Opinion ID: 2151564
Heading Depth: 2
Heading Rank: 6

Heading: Annuity Reserve

Text: ถ 27. The third pertinent account is the annuity reserve. [74] For purposes of this litigation, the annuity reserve has a balance of $14.8 billion. [75] The annuity reserve holds funds for employees who choose to accept an annuity instead of a lump-sum payment upon leaving public service. [76] Most long-term employees choose some form of annuity when leaving public employment. [77] ถ 28. Long-term employees typically choose from a variety of annuity options when leaving public employment. There are three types of annuities: straight life annuity, life annuity with guarantee period, and joint survivorship annuity. [78] In addition, two permissible calculation methods lead to two different benefit options, a money purchase plan or a formula benefit plan. [79] ถ 29. The formula benefit plan provides an annuity for a retiring employee based on a percentage of the employee's final average earnings. [80] A statutory formula determines an employee's initial annuity. [81] Different classes of public employees are eligible for different percentage calculations in determining annuities. [82] The WRS has been described as a defined benefit plan to the extent that its participants are eligible to receive a specific retirement benefit calculated to the following formula: (creditable service) ื (final average earnings) ื (formula multiplier) ื (actuarial adjustment for retirement prior to the normal retirement date). [83] ถ 30. The elements of this formula are defined in Chapter 40 of the statutes: creditable service is defined in Wis. Stat. ง 40.02(17); final average earnings is defined in Wis. Stat. ง 40.02(33); normal retirement date is defined in Wis. Stat. ง 40.02(42); the formula multipliers are set out in Wis. Stat. งง 40.23(2)(b)1-4 and 40.23(2m)(e)1-4. [84] Actuarial reductions for early retirement are described in Wis. Stat. งง 40.23(2)(d) and 40.23(2m)(f). [85] ถ 31. The money purchase plan can offer a departing employee a better annuity if accumulated funds can purchase a larger annuity, based on actuarial tables, than a formula benefit. [86] ถ 32. When an employee leaves public service, a variety of monies are transferred to the annuity reserve to finance the employee's annuity. [87] The entire balance of the employee's account in the employee reserve is transferred to the annuity reserve. [88] In addition, an amount is credited to the annuity reserve to account for any variable trust participation by the employee, including any employer required contributions arising from variable trust participation by the employee. [89] Finally, an amount is transferred from the employer reserve to the annuity reserve that when increased by an interest income assumption of 5% annually will fully finance the [employee's] future benefit payments. [90] Even after the funds are sent to the annuity reserve, the monies continue to be invested in the fixed trust [91] or in the variable trust in the same proportion as prior to the employee leaving public service. [92]