Wisconsin Pension Fund Managers Receive $14 Million in Bonuses

Beating its own benchmark returns has paid off handsomely for most employees of the Wisconsin state pension fund.

Pension fund managers and those who work directly with the state’s investments will receive bonuses totaling nearly $14 million this year, the highest total ever, as a reward for strong returns, the State of Wisconsin Investment Board (SWIB) announced on April 21.

The bonuses are awarded based on investment performance above market returns over the past five years, according to the state pension board. It also said that in 2016, the fund beat its one-, three- and five-year performance benchmarks, and over the past five years, investment returns added $1.2 billion to the retirement system.

The $13.8 million in bonuses was approved for 152 of 163 board employees, and were greater than the $11.1 million paid out in 2016. Fifty-one employees — a third of those who got bonuses — received $100,000 or more, while 11 people failed to receive bonuses because they did not qualify or their job performance was below expectations, said board spokeswoman Vicki Hearing. The 2017 bonuses were $500,000 more than the previous record high of $13.3 million paid out in 2014.

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Several employees received bonuses worth nearly twice their base salary. Michael Williamson, the board’s executive director, received the highest bonus at $520,000. Chuck Carpenter, a managing director, was second highest at nearly $550,770. His annual salary is $291,500. David Villa, chief investment officer, was third highest at $582,489. Todd Ludgate, another managing director, received $541,221 and his 2016 salary was $236,000.

In 2016, the diversified “Core Fund,” posted an 8.5% return, while the higher risk “Variable Fund” posted a 10.6% return.

The board manages more than $104 billion in assets, most of which is in the 600,000+-participant Wisconsin Retirement System

In a statement, Executive Director Michael Williamson said “SWIB operates in a highly competitive industry and seeks to hire and retain talented professionals, then compensates them based on their ability to meet aggressive targets and add value to the trust funds.”

According to the Pew Charitable Trust, Wisconsin was one of only15 states to have a positive net amortization as a percentage of covered payroll of about 4.75% in 2014.

Editor’s note: A previous version of this story contained numbers that were not updated.

Tags: bonus, fund managers, Wisconsin

The deficit for the 100 largest US corporate pension plans dropped to $247 billion in March, from $275 billion, as their funded ratio rose to 85.3%, from February’s 83.8%, Milliman reports.

The improvement in the Milliman 100 pension funding index comes about as a result of strong asset returns as well as a rise in the discount rates these pension funds use to value their pension liabilities, which is tied to benchmark corporate bond rates, the Seattle-based actuarial consulting firm said.

“The first quarter of 2017 has seen the cumulative asset values of the Milliman 100 pension plans exceed expectations – increasing by $37 billion thanks to strong recurring investment returns – while discount rates are just shy of where they were at the beginning of the year,” according to Zorast Wadia, a Milliman principal. “Overall, funded status has increased by $33 billion during the quarter.”

For March, these corporate pension plans enjoyed an investment return of 1.13%, which boosted their asset values by $11 billion to $1.434 trillion. In addition, these plans saw their projected pension benefit obligation drop by $17 billion in March to $1.681 trillion, as their discount rates rose eight basis points to 3.96%.

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Over the last 12 months, these pensions have enjoyed a return on assets of 8.78%, and these beneficial returns have led to an improvement in their deficit of $128 billion. Discount rates have moved up as well, from 3.78% as of March 2016, to the current 3.96%. Over the year, these corporate plans’ funded ratio has risen from 78.6% to the current 85.3%.

Milliman projects that if these plans attain their 7% expected asset return and maintain their current discount rate of 3.96% through 2017 and 2018, their funded status will improve. At the end of 2017, their pension deficit would drop to $217 billion, and their funded ratio would rise to 87%. By the end of 2018, Milliman anticipates a pension deficit of $173 billion, and a funded ratio of 89.7% for these 100 largest corporate pension plans.

In an optimistic scenario of rising interest rates and asset gains, their funded ratio could even rise to 95% by the end of 2017, and 108% at the end of 2018. And if Milliman’s pessimistic forecast plays out, these pension plans could see their funded ratio drop off to 80% by year end and 73% by the end of 2018.

Tags: deficit, discount rates, pension liabilities, Pension Plans