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State pension fund rides stock market gains

The Cap Times | by Mike Ivey | January 16, 2013

It was a good year for the stock market and public pension funds in general. But the question going forward is what kind of returns should retirees expect and whether fund managers can deliver.

The State of Wisconsin Investment Board just released its preliminary 2012 figures, showing its $79 billion Core Fund of stocks and fixed-income investments returning 13.6 percent, the fourth straight year of positive returns since 2008.

The $6 billion Variable Fund, an all-stock mix of domestic and international equities, was up 16.9 percent. About 18 percent of participants in the Wisconsin Retirement System elect to put some of their money there in addition to the Core Fund.

Unfortunately, the solid returns won't mean larger checks for retired teachers, firefighters, street workers or UW employees who participate in the WRS. Due to the complicated "smoothing" mechanism built into the system, the state is still paying off losses from the 2008 market plunge that sent the Core Fund down 26.2 percent.

In fact, none of the 165,000 current retirees in the system are getting any increase this year and some 80,000 will actually see their payouts reduced again, some by as much as 13 percent, according to the latest projections from the Wisconsin Department of Employee Trust Funds (ETF).

 

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