2022 WRS financials in good shape despite tough markets

Approximately $7 billion in benefits were paid by WRS in 2022, based on Comprehensive Annual Financial Report recently launched by ETF.

The report also shows that the WRS funding ratio calculated in accordance with accounting standards was approximately 96% as of December 31, 2022. This implies that sound financing and plan design principles kept the WRS financially strong during this period. .

Below are highlights from the 2022 financial report.

Assets and Reserves

At the end of 2022, WRS had net assets of approximately $118 billion, a decrease of $24 billion from 2021. These assets were invested in a balanced portfolio of equities, fixed income and other investments managed by WRS.

$76.5 billion was set aside in reserves to pay monthly benefits to more than 232,000 retirees and beneficiaries, with an average annual benefit of $29,889. The annuity reserve, plus 5% annual interest, was sufficient to pay lifetime benefits without any additional contributions.

Employer and employee reserves, worth $26 billion and $22.3 billion, respectively, include contributions made by and on behalf of non-retired participants.

The employee pool is made up of more than 445,000 individual participant accounts, while the employer pool is a single, mixed account with no separation of individual employer contributions.

When a participant retires, the present value of their annuity is transferred to the annuity reserve from the employer’s and employee’s reserves. These are also used to pay separation and death benefits.

The Market Recognition Account is used to smooth the effects of investment gains and losses in the WRS Core Trust Fund. Investment returns that exceed or fall below the assumed investment return of 6.8% are spread over five years. As of December 31, 2022, WRS has $6.8 billion in past investment losses that will be added to investment income over the next four years.

Income and Expenses

In 2022, WRS suffered an investment loss of US$18.7 billion. This has been attributed to less favorable market conditions across several asset classes during 2022. Investment income represents approximately 78% of WRS revenues over the past 10 years.

Combined contributions from members and employers generated $2.3 billion.

Employer contributions are paid by WRS employers and held in the employer reserve until they are transferred to the annuity reserve to fund new annuities. On the other hand, member contributions are paid mainly by active employees. These are held in the participant’s individual accounts until retirement, or paid as a termination benefit if the employee leaves covered employment and chooses to withdraw contributions.

When comparing WRS’s total expenditure of $7.0 billion to the combined contributions from members and employers of $2.3 billion, the importance of a strong investment program to make up the difference becomes clear.

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