HR, Payroll and Benefits News

The Wisconsin Retirement System - A Strong Foundation for Retirement
September 5, 2019

You may know that as a Wisconsin Retirement System (WRS)-eligible UW System employee, you have been automatically enrolled in the WRS, but maybe you don’t know exactly what that means for you.

It’s important to be adequately prepared for retirement, and the WRS helps ensure UW System employees have a good start towards that goal. Under the WRS, both you and the UW System contribute a percentage of your eligible earnings towards your retirement. The WRS is a strong public pension plan because of its stable funding, unique plan design and robust governance. These factors set the WRS apart from the majority of other public retirement plans in the United States.

How is the WRS designed?
The WRS has the elements of both a defined benefit plan and a defined contribution plan. In WRS terminology:

• A defined benefit plan is a benefit that is based on your earnings and years of service and is referred to as a formula benefit.
• A defined contribution plan is a benefit based on the dollar value of your account and is referred to as a money purchase benefit.

Although many of us focus on the dollar value of our account, at retirement time it could be that the formula benefit provides a much higher monthly annuity.

How is the formula benefit calculated?
A formula benefit is calculated using your final average earnings (a monthly average of your three highest years of WRS covered earnings) multiplied by your years of service multiplied by a formula factor. If you retire before normal retirement age (generally 65), your benefits are reduced to compensate for the longer length of time you would be receiving the benefit.

For those working in a WRS-covered position after 1999, the formula multiplier is .016. This means that for every 10 years you work, your WRS annuity will replace roughly 16% of your pre-retirement income. If you work 20 years, 32% of your pre-retirement income will be replaced.

What will your annuity be based on?
Your WRS annuity is based on whatever method - formula or money purchase - gives you the higher monthly payment. But remember, you will receive at least 16% of your final average earnings for every 10 years of work. This information may be helpful when planning for retirement and may help you determine whether you should supplement your WRS benefit by investing with a supplemental retirement plan like the UW Tax-Sheltered Annuity (TSA) 403(b) Program or the Wisconsin Deferred Compensation (WDC) 457 Program.

Considerations for employees who first began WRS employment on or after July 1, 2011:

• If you leave the UW System (or WRS-covered employment) before you retire but as long as you are vested with five years of creditable WRS service, you can leave your WRS account until you reach retirement age to get the value of both your contributions and the employer contributions.
• If you leave the UW System (or WRS-covered employment) before you have five years of creditable WRS service, you’ll still get the benefit of your contributions, but you will not be eligible for the value of UW System’s employer contributions. You may want to consider leaving your contributions in the plan if you think you may return to WRS-covered employment in the future.

For information on the WRS and the supplemental retirement savings plans available to you, visit the Retirement Plans page on the UW System Employee Benefits website.

Source: UW System Human Resources
Categories: WI Retirement System (WRS)