid throughout life to the employee. However, the employee has an option to decide whether or not the benefits have to continue to any beneficiaries that may be eligible after the death of the employee. The selection of this kind of payment benefit is done at the time when the employee applies first time for the pension benefits. The annuity has to begin by 1st April of the year after the calendar year in which the employee reaches an age of seventy years and six months.
- Life Annuity for a Guaranteed Period – This kind of annuity is paid throughout life to the employee and is backed with a guarantee for a specified number of months.
- Joint & Survivor Annuity – This kind of annuity allows for continued monthly payments to a beneficiary designated by the employee, provided the beneficiary is surviving the employee. It is paid until both the employee and the designated survivor are alive.
The biggest part of the assets is managed by the Investment Board. The Core Fund is managed at an average rate of return of 3.4% and the Variable Fund is being managed at an average rate of return of 10.2%. The level of funding for these trust funds is at 93%. The number of active participants in the Wisconsin Retirement System is 570,000. The total assets equal 85 billion dollars and the pension payouts have amounted to 742 million dollars as per the last report. The active state employees are 61,320.
The Wisconsin Retirement System does not provide for any cost of living adjustments unlike the other retirement systems for public employees in the United States. The annuity adjustments are dependent mainly on the calculations done by the actuaries and the investment returns.
The public employees in the State of Wisconsin are probably in for a slight increase in the rates of contribution they make into the Retirement System. The State proposal has come about for rates that may be fixed at 7% for both the employers and the employees as reported by the State Journal of Wisconsin. Though the Retirement System gets over ninety per cent of the income from the investments, this decision may have been prompted by huge market losses since the past couple of years.