Wisconsin Coalition of Annuitants

December 16, 2024, Minutes

www.wicoa.org

Meeting called to order by the Chair Diane Wilcenski at 9:32a.m.

DIRECTORS & ALTERNATES PRESENT: Robert Beglinger, AFT-R; Barbara Bird, DOT; James Blank, Bay Lakes United Educators-R; Robert Brooks, Central Wisconsin Center Retirees; Jean Grosklaus, West Allis Retirees; Paul Haubrich, UW Milwaukee Retiree’s Assoc.; Brian Holmes, Epsilon Sigma Phi; Bruce Johnson, SWIB Retiree; Allen Knop, WEAC-Retired; Dick Kratz, WI Retired Corrections Personnel; Kathy Kreul, WFT/AFT Retirees; Jack Lawton, ACE; Laurie Mayberry, UWRA President; John Maydak, West Allis Retirees; Fred Nepple, OCI; Elaine Reiter, Kettle Moraine Retired; Robert Schaefer, WI Assoc of Retired Conservationists and State Engineering Association; Sari Simer, Roger Springman, WFT/AFT Retirees; Jeanne Stangl, Dodge County Area REA; Joe Strohl, Retired Professional Fire Fighters of WI; Diane Wilcenski, WREA; Rick Wojciak, DNR; Christopher Wren, Wisconsin State Attorneys Association; and wicoa.org

DIRECTORS & ALTERNATES NOT PRESENT: Dave Bosanko, Retired Professional Fire Fighters of WI; Sandy Drew, SWIB Retiree; Ed Frank, WI Assoc of Retired Conservationists; Rick Klemme, Epsilon Sigma Phi; Tara Leithold, Kettle Moraine Retirees; Lucrecia Mattson, UW-Eau Claire Emeritus; Jim Palmer, WI Professional Police Association Retired; Dee Pettack, SAA; Jim Thiel, Association of Career Employees Clara Welch, Beloit Area REA

DIRECTORS & ALTERNATES EXCUSED:

Roll Call: Taken by Rick

Approval of the November Minutes: Minutes approved as printed.

Guest: Rochelle Klaskin, Deputy Executive Director and Chief Operating Officer, SWIB

Legislative Audit Bureau Management Audit

Rochelle began her presentation discussing the LAB (Legislative Audit Bureau) Management audit of SWIB that was completed in early November. LAB conducts program evaluation audits of state agencies on behalf of the legislature. Because of SWIB’s independence, SWIB is audited twice a year on financial statements (WRS and SIF) and every two years there is a Management Audit that covers SWIB’s policies and management practices. There were no significant concerns identified by LAB during the audit. LAB did make a few recommendations that SWIB feels are very addressable. SWIB will now track those recommendations and report back to the legislature in March about them. It usually takes about a year to complete them.

The full LAB Management Audit can be found on the LAB website.

https://legis.wisconsin.gov/lab

New Chief Technology Officer

SWIB has hired Cefe Quesada as their new Chief Technology Officer. He joined SWIB in April. Cefe is responsible for developing and leading the organization’s technology and data strategy, overseeing the implementation of solutions that support their goals and objectives, and driving innovation to keep SWIB a premier investment manager. Cefe has more than 24 years of experience in leading large technology teams for global financial services firms.

Cefe has been doing an assessment of SWIB technology to identify areas that need to be shored up from a foundational perspective and then thinking ahead to innovation for the future. One project that Cefe has been working on is rolling out Copilot which is a Microsoft AI tool. It became available in Q4 for government users. In order to release Copilot for everyone at SWIB to use, SWIB will have to make sure that there are enough security measures and data and cloud protections in place. In addition, SWIB is in the process of securing an enterprise license for Chat GPT. Having an enterprise license allows you to feed it information and documents that stay in your own environment and is contained.

Asset Allocations

There is only going to be a mild change in the CTF’s asset allocations this year. Private Equity and Debt is going to increase 2% and Public Equity is going to decrease 2%.

5-year Smoothing

Based on the results of SWIB returns over the last 5 years, we may experience a dividend reduction in 2027 as we will drop our all three high-returning years of 2019, 2020, and 2021 with returns of 19.4%, 15.2%and 16.9% respectfully. The negative 2022 return of -12.9% will be smoothed through the remaining five years. This forecast is based on assumptions of returns of 6.5% for 2024, 2025 and 2026 years. Just a heads up!

2025 SWIB Internal Budget

This is for expenses that SWIB incurs in Madison. SWIB does not budget for the external manager fees as those are arranged by contract. There is about a 4.5% increase in this budget from the 2024 budget. Factors causing the increase are increasing technology investment by 1.9%. Foundational increases that need to be made relating to cloud security, cybersecurity, as well as some other important data. Another reason is that the relative returns have been high so the SWIB employees will earn a little more this year from annual incentive compensation and long-term incentive compensations driving the coast up 1.6%.

As of the end of the third quarter, External Management Fees were 378.2M and Internal Management Costs were 123.5M. SWIB does need external partners to get certain returns and run different investments strategies. SWIB does try to be thoughtful about what they can do in-house to save the cost differential.

Projects

SWIB has completed implementing its new and internal in Our Investment Book Of Record (IBOR) on the SimCorp platform. SWIB will be implementing Workday in 2025 which helps with all finances as well as HR. It is a very standard platform used by many companies.

SWIB is moving forward on OMS (Order Management System). It is evaluating options to choose the platform for the future including to determine whether it is better for the WRS to upgrade its current system or invest in a different system. This platform hooks in-to their IBOR which allows trades to happen and also get analytics to see those trades and for tracking purposes.

 Cost Benchmarking

SWIB hires a group out of Toronto called CEM who are independent cost consultants who help SWIB benchmark how their costs are. CEM has a base of 41 public pension plans. It picks 15 plans that look the most like SWIB and compares SWIB to them. It allows SWIB to evaluate how they are doing.

 Performance Update

SWIB has been beating the benchmarks over the past five years. (October 2019 – September 2024) creating $4.14B in excess value.

Performance returns

As of November 30, 2024 Five-Year Basis Ten-Year Basis

Core 10.52% Benchmark 9.34% Core 8.05% Benchmark 7.31% Core 7.50% Benchmark 7.00%

Variable 22.15% Benchmark 21.56% Variable 12.31% Benchmark 12.43% Variable 10.58% Benchmark 10.55%

Assets Under Management

Core Fund 130.9B Variable Fund 11.4B for a total of 142.3.B in retirement fund assets

GUEST: ETF Update by Mark Lamkins, Communications Director

mark.lamkins@etf.wi.gov

Wisconsin Department of Employee Trust Funds

WCOA Meeting 12/16/24

Mark graciously allowed me to use his talking points for the meeting as the minutes-Jeanne

My update covers four areas, including Legislation, Board action, ETF’s Modernization initiative, and the January WRS retiree newsletter.

LEGISLATION

•Judicial Decision Striking Portions of Act 10:

• As you are likely aware, earlier this month the Dane County Circuit Court issued a final decision that struck certain provisions of Act 10 and Act 55 related to the creation of a separate classification of “public safety employee” for the purpose of collective bargaining. The effect would remove many of the restrictions placed on public employee collective bargaining.

• The court did not strike any of the Act 10 provisions that amended Wis. Stat. Chapter 40 related to the Wisconsin Retirement System or the Group Health Insurance Program.

• It is important to note, ETF is not involved in the administration of state employee collective bargaining.

• The Legislature has indicated it plans on appealing this decision. ETF will continue to analyze and monitor the court decision and provide updates as warranted.

• Regarding ETF’s 2025-2027 Biennial Budget, we are waiting for the Governor to issue budget recommendations sometime during January through February.

• Tarna Hunter and SWIB’s Jay Risch will begin conducting legislative visits in January, which aligns with the start of the new legislative session.

BOARD ACTION

ETF Board December Meeting

•At last week’s ETF Board meeting, the Board approved the WRS Three-Year Experience Study prepared by actuary Gabriel, Roeder, Smith & Co. (GRS) and conducted other business.

• The experience study provides WRS economic and demographic assumptions based on the reporting period of Jan. 1, 2021, through Dec. 31, 2023.

•There were no changes to economic assumptions, and the following remains in effect:

• 6.8% assumed rate of investment return,

• 3.0% wage growth assumption, and

• 2.4% price inflation assumption.

• There were some changes to demographic assumptions such as higher retirement rates. However, the mortality assumptions were unchanged.

• The assumption changes will have a small impact on future required contributions for employees in the general category.

• The Board meets next in March to set the annuity adjustments for 2025 and to review ETF’s projections for future Core Fund annuity adjustments and effective rates and conduct other business.

Switching to the Group Insurance Board…

• The Group Insurance Board meets next on January 15, 2025, to review results of the Request for Proposals for a Pharmacy Benefit Manager and administrators of Medicare Advantage and Medicare Plus plans. The Board is expected to approve the issuing of letters of intent to award contracts effective January of 2026.

•The Group Insurance Board is also expected to decide on the coverage of weight-loss drugs for the 2026 plan year in the coming months.

MODERNIZATION

ETF has several multi-year projects going to support its Modernization initiative to replace fragile and fragmented legacy IT systems and improve the online customer experience for self-service.

•ETF’s new Insurance Administrative System is planned to go live in July of 2025 and will be used by members for open enrollment in the fall for eligibility and enrollment. The secure online platform will be called My

•Insurance Benefits. Please watch for information describing how you will interact with My Insurance Benefits in the January WRS retiree newsletter.

JANUARY WRS RETIREE NEWSLETTER

I want to thank you for the past feedback on the WRS retiree newsletter. At your September meeting, newsletter editor Omar Dumdum walked through content and the redesign of the WRS retiree newsletter. The new design will be unveiled with the January 2025 edition.

• The January newsletter will include:

• Leadership messages from Secretary John Voelker and SWIB’s Edwin Denson. Tarna will also provide a legislative update.

• ETF’s Division of Trust Finance will provide projections for the 2025 annuity adjustments in based on SWIB’s preliminary investment returns for CY 2024.

•Annuity payment schedule for 2025.

• New rates for participants of the Wisconsin Deferred Compensation Program.

• Starting January 1, 2025: $3.90/month which is $46.80/year for balances of $5,001 or greater. Those with balances of $5,000 or less still pay nothing.

• I want to invite you to provide information on the coalition’s 2025 annual conference. Please provide content and any links for information and registration by Monday, January 6, 2025. Please send article to me at mark.lamkins@etf.wi.gov.

INFORMATION SHARED VIA ZOOM CHAT

Annuity Adjustment Projects for 2025 As reported in the September 2024 WRS retiree newsletter, ETF projects the following annuity adjustments next year based on four investment return scenarios:

• With a 12% investment return this year, the Core annuity adjustment next year is projected between 2.6% and 3.0%.

• With a 6.8% investment return this year, the Core annuity adjustment is projected between 1.7% and 2.1%.

• If the 4.87% investment return this year, the Core annuity adjustment is projected between 1.3% and 1.7%.

• Without a growth or dip in investment return this year (0%), the Core annuity adjustment is projected between 0% and 0.8%.

Follow-up to question from WCOA Board Director Jean Grosklaus: Here is information on WRS death benefits: https://etf.wi.gov/retirement/wrs-retirement-benefit/death-benefits

The benefit is based on the annuity option chose at the time of retirement. This could include one of the following:

• Any remaining payments in a specific guarantee period (paid to a beneficiary), or

• A lifetime benefit paid to one Named Survivor, or

• No benefit payable.

ETF Guest: Chris Preisler, Senior Communications Specialist, SWIB

The last podcast of the year is out.

It is Podcast 31 with Joy Mukherjee the lead portfolio manager of SWIB’s small cap equity strategy

What does SWIB’s small cap portfolio look like? How does it fit into SWIB’s investment strategy for the Wisconsin Retirement System, or WRS? Joy Mukherjee, lead portfolio manager of SWIB’s small cap equity strategy, explains the difference between large cap and small cap investments, describes some of the common misconceptions of small cap investments, and talks about how SWIB’s portfolio has capitalized on opportunities that have had a positive impact on the WRS trust funds.

https://www.swib.state.wi.us/podcasts

Correspondence:

Diane mentioned that our treasurer, Willie Backes passed away last week

https://www.cressfuneralservice.com/obituaries/william-backes

Diane also mentioned that the list of participating groups in this organization is not up to date. Also mentioned was the fact that many of us do not have alternates for ourselves. Please find someone who could represent you and send their information to Rick.

Old Business: 2025 Annual Conference

After much discussion and suggestions, the final agenda for WICOA 2025 Annual Conference looks like this:

May 13

 John Voelker - ETF

Board on Aging and Long-Term Care - Nick Lutes - Jack Lawton point of contact.

 

May 14

Edwin Denson - SWIB

Social Security AARP- Diane Wilcenski point of contact.

 

Backup Plan

Impact of Elections - AARP - Diane Wilcenski point of contact

Social Security - Mike Collins

Old Business: Medicare Letter

Jack Lawton gave an update on the work that the committee has been working on.

The final draft of the letter is completed. It is 17 pages in length with pages 1-6 being the heart of the letter and the rest being attachments. We could send the letter and paperclip the attachments.

The question arose as to who to send it to. Tammy Baldwin and Mark Pocan were suggested as being the first to send it to and then get their reactions and suggestions.

Others suggested that we send our letter beyond just our state representatives.

If we do a press conference, we may need to send a summary page to lay the groundwork. Channel 15 was suggested.

Project 25 is pushing for Medicare Advantage to be the default choice to encourage privatization of Medicare. Americans would have to special request original Medicare

Jack will send Jeanne the final draft and she will send it out to our members.

A large portion of our January Meeting will be reviewing the letter.

New Business:

We are looking for someone to agree to be the new treasurer.

Treasurer Report:

None

Next Meeting:

January 13, 2025 at 9:30 AM via Zoom

Meeting adjourned at 11:07AM

 

Respectfully submitted,

Jeanne Stangl

WICOA Secretary