Department of Employee Trust Funds - Hot Topic
December 17, 2002

ETF Board Sets Negative Fixed Dividend Threshold for 2003

As a result of several consecutive years of poor investment performance, it is likely that no, or negative, fixed annuity dividends for retirees could occur. As a result, the Employee Trust Funds (ETF) Board has decided how to deal with this situation. At its December 13 meeting, the Board decided that a negative fixed annuity dividend would be applied to April 1 2003 payments only if the loss is greater than .5%. If the loss is less than .5%, it will be carried over to next year's dividend calculations. This equates to 50 cents for every $100 of annuity.

Annuitants: Please remember the fixed portion of your benefit is guaranteed by law to never drop below your final computed amount - only past dividends can be taken back.

Under state law, the ETF Board grants positive annuity dividends if it would result in at least a 2% increase for all annuities. The law also allows the Board, if there is a deficit in the fixed annuity reserve, to revoke past annuity dividends. This has never happened in Wisconsin Retirement System (WRS) history, but it is possible. Over the past year, the Department has been informing annuitant groups and WRS participants that, depending on market experience, there may be no dividends or negative dividends in some years.

State of Wisconsin Investment Board (SWIB) investment returns as of December 31, 2002, will determine the 2003 effective rates (interest on active and eligible inactive accounts) and annuity dividends set by the ETF Board. For more information on calendar year-to-date investment returns, SWIB assets under management and investment policies, etc., visit the SWIB Internet site, www.swib.state.wi.us.

The actual annuity dividend amounts for 2003 should be calculated and available by late February. Watch the "Hot Topics" section of our Internet site.