Stock market rebounds, but another annuity cut projected for Wisconsin retirees in 2010

Another annuity cut projected for Wis. retirees

MADISON, Wis. — Even though the stock market rebounded in 2009, the state investment board is projecting a 1 percent cut in benefits for retirees in the Wisconsin Retirement System.

Benefits paid to the 144,000 retirees went down 2.1 percent last year for the first time thanks to steep losses in retirement system investments. Any gains or losses are spread out over five years, to smooth the effects on participants.

That helped keep last year’s reduction smaller than it otherwise would have been, but it also means that even though the state’s so-called core fund increased 22 percent in value in 2009, retirees are still going to be saddled with a 1 percent benefit drop, according to the State of Wisconsin Investment Board projections released Thursday.

The numbers will be finalized in March with the new benefit levels taking effect in May.

All retirees participate in the core fund, which includes a diverse group of both domestic and international investments.

In 2008, the core fund lost 26.2 percent but last year it rebounded and grew 22 percent. The riskier variable fund, which 35,000 retirees invested part of their contributions in, lost 39 percent in 2008 and grew nearly 34 percent last year.

That was the largest year of growth for the fund since the Wisconsin Retirement System started in 1982, according to the investment board.

Benefits for variable fund recipients dropped 42 percent in 2009 but this year they are projected to increase between 25 percent and 30 percent.

Both the core and variable funds ended the year ahead of their 10-year benchmarks, the investment board said.

David Villa, the state’s chief investment officer, said concerns about investments remain for this year due to high unemployment, weak consumer spending and uncertainty about the impact of the federal stimulus spending.

The investment board manages money on behalf of the Wisconsin Retirement System, which covers all the retirees and current workers employed by the state, local governments and school districts. Milwaukee city and Milwaukee County have separate pension funds.