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For the first time in six years, retired Wisconsin employees who have spent all their money in the Wisconsin Retirement System's (WRS) main trust fund could benefit from a reduction in their pension checks.
The Wisconsin State Investment Board, which manages WRS funds' money, delivered preliminary results for the end of fiscal year 2018 on Friday night and, like the stock market, the results were at the drop.
The core fund, with $ 93.6 billion in badets as at December 31, had a preliminary return of minus 3.3% for 2018, while the smaller variable fund with badets of $ 7.1 billion had a preliminary return of minus 7.9%.
This means that pension payments for most of the 203,000 WRS retirees could suffer.
"We expect Wisconsin Retirement Annuities for retirees participating in the Core Trust Fund will not change, a 0.5% decrease," said Mark Lamkins, spokesperson for the Wisconsin Employee Trust Fund. .
Lankins said those who have money in the variable fund will likely see a 10% to 14% drop in that portion of their pension.
Retirees will discover in April what their payments will be for the 12 months from May. The median annual pension for Wisconsin pensioners is $ 20,758. If a reduction of 0.5% was adopted in the base fund, the decrease would reach about $ 103 for those receiving the median amount.
The Wisconsin Pension System holds accounts for more than 632,000 current and former employees. The diversified core fund is used by all retirees and its results are averaged over five years. The Voluntary Floating Fund consists entirely of equities and its results are not smoothed over a longer period, but are adjusted from year to year.
Bill Mercer, president of the Wisconsin Retired Educators' Association (Association of Retired Educators of Wisconsin), said that he was not surprised that the WRS results were negative.
"Given the weakness of the markets last year, the situation could have been worse," said Mercer of La Crosse.
On December 31, 2017, the Dow Jones Industrial Average Index was down 5.6% from its closing price. Standard & Poor's 500 securities fell by 6.2% and those of Nasdaq Composite by 3.9%.
Over the last five years, the WRS Core Fund has had a preliminary return of 5.2% and a 10-year return of 8.8%. Returns reflect changes in the value of the securities as well as dividends, distributions and capital gains.
"Despite the challenges that financial markets have sometimes presented over the past 10 years, SWIB's investment management has led to returns that have achieved the objectives of the WRS, to maintain consistent contributions and to preserve the fully capitalized status of the WRS, "said David Villa.
"Our strategy is designed to provide the core fund with moderate protection against another dramatic slowdown, while generating reasonable returns," he said.
Only retirees whose basic fund accounts have accumulated dividends would benefit from a reduction, if any. Pensions of the basic fund can not be reduced below the level set at retirement.
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