When a WRS participant retires and takes an annuity, monies are taken from the employer and employee reserve accounts and deposited into the annuity reserve, from which payments to the retiree are then made. In addition to the three reserves, there is also an account into which the gains and losses on the reserves are maintained. Upon retirement, an annuitant will always receive the higher of a money purchase or formula benefit amount. The amount of money in the employer reserve does not affect the amount of the annuity which an annuitant is entitled to receive. The obligations of the WRS and the amount of funding necessary to pay those obligations is calculated periodically by the actuary retained by the Employee Trust Funds Board.
Employers pay for two types of obligations when they make payments to the employer reserve.
One is for the benefits connected with employees' current service. The other is for the benefits connected with employees' past service. The latter obligation can arise when an employer chooses to join the WRS and wants its employees to have credit for services previously rendered, or when the legislature retroactively enhances retirement benefits for services previously rendered - thus creating a liability for past service. Employers make annual payments to reduce their unfunded liability based upon a percentage of payroll. Employers also pay interest on their unfunded liability.