Employee Matters

State of Wisconsin Investment Board (part 3 of 3)

What investment choices does the Wisconsin Retirement System offer?

Participants in the Wisconsin Retirement System (WRS) have at least half — if not all — of their pension contributions in the Core Fund. The WRS also offers an option called the Variable Fund, an all-stock fund. This is a unique option among public pension funds. As employees, you can elect to have 50 percent of your retirement contributions in the Variable Fund. There is one opportunity to join the Variable Fund. Once canceled there is no opportunity to rejoin. Although a change can be made at any time during the year, it does not go into effect until the end of the calendar year.

How do I opt into or cancel my participation in the Variable Fund?

You can elect to participate or cancel participation in the Variable Fund by contacting the Department of Employee Trust Funds (ETF) at (877) 533-5020 (toll free) or by downloading the forms for Election to Participate in the Variable Fund and Canceling Variable Fund Participation. This Web page also offers a publication called How Participation in the Variable Trust Affects Your WRS Benefits.

What is the difference between the Variable and Core Funds?

The Variable Fund is invested only in stocks. In the Core Fund, stocks make up about 58 percent of investments and bonds, real estate, private equity and business loans make up the remaining portion. Stocks in both funds are the same and are diversified across large-, mid- and small-capitalization companies in the U.S. and internationally. The impact of Core Fund returns on personal annuity amounts is smoothed during five years. Variable Fund returns are not smoothed and directly effect personal accounts and annuity amounts.

Should I participate in the Variable Fund?

Participation is a personal decision and should be based on individual circumstances, including years until retirement and other personal retirement investments. Some financial advisers and planners suggest that people who are near retirement or who have retired may want to consider more conservative investments, which may include having fewer stocks. Participation in the Variable Fund results in a greater stock exposure in your pension fund account.

The Core Fund’s mix of investments helps to stabilize the effects of market changes. However, because of the movement of the stock market, participants in the Variable Fund are likely to see a wide range of changes in the variable portion.

Historically, stocks have outperformed more conservative fixed-income investments during the long term. However, the investment performance of the two funds — based on a 20-year annualized total return ending Dec. 31, 2005 — were similar: 10.2 percent for the Core Fund and 10.3 percent for the Variable Fund.

Further information, including a historical comparison of Core and Variable Fund annual returns, can be found at the State of Wisconsin Investment Board.