Current System Is Stable and Highly Funded, But Wisconsin Must Continue to Monitor Health and Evaluate Options to Ensure Stability into the Future
Madison – Today, the Department of Administration (DOA), the Department of Employee Trust Funds (ETF), and the Office of State Employee Relations (OSER) submitted the study of the Wisconsin Retirement System (WRS) to Governor Scott Walker and the Joint Committee on Finance (JFC). As required by law, DOA, ETF, and OSER studied the structure of the WRS and the current Defined Benefit plan provided under the system.
According to the analysis provided by Gabriel, Roeder, and Smith, the independent consulting actuary for the WRS, the WRS is insulated from large swings in annual contribution rates or funding levels due to the plan’s cost-sharing and risk-sharing features. Their findings revealed the WRS is a stable and highly funded with low risk to taxpayers. In addition, the study notes taxpayers’ costs to fund WRS have decreased as a result of Act 32.
DOA Secretary Mike Huebsch stated, “Wisconsin will continue to monitor the health of the current system. It is our duty to make sure Wisconsin taxpayers know their tax dollars are being invested efficiently and state employees know their retirement plans are being well managed.”
The study also evaluated the potential effects of establishing an optional Defined Contribution plan. The findings show a Defined Contribution plan would provide zero risk to taxpayers and provide the portability necessary for a highly qualified and robust 21st century workforce. The Defined Contribution plan would also place an emphasis on individual employee investment choices. However, the study notes the professional management of all pooled assets boosts the current Defined Benefit plan.
“The state will continue to look at potential options for reforming the current system because the workforce of the future may not look like our current workforce,” Secretary Huebsch continued. “Taxpayers deserve to have the best and hardest working employees, and a 21st century workforce may prefer portability of benefits and freedom offered by other retirement options.”
In addition, the study reviewed an option for employees to opt-out of required contributions and receive the money purchase annuity. The study raised concerns about the impact of this option on the current Defined Benefit plan, since it would reduce overall contributions to the current system’s cash flow position, which may negatively affect contribution rates for those in the current Defined Benefit plan. This option could also raise qualification issues with the IRS for the current plan.
Given the current financial health of the current system, at this time, the study recommends against implementing either the Defined Contribution or the opt-out option for employees.
The full study can be found on the ETF website at the following link. http://etf.wi.gov/publications/wrs-study.pdf
For any questions please contact DOA communications at DOAcommunications@wi.gov or by calling the DOA media line at (608) 266.7362.
Department of Administration
101 E. Wilson St.
Madison, Wisconsin 53703