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Public sector workers face uncertainty(The Leader-Telegram (Eau Claire, Wis.) Via Acquire Media NewsEdge) Oct. 12--The retirement plans of many Chippewa Valley residents who work or previously worked in the public sector are not immune to the effect of the recent downturn in the stock market. More than 550,000 people are enrolled in the Wisconsin Retirement System, or WRS, a group that includes current and former employees of state agencies, the UW System, technical colleges, school districts and most local governments. The Department of Employee Trust Funds, or DETF, administers the program, and the State of Wisconsin Investment Board invests the system's assets. Contributions are made to the WRS by participating employees and employers, and the accumulated funds are used to pay retirement, death and disability benefits. Retirees receive a pension annuity initially determined by the DETF. Each 1 percent drop in stock markets worldwide results in a loss of about $500 million in market value of the WRS, said Vicki Hearing, public information officer for the investment board. "The investment returns for the retirement system as of Dec. 31 will be a significant factor when the Department of Employee Trust Funds determines adjustments to active WRS members' accounts and retired members' monthly checks in 2009," she said. The system is comprised of core and variable funds. All WRS members have at least half, and often far more, of their pension account contributions in the much larger core fund, Hearing said. The fund is diversified, employs a long-term strategy and includes stocks, bonds, business loans, real estate and private equity. It is smoothed over five years and is therefore significantly less susceptible to a volatile stock market. Active WRS participants, however, can have up to 50 percent of their contributions in the riskier variable fund, which fully reflects market changes. "Variable fund returns are not smoothed and negative returns could cause annuities to decrease below the initial base amount," Hearing said. The WRS paid out more than $3.54 billion in benefits in 2007 and had $87.8 billion in assets as of Dec. 31 of last year. The core fund returned a positive preliminary return of 8.8 percent in 2007; the variable returned 5.6 percent. About 20 percent of WRS members took part in the variable fund. Benchmarks, or the objectives of the portfolios, are established for annualized returns. As of Aug. 31, the year-to-date returns were negative 7.5 percent for the core fund and negative 12.1 percent for the variable fund. Matt Stohr, DETF communications director, said the stock market undoubtedly will affect benefits but it's too early to determine exactly how much. Payouts are not backed by taxes or other sources of revenue, so they'll take a hit if the stock market fails to bounce back. Retirement dividends are determined in the spring each year and become effective May 1. "It's tough to say at this time, because it's a long process," Stohr said. "We'll know much more at the end of the year, but we won't know how the markets' performance impacts specific members until well into the spring of 2009." Marlaire can be reached at 833-9215, 800-236-7077 or [email protected]. To see more of The Leader-Telegram or to subscribe to the newspaper, go to http://www.leadertelegram.com. Copyright (c) 2008, The Leader-Telegram, Eau Claire, Wis. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |