All Wisconsin Retirement System pension checks to see a cut in May

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For the first time, every retired public employee who is a member of the Wisconsin Retirement System will get a smaller pension check this spring.

Retirement payments will shrink by 2.1 percent, effective May 1, for the 146,000 retirees whose pensions are funded solely by the Core Fund, the primary pension account, the state Department of Employee Trust Funds (ETF) said Friday. The reason: the stock market’s skid in late 2008.

"The sizeable decline in the value of WRS assets due to the global economic crisis made this year’s negative annuity adjustment necessary," said agency Secretary Dave Stella.

For the 35,000 retirees who have some of their money invested in the optional Variable Fund, the cut will be dramatically sharper. They will lose 42 percent of the portion of their pension that comes from the Variable Fund, as of May 1.

For Jerry Davis, a retired biology professor from UW-La Crosse and UW-Madison, that will mean losing about $500 a month. It’s not a total surprise, but it will be a blow, he said.

"We’re looking very carefully at the money we spend," said Davis, 68, of rural Barneveld. He said he and his wife are thinking twice about their daily activities, including grocery shopping. "You look at it and say, do I really have to do this today?"

Davis supplements his income with part-time teaching and freelance writing, including outdoors stories that appear in the Wisconsin State Journal.

All public employees in the WRS have money in the Core Fund, which began as a conservative investment vehicle but now includes equities and is considered a balanced fund.

Workers who chose to invest in the all-stock Variable Fund had to allocate 50 percent of their retirement money to that account. If, for example, their involvement dates back to the 1970s, as much as 60 percent of their retirement payments may come from the Variable Fund now, ETF spokesman Matt Stohr said. Others, who may have joined the Variable Fund more recently, may be getting about 40 percent of their pensions from that fund, he said.

In 2008, the average Variable Fund pension payment was $1,018 a month. With a 42 percent cut, those payments will be slashed to $590 a month. Every Variable Fund member also gets part of his or her pension from the Core Fund.

The average monthly Core Fund pension check last year was $1,966. A 2.1 percent cut will drop that to $1,925.

Last year, Core Fund pension payments increased 6.6 percent. Core Fund results are smoothed over a five-year period; otherwise, the account would have taken a bigger hit this year. The Core Fund’s value fell 26.2 percent this year, while the Variable Fund skidded 29 percent. Both are managed by the state Investment Board.

In 2008, the Department of Employee Trust Funds paid $3.7 billion in retirement benefits to more than 145,000 retirees.

Despite the first-ever negative Core annuity adjustment, the Core portion of any state retiree’s annuity can never be reduced below the amount he or she started with at retirement, Stella said. Only Core annuity increases granted in previous years as a result of investment increases can be reduced. However, there is no similar limit on the Variable portion of a retiree’s annuity.

For retiree Davis, the cut in the Variable part of his pension checks will mean a delay in replacing their 10-year old pickup truck and cutting back on donations.

But he said with so many companies closing plants and reducing staff, he feels fortunate. "At least there’s some income coming in, compared to someone who has lost (his or her) job," Davis said.


source: http://www.madison.com/wsj/home/biz/441883