Press Release

For Immediate Release
June 22, 2001

Contact: Pam Henning, (608) 267-2929

Employee Trust Funds Board Sets 2002 Contribution Rates

MADISON -- Eric Stanchfield, Secretary of the Wisconsin Department of Employee Trust Funds, (ETF) announced that required contribution rates for the majority of Wisconsin Retirement System (WRS) employees – participants in the "General" employee category -- will not change for 2002. This rate stability follows a six-year trend of declining rates for this group, which includes more than 230,000 state and local government employees and public school teachers.

Contribution rates for protective category employees with Social Security will increase 0.4%, and rates for executives & elected officials and protective category employees without Social Security will decrease 1.6% and .6%, respectively.

The rates are based on the recommendations of the ETF Board's consulting actuary and were approved by the Board today. They go into effect for salaries and wages beginning January 1, 2002.

The rates do not reflect the impact of 1999 Wisconsin Act 11, the pension and benefits law upheld last week by the State Supreme Court. The Board delayed recognition of the financing and benefit changes of Act 11 on contribution rates until 2003, due to the timing of the Court's decision.

"The Court decision did not occur soon enough to incorporate the impact of Act 11 on the financial and actuarial data for 2000," says Dave Stella, Administrator of the Division of Retirement Services. "The Department needs time to convert employee records to reflect

the new law's provisions and the actuaries need time to recalculate the contribution rates due to Act 11. This was not possible within the time constraints involved in the rate setting process. WRS employers depend on the certainty of contribution rates, traditionally issued in late June, to create budgets and negotiate labor agreements. Any delay in issuing the 2002 rates would be highly problematic."

Total contribution rates as a percentage of salary by WRS employment category for 2002 are summarized as follows:

The ETF Board annually determines contribution rates for each WRS employment category. Rate changes, whether up or down, are considered to be normal for retirement systems such as the WRS that pre-fund retirement benefits. Contribution rates are directly affected by investment experience of the retirement trust funds. If investment return does not meet the assumed 8% rate of return expected by the actuary, contribution rate increases may be required.

Stella said 2002 contribution rates stayed the same for general participants and teachers primarily because actuarial experience was close to what the consulting actuary predicted. The rate increase for protectives with Social Security is primarily due to higher than anticipated salary increases. The decreases for protectives without Social Security and elected officials and executives were due to greater than anticipated investment return.

Additional information

• By law, the WRS receives funding from three separate sources: employee contributions, employer contributions, and investment earnings. Together, these must be sufficient to meet all of both the present and future pension and benefit commitments of the system. Every June the ETF Board determines the rate at which employers and employees contribute to the WRS for the following year. The Board's decision is based on recommendations made by a consulting actuary.
• Contribution rates do not affect retirement annuity benefits under the WRS.
• General employees make up 90% of all actively working WRS participants, so rate increases or decreases in this category have the most impact on employers and employees.
• Part or all of the required employee contribution may be paid by the employer on behalf of the employee
• The total general employee covered payroll in 2000 was $8.3 billion
• The Board motion further recognized a pending statutory change that could affect the amount of employee required contributions, authorizing the change in allocation between employee and employer rates, should the law be enacted.

WRS employee categories and counts are as follows: