Morningstar: Wisconsin Retirement System Strongest in Nation

According to the Morningstar annual public pension report, The State of State Pension Plans 2013, Wisconsin is home to the strongest public pension in the country.

Wisconsin’s plan is 99.9 percent fully-funded, while the national average stands at just 73 percent. Illinois, home to the weakest plan, has a funding ratio of just over 40 percent. Wisconsin’s pension liability is just $18 per capita, while Illinois’ is $7,421.

Wisconsin has long been regarded as a leader in pension fund management. A little more than a year ago, the Pew Center on the States found that WRS is fully funded and one of just a few “solid performers” in the country. A fact sheet about the state’s pension fund in 2010 shows that Wisconsin paid 108 percent of the recommended contribution to its pension fund. According to Pew, most experts say that a pension fund should be at least 80 percent funded.

In related news, the Department of Employee Trust Funds announced the Wisconsin Retirement System exceeded year-to-date benchmarks for both funds managed by the State of Wisconsin Investment Board. The Core Trust Fund recorded a performance result of 5.1 percent, compared to a 4.8 percent benchmark. The Variable Trust Fund’s performance result of 13.3 percent exceeded its benchmark of 12.7 percent. These figures are based on preliminary data.

State Budget Solutions, a free-market research organization, released a report earlier this month maintaining that WRS has a funding ratio of just 57 percent. The Department of Employee Trust Funds responded to the report, reasserting that WRS is 99 percent funded, a figure confirmed by independent actuaries.

The response went on to say State Budget Solutions used faulty logic in analyzing the data:

“The report reached this conclusion by measuring future WRS pension obligations using a rate of return pegged to the yield on 15-year U.S. Treasury bonds, which at the time was about 3.225%. The report did not analyze the specifics of the WRS. It simply applied this rate to the WRS, resulting in a substantially overstated unfunded liability. Using such a low rate of return is not appropriate for the WRS, which, by appropriate measures, is better than 99% funded on a smoothed valuation basis and approximately 103% on a fair value basis as of December 31, 2012.”