Overview of the Wisconsin Retirement System (WRS) Pension

Written By: Ryan Rink CFP®, ChFC®, CLTC®

The Wisconsin Retirement System (WRS) pension is one of the top funded and managed public pension plans in the United States. We often find that many clients with a WRS pension know they have a pension benefit, but don’t quite understand how it works. Below are answers to some of the common questions we are asked.

Who Makes Contributions to My Pension?

Both employees and employers are responsible for making contributions to the pension plan. For most workers (government employees & teachers), the contribution you make is the same as your employer.  In 2022, the contribution amount is 6.5% for the employee and 6.5% for the employer. This brings the total contribution to 13% for your pension this year. The employer contribution amounts may differ if you are in protective services (police officer, firefighter, etc.). The required contribution amounts will also vary year-to-year based on the funding level of the pension. You are fully vested in employer contributions after five years of service.

Employee contributions to the WRS pension are always 100% vested. For employees that were WRS eligible prior to 7/1/11 contributions made by the employer are fully vested at the age of 55. For employees hired on or after 7/1/11, contributions made by the employer are fully vested at the age of 55 and after five years of creditable WRS service has been obtained.

How are My Funds Invested?

There are two different investment options within the WRS pension plan: Core and Variable. The Core option is the primary (and default) choice for the majority of participants. It is the more conservative option between the two, with about 50% of the fund invested in stocks. The Variable option is the riskier choice, however, the goal is that the fund will perform better over time. This fund is invested 100% in stocks. Going forward, you are only allowed to have a maximum of 50% of your contributions invested in the Variable fund. There is no limitation on the amount you can have in the Core fund.

You are not permitted to reallocate funds from the Core to the Variable fund. However, you are able to make an election to have 50% of future contributions go into the Variable fund. The election can be made on the Election to Participate in the Variable Trust Fund (ET-2356) form, but will not take effect until January 1^st of the following year. If you are over a decade away from retirement, investing in the Variable option can be great option since you have many years to ride the highs and lows of the market and will hopefully achieve a higher return long-term.

You are permitted to move funds from the Variable to Core fund at any point. However, you can only make this shift ONCE during your lifetime. Therefore, you want to be certain if you decide to make the change.

When Can I Start Drawing My Pension and What are My Options?

You are first eligible to start drawing your pension benefit once you turn age 55. The age is reduced to 50 for protective service employees (police officer, firefighter, etc.).

There are two calculation methods used to determine your monthly pension amount: Formula and Money Purchase. You are entitled to draw the higher of the two benefit amounts. The Formula method is based off a variety of factors, with the most important being years of service and your three highest years of earnings. As a government employee or teacher, having at least 30 years of service and being age 57+ can make a big difference on your payout, as well. The Money Purchase method is based primarily on the account balance of your pension at the time of your retirement.

You have a variety of benefit election options upon retirement, including Life Only, ‘x’ Payments Guaranteed, and ‘x’% Continued to Named Survivor. The benefit amounts shown on your Annual Statement of Benefits are ‘Life Only’ amounts, which may not be the best option for your situation. In many instances, the ‘100% Continued to Named Survivor’ option often makes the most sense, unless one of the spouses is in very poor health. There may be restrictions on the survivor options depending on the age of your beneficiary. It is important to have a discussion with your Shakespeare advisor to determine which option makes the most sense for you.

What is My Death Benefit?

A question we are often asked by clients is what happens to their pension benefit if they predecease their spouse. The answer depends on a few different factors, such as if they are still working and if they are drawing their benefit. Here are a few scenarios to better paint the picture:

If you are still working at a WRS-covered employer and pass away, the entire balance (employee and employer) will be paid out as a lump sum to your primary beneficiary listed on file. The lump sum is eligible to be rolled over to a spousal IRA.

If you are still working, but not at a WRS-covered employer and pass away, just the employee portion will be paid out as a lump sum to your primary beneficiary. Your beneficiary would NOT be entitled to the employer portion of the pension since you were not working at a qualifying employer at the time of your passing. We have found that this often surprises individuals who have a WRS pension from a past employer.

If you are no longer working, drawing on your pension benefit and pass away, the proceeds your beneficiary receives would depend on the pension election you made when starting to draw. For example, if you elected the ‘100% Continued to Your Named Survivor’ option, your spouse would continue to receive the same dollar amount as you were receiving prior to your death.

The common theme in each of these instances is to be aware who you have listed as your primary beneficiary and to keep this information up to date. A great time to review this is when you receive your Annual Statement of Benefits each spring. Section 5 of the statement will list your current primary beneficiary on file. Your beneficiaries can be updated by using the Beneficiary Designation (ET-2320) form.

If you have questions on your own WRS pension, reach out to your Shakespeare advisor. We are happy to talk through the best options for your situation.